Engaging the private sector in climate change adaptation: Early evidence from the Pilot Program on Climate Resilience

Investment in projects that help countries adapt to climate change attracted around USD 20-24 billion in 2012, according to CPI?s recently published Global Landscape of Climate Finance 2013. However, due to data gaps and limited understanding of private sector adaptation efforts, the Landscape 2013 only tracks public adaptation finance.

This knowledge gap is symptomatic of a broader problem. Private actors lack understanding and awareness about climate-related risks and opportunities, even if climate change can directly affect their assets and revenues. Knowledge, technical, financial, and risk barriers hinder their engagement.

The public sector can play a role in helping to overcome these obstacles. To better understand how public resources can be deployed to engage private actors in building countries? climate resilience, a forthcoming San Giorgio Group case study explores approaches taken on-the-ground by the Pilot Program for Climate Resilience (PPCR) in the Nepalese agricultural sector.

The Nepalese project is the first of 11 private sector projects in the PPCR portfolio to attract the engagement and interest of private sector participants, such as agribusiness companies, in contributing toward the country?s adaptation efforts. Processors of rice, maize, and sugarcane ? among the most vulnerable crops ? have committed to train farmers on how to avert climate-related losses and to increase productivity, through knowledge and training tools provided with the support of PPCR?s funds. The overarching goal of the Nepalese project is to build models that make climate-resilience a long-term business for the private companies involved, thereby creating the conditions for their eng agement beyond the project?s life. This is essential for scaling-up resources and achieving transformational results. Getting private actors on board in activities that reduce countries? vulnerabilities to climate risks in other pilot countries ? mainly least developed ones ? is proving more difficult.

Obstacles to progress for PPCR private sector interventions in countries such as Mozambique, Niger, and Zambia were among the topics discussed at the PPCR meeting held in Washington last week.

The experience of the International Finance Corporation (IFC), the organization in charge of PPCR private sector projects, shows that unfavorable investment climates and underdeveloped private sectors are limiting the opportunities for engagement. Further, major barriers to private actors? involvement also include the mismatch between possible returns on climate investments and investors? time horizons. Lack of data, the inability of local actors to comply with IFC?s social, environmental and financial standards, and governments? limited support to private activities, can represent further impediments.

Nevertheless, exploring ways to engage the private sector and learning from these experiences is part of the game in pilot initiatives. To experiment further, possibly encouraging Multilateral Development Banks (MDBs) to look for opportunities beyond their comfort zone, the PPCR established a USD 70 million private sector competitive reserve in November 2012. Through the MDBs, PPCR pilot countries submitted 11 project proposals for activities in nine countries. The six projects selected at the PPCR meeting last week, for an investment of about USD 41 million in concessional loan resources, range from the energy and infrastructure to the agriculture and forestry sectors in Haiti, Jamaica, Mozambique, Saint Lucia, and Tajikistan.

The delays and under-achievements of some PPCR private sector projects are not a reason to reduce efforts for engaging the private sector. In the end, resilience in an ever warming world will depend on decisions and actions taken by millions of private individuals and companies. Those decisions and actions will depend on how quickly we can learn to engage them effectively. Chiara Trabachi is an analyst at Climate Policy Initiative and is currently enrolled in Ca? Foscari University of Venice?s PhD program on the Science and Management of Climate Change.