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Background Paper

Broken Connections and Systemic Barriers: Overcoming the Challenge of the "Missing Middle" in Adaptation Finance

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Climate change is undoubtedly one of Africa’s greatest challenges. According to the Intergovernmental Panel on Climate Change (IPCC) special report on the impacts of global warming of 1.5 degrees, climate change will continue to threaten food security, water security, ecosystems, health, infrastructure, national economies, and the livelihoods and wellbeing of people and communities. It will also place increasing demands and stresses on the governance structures and institutions needed to address those impacts – particularly in Africa. Considering Africa’s capacity, these impacts pose critical challenges for the sustainable development of the entire continent. A wide range of adaptation actions on all levels, ranging from continental to local, are needed to combat the urgent adverse effects of climate change now, to further support climate-resilient, inclusive and equitable socio-economic development and to increase resilience to future impacts.

African countries face significant challenges to effective climate adaptation. With adaptation needs locally nuanced, effective adaptation will require countries to have a sound understanding of the domestic impacts of climate change, particularly at the subnational and local levels. This is currently lacking in most African countries.

A major obstacle to climate change adaptation for African countries is inadequate climate finance. Public climate finance flows for adaptation are slow to rise, increasingly delivered as loans and significantly below the level needed. According to several recent tracking reports, they constitute just 20 – 25 percent of the overall public funding flowing from developed to developing countries, and too little of it reaches the poorest and most vulnerable countries. In Africa, the gap between adaptation finance needs and flows into the continent is already significant and it is likely to widen. The cost of adapting to the impacts of climate change is growing, with estimates reaching USD 100 billion per year by 2030 for Africa. These costs will increase rapidly with higher levels of warming. Households and communities in Africa already carry the heaviest burden in having to deal with severe impacts such as extreme weather events and disasters, in terms of both human and financial costs, with Africa’s women often disproportionally affected. While African countries are already investing in adaptation with their domestic resources, the scale at which the impacts are being felt far outweighs the capacity of African countries, its people and communities, to respond at a scale that is sufficient.

It is critical that the funds that are being mobilized at the international level provide targeted support to vulnerable developing countries to respond to climate change impacts in a way that is most effective and most equitable.

The United Nations Framework Convention on Climate Change (UNFCCC) and the Paris Agreement present an opportunity for multilateral processes to support such adaptation action by ensuring that their funding supports the long-term resilience of people and communities, and their agency as important adaptation actors. Through the financing mechanism and related UNFCCC funds, significant amounts of multilateral adaptation finance are to be channeled to help developing countries respond to the adaptation challenge with special consideration for those that are most vulnerable, many of which are in Africa.

Two dedicated adaptation funds were set up under the UNFCCC and the Paris Agreement to support adaptation action for developing countries, namely the Adaptation Fund (AF) launched in 2007 and the Least Developed Country Fund (LDCF) in 2001. Initially set up as an adaptation focused fund, the Special Climate Change Fund (SCCF) now also supports technology transfer. The AF, though small in size, is noteworthy for its innovation in having pioneered direct access to climate funds, which allows developing countries to accredit their own institutions to access funding, without having to go through international intermediaries such as multilateral development banks or UN agencies. While not exclusively funding adaptation actions, the Green Climate Fund (GCF) was established in 2010 with the explicit understanding that it would, as the largest multilateral climate fund, channel a significant portion of multilateral adaptation financing to developing countries. It likewise offers direct access and has significantly expanded the network of developing country institutions that are BROKEN CONNECTIONS AND SYSTEMIC BARRIERS implementing partners for multilateral climate finance. It is also committed to a balanced allocation between adaptation and mitigation. Both the AF and GCF have made significant investments in capacity building and readiness support for developing countries wishing to access their resources.

Even with these innovations, developing countries are struggling to access climate finance and to deliver sustainable and transformative responses to climate change impacts at scale. According to a recent report, African countries are only meeting approximately 20 percent of their adaptation needs through domestic and international finance, and it is estimated that only approximately 5 percent of all funding flows from international climate funds have been disbursed for locally based climate adaptation interventions. The rest of the funds, while meant for climate change interventions, do not reach the levels where they are needed the most- the poor and vulnerable communities.

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Global Commission on Adaptation
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Table of contents

1.1 What is the "missing middle"?
1.2 Report structure

2 Purpose, approach and methodology

3 Disconnections and barriers: The architecture of the multilateral climate funds
3.1 The architecture of the multilateral climate funds
3.2 Disconnections and barriers
3.3 The crucial role of empowered subnational actors
3.4 The Direct Access Modality

4 Disconnections and barriers: Programming for and delivering adaptation action
4.1 The crucial role of subnational actors in delivering climate finance
4.2 National adaptation planning Processes and country-owned pipelines
4.3 Inclusive and participatory programming approaches
4.4 Capacity of DAEs in supporting programming
4.5 Co-financing requirements as a programming constraint
4.6 Risk perception and willingness to engage with new climate finance actors
4.7 Climate information in the development of the climate rationale
4.8 The ‘Climate change adaptation’ and ‘development’ divide
4.9 Challenges with language and jargon
4.10 The role of MIEs in capacity strengthening of national actors

5 Disconnections and barriers: Access to public multilateral climate finance    
5.1 The innovation and potential of Direct Access
5.2 Barriers to Direct Access
5.3 South-South support for accreditation
5.4 Enhancing readiness support
5.5 Role and Capacity of National Designated Authorities
5.6 Access for subnational and local actors to multilateral funds
5.7 Enhanced Direct Access

6 Disconnections and barriers: Mobilisation and governance of adaptation finance    
6.1 Funding needs and availability for adaptation
6.2 Grant financing for adaptation
6.3 Funding certainty
6.4 Increasing funding transparency through allocation parameters
6.4.1 Balanced allocation for adaptation and mitigation
6.4.2 Ring-fencing of funds for NIEs and certain groups of countries

7 Overarching messages and conclusions