Citation
Tanguy, A., Magnan, A., Vallejo, L. (2024). "MDBs in Financing Adaptation: New Approaches to Assess the Effectiveness of Adaptation Interventions", in Gopalika Arora, Ed., Funding Our Future: Unlocking Resources for Adaptation Financing, November 2024, Observer Research Foundation.
Chapter's abstract
International public finance for adaptation to developing countries has decreased since 2020. Multilateral Development Banks (MDBs) channel public finance for adaptation, as acknowledged in the 2023 first Global Stocktake (GST) decision, which “call[s] on multilateral development banks and other financial institutions to further scale up investments in climate action.”
Barriers to adaptation have led to MDBs being hesitant to finance adaptation projects. These barriers include low returns on investments, lack of knowledge and common definitions of adaptation and what makes it efficient, and its links with development and disaster risk reduction. However, MDBs have taken steps towards integrating adaptation financing in their activities; An annual Joint Report on Multilateral Development Banks’ Climate Finance tracks adaptation finance activities in MDBs with a view to reducing double counting. The report, however, focuses on mapping flows while neglecting to question their effectiveness in reducing climate risks and supporting adaptation. Effectiveness is generally overlooked in discussions around the adaptation finance gap.
This essay addresses this issue by asking the following questions: What are MDBs’ current approaches and challenges to measure the climate effectiveness of the adaptation finance they provide? To what extent can innovative assessment methods help respond to these challenges?
