Closing the gap in Climate Adaptation Finance: A focus on AFOLU

Understanding Climate Adaptation Finance in AFOLU

AFOLU (Agriculture, Forestry and other Land Use) sectors hold a pivotal position in the fight against climate change. They contribute significantly to greenhouse gas emissions while also presenting solutions for both mitigation and adaptation. The Intergovernmental Panel on Climate Change (IPCC) reported that between 2010 and 2019, AFOLU accounted for about 13-21% of global greenhouse gas emissions. 

AFOLU can help the climate in multiple ways, including:

• Carbon Sequestration: Enhancing natural carbon sinks through reforestation, afforestation and improved farming practices.
• Reducing Emissions: Cutting greenhouse gas emissions through sustainable land management practices.
• Building Climate Resilience: Implementing integrated land use practices like agroforestry and sustainable forestry to enhance ecosystem and community resilience to extreme weather.

The objective of channeling climate adaptation finance to AFOLU is to augment their ability to withstand and recover from climate change impacts while promoting sustainable development. This funding supports technological advances and mechanisms aimed at climate change adaptation and resilience. 

Key approaches include:

• Investment in Sustainable Agriculture: Financing initiatives advocating for sustainable farming techniques such as agroforestry, and use of organic fertilizers, is crucial for building resilience, especially in regions like southern Africa and Asia. For instance, the Climate Resilient Agriculture in Three of the Vulnerable Extreme Northern Crop-Growing Regions (CRAVE) in Namibia, funded by the Green Climate Fund, aims to  increase  the resilience of smallholder farmers through drought-resilient crops, enhanced water management, soil conservation, capacity building and climate information services.

• Forest Conservation and Restoration: Forests and other green cover absorb carbon dioxide, aiding in climate change mitigation by acting as carbon sinks. There is a growing need to invest in forest regeneration, rehabilitation of degraded land and the halting of deforestation to increase carbon capture and safeguard biodiversity.

• Carbon Markets and Payments for Ecosystem Services (PES): Offering monetary rewards for emission-reducing efforts. PES programs encourage land management that produces ecosystem services supporting climate resilience and adaptation.

• Capacity-building and Technical Assistance: Providing financial backing for capacity-building, technical support, and knowledge dissemination to assist communities adopt climate-resilient and low-emission practices in AFOLU.

• Public-Private Partnerships: Facilitating collaborations among governments, private sector entities and civil society organizations to pool resources, share risks, and implement climate-friendly projects within AFOLU.

The Need for Climate Change Adaptation and Resilience in the Developing World

Least developed countries (LDCs) are more vulnerable to extreme climatic events due to their heavy dependence on natural resources and lower preparedness levels. For instance, Cyclone Freddy, which hit Malawi and Mozambique in March 2023, left devastating impacts on people, the environment and economies. A post-disaster needs assessment by the government of Malawi estimated damages at about US$506 million, highlighting  the need for investment in climate change adaptation and resilience.

The Big Decision

Governments must decide whether to direct more funds into climate change mitigation or climate change adaptation. As of 2022 only 5% (USD 63 billion) of  global climate funds were channeled to climate adaptation, down from 7% in 2020. With the increasing impacts of climate change, the need for financial investment in climate adaptation and resilience is more evident.

According to the United Nations Environment Programme (UNEP), as of 2023, the adaptation finance gap (difference between estimated adaptation financing costs and finance flows) stands at between US$194 billion and US$366 billion per year. While exact figures for AFOLU adaptation finance are difficult to pinpoint,  the Climate Policy Initiative’s Global Landscape of Climate Finance 2023 estimated that about 11% (USD 7 billion) of total adaptation funds was funneled into AFOLU. 

Despite the urgent need to scale up adaptation finance, especially in the developing world, the flow of finances for adaptation has slowed, partly due to a lack of knowledge in adaptation policies and clear models for assessing the impact of adaptation investments.

The Future of Climate Change Adaptation and Resilience Finance

Bridging the gap in climate adaptation finance could involve  private investments. This involves directing funds from the private sector towards projects that enhance societies’ ability to withstand and recover from climate-related disasters. Investments in agriculture, infrastructure, technology and natural resource management are key. Creating favorable policy environments, providing financial incentives and an increasing  awareness of the potential returns on such investments are crucial steps.

One successful private investment is the Acumen Resilient Agriculture Fund (ARAF), a USD 58 million fund aimed at enhancing climate resilience of smallholder farmers in East and West Africa. Sponsored by Acumen and anchored by the Green Climate Fund, ARAF invests in early-growth stage agribusinesses to help farmers anticipate, withstand and recover from extreme climate events, leading to increased yields and income.

Public funds alone are insufficient to support global  climate change adaptation initiatives. Leveraging resources and expertise from the private sector and civil society is essential to addressing  climate change impacts and reducing countries’ vulnerability,  ultimately paving the way for more sustainable development models.

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