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1、Tracking and Mobilizing Private Sector Climate Adaptation FinanceSeptember 2024Copyright 2024 Climate Policy Initiative climatepolicyinitiative.org.All rights reserved.CPI welcomes the use of its material for noncommercial purposes,such as policy discussions or educational activities,under a Creativ

2、e Commons Attribution-NonCommercial-ShareAlike 4.0 International(CC BY-NC-SA 4.0)License.For commercial use,please contact adminsfcpiglobal.org.AUTHORSJake Connolly Morgan Richmond William Wallock Sasha Abraham Neil Chin Chris GrantACKNOWLEDGEMENTSThe authors would like to acknowledge and thank the

3、Gates Foundation for supporting this work.They would also like to acknowledge the CPI team who supported this effort:Dharshan Wignarajah,Baysa Naran,and Sean Stout for their guidance and internal review and Rob Kahn,Pauline Baudry,Alice Moi,Kirsty Taylor,Jana Stupperich,and Angela Woodall,for their

4、editing,layout,and graphics support.In addition,they acknowledge the many people who provided inputs and guidance throughout the process across the public and private sectors.With thanks to CDP,the global environmental disclosure system,for providing data on corporate climate adaptation.CPI encourag

5、es institutional investors to become CDP signatories,endorsing its annual disclosure request to access data directly from portfolio companies.Companies should disclose through CDPs corporate questionnaire,which covers climate change,deforestation,water security,biodiversity and plastics-related info

6、rmation.Thanks also to Vibrant Data Labs for development of the adaptation activity classification model used to tag investment data referenced in this report.ABOUT CPICPI is an analysis and advisory organization with deep expertise in finance and policy.Our mission is to help governments,businesses

7、,and financial institutions drive economic growth while addressing climate change.CPI has seven offices around the world in Brazil,India,Indonesia,South Africa,the United Kingdom,and the United States.Tracking and Mobilizing Private Sector Climate Adaptation Finance1RELATED CPI WORKSGlobal Landscape

8、 of Climate Finance 2023Accelerating Adaptation Finance Africa and Global PerspectivesState and Trends in Climate Adaptation Finance 2023Tracking Investments in Climate Resilient InfrastructureCONTACTJake Connolly Jake.Connollycpiglobal.orgMorgan Richmond Morgan.Richmondcpiglobal.orgMEDIA CONTACTRob

9、 Kahn Rob.Kahncpiglobal.org RECOMMENDED CITATIONClimate Policy Initiative.2024.Tracking and Mobilizing Private Sector Climate Adaptation Finance2Tracking and Mobilizing Private Sector Climate Adaptation FinanceEXECUTIVE SUMMARYCPI has developed a methodological and data approach to improve tracking

10、of private sector adaptation finance.These efforts have increased private adaptation finance tracked by more than four times from the approximately USD 1 billion previously tracked in CPIs Global Landscape of Climate Finance(GLCF)on average annually for the period 2019 to 2022 for the same set of pr

11、ivate sector institutions.By applying the new methodology including a bespoke taxonomy for identifying adaptation-relevant private finance the tracking in this report now captures annual average flows of USD 4.7 billion from the private sector to adaptation-relevant activities.1Unlike public actors,

12、who are increasingly expected to report on adaptation finance,there is no mandatory reporting mechanism around adaptation and resilience(A&R)for private actors.Though some have signed up to reporting frameworks concerning decarbonization and net zero(such as CDP and GRESB),no such framework exists f

13、or adaptation or for investment in climate solutions writ large.The lack of data on private adaptation finance yields significant uncertainty regarding progress on addressing climate vulnerabilities and leaves public and private decision makers without critical information on where they should targe

14、t existing and additional investments.Limited data and reporting on private adaptation finance also reinforce the common narrative on the scarcity of viable business models for adaptation.Public finance is critical,but if adaptation is framed solely as a public issue,we risk missing the tremendous p

15、otential of the private sector to mobilize the levels of capital required to meet global adaptation investment needs.Informed by this gap,the work represented in this report has two central goals:1.To develop a taxonomy for private adaptation finance tracking that is comprehensive,descriptive,and in

16、 harmony with wider efforts in the community,building upon existing attempts to define and classify adaptation finance in both a public and private context.The objective of this work is to structure the taxonomy so that it can be increasingly incorporated into CPIs existing tracking of climate finan

17、ce,including the GLCF.2.To build a machine learning model and dataset that expand the scope of trackable private adaptation finance.The model(which is ultimately intended to be open source)will allow CPIand ideally the broader community,including policymakers and capital allocators in the private se

18、ctorto more readily assess the adaptation relevance of investments.The dataset builds upon prior adaptation finance tracking approaches,with the inclusion of additional data sources and the application of machine learning tools to efficiently and accurately categorize finance flows according to the

19、taxonomy developed.1 CPIs global climate finance tracking methodology prioritizes primary data on project-level investment due to its relevance to impact on the real economy.Tracking and Mobilizing Private Sector Climate Adaptation Finance3GOAL 1:TAXONOMY DEVELOPMENTGiven existing taxonomies limited

20、 applicability to private adaptation finance tracking,we developed new criteria for this tracking exercise.We classified flows as adaptation finance if they went to an activity that met all of the following criteria:1.The activitys end users or beneficiaries(people,assets,etc.)are located in a setti

21、ng with material physical climate risks/impacts.2.The activity materially reduces physical climate risks to the project or investment in which the activity occurs,materially reduces physical climate risk in other economic activities,or addresses systemic barriers to adaptation.3.The contribution to

22、adaptationi.e.,adaptation-related outcomescan be defined and qualitatively and/or quantitatively measured.4.The activity adopts the best available knowledge to provide solutions that do not lead to maladaptation of the direct user or the system in which the user operates and that manage against sign

23、ificant harm to other social and environmental objectives.In order to apply these criteria,we developed an adaptation taxonomy that can be used to track private adaptation finance.It classifies climate adaptation activities according to a set of seven themes which are derived from the adaptation tax

24、onomies developed by Tailwind and Climate Bonds Initiative(CBI)and are modified for the purpose of tracking financial flows.The intention here is to develop a consistent approach to identifying adaptation finance flows for private actors.Within each theme,the taxonomy identifies a set of adaptation

25、sectors,subsectors,and activities.The activities are intended to be:(a)collectively exhaustive of all the adaptation activities that would potentially receive trackable private financing and(b)mutually exclusive to the greatest extent possible.The taxonomy is a living document that is open to revisi

26、ons in structure as well as the addition of missing sectors,subsectors,or activities.The taxonomy tags each activity(165 activities in the September 2024 release)with the following elements:Table 1:Taxonomy ElementsTopicPurposeSecondary ThemeWhile each activity is allocated to a single primary theme

27、 in the taxonomy,those that could reasonably belong to an alternative are assigned a secondary theme.Activity TypeEach activity is classified as either(a)a product or service,(b)an enabling activity,or(c)intelligence.Adaptation LikelihoodThis indicator describes our confidence that any project match

28、ed to the given taxonomy activity could be considered an adaptation effort without further context.We categorize this likelihood on a three-point scale of low,medium,or high.Maladaptation or Significant Harm RiskIdentifies if an activity has a high potential of either:(a)being considered maladaptive

29、 or b)causing significant harm to other social and environmental objectives,even when minimum compliance and industry standards are followed.4Tracking and Mobilizing Private Sector Climate Adaptation FinanceTopicPurposeCities RelevanceCorresponds to any activity that significantly enhances cities ad

30、aptive capacity and resilience to climate-related risks.Activities are included if they are usually located within city boundaries or aim to address a climate risk faced by cities.Gender RelevanceCorresponds to any activity that significantly and disproportionately benefits women or other marginaliz

31、ed genders.Almost all activities can be implemented in a way that is gender-responsive,but the tagging of gender relevance is intended to identify activities that nearly always contribute to gender equity.Mitigation Co-BenefitCorresponds to any activity that directly and significantly reduces the po

32、tential release of greenhouse gas(GHG)emissions(e.g.,wildfire management)or directly captures existing GHG emissions(e.g.,resilient soil management).Climate HazardsCorresponds to the hazards that an activity either directly or indirectly addresses.Associating each activity with the climate hazard it

33、 is addressing will allow taxonomy users,including CPI,to comment upon the relative financial flows mitigating each risk,as well as providing important information for assessing adaptation relevance.Private ActorsThe taxonomy associates each activity with the private actors that are likely to signif

34、icantly contribute to its investment.This will facilitate more efficient data collection,as the assessment will allow CPI to narrow the range of data sources investigated for each activity.GOAL 2:MACHINE LEARNING MODEL DEVELOPMENT AND EXPANSION OF A DATASET OF PRIVATE ADAPTATION FINANCE FLOWSInforme

35、d by the structure provided by the taxonomy,the process for creating the private adaptation finance data followed a five-step approach:Step 1:Data Scoping.Available data sources are identified based on various criteria such as theme,activity,and actor type.This stage focuses on collecting comprehens

36、ive data,including direct financing information,aggregated market data for specific products,and corporate A&R policies.Step 2:Data Collection.Data is prioritized by its importance and the scale of investment it represents.The collection involves ingesting raw data,which can be obtained through data

37、 sharing agreements,direct downloads,or web scraping.Step 3:Data Tagging.Following collection,a subset of this data is tagged according to a taxonomy to facilitate model training,a process referred to as Data Tagging.Step 4a:Classification Model Development.The tagged data then feeds into the Classi

38、fication Model Development stage,where a machine learning model is developed to classify projects,companies,and funds according to the CPI private adaptation taxonomy.Step 4b:Data Processing.Simultaneous with model development,data processing involves standardizing and combining data from all source

39、s to create a uniform dataset,including adaptation activity attribution.Upon completion of processing data sources into a cohesive dataset,the classification model is applied over project names and descriptions to classify projects according to the CPI adaptation taxonomy.Step 5:Data Analysis.Finall

40、y,the processed and standardized data is analyzed in the Data Analysis stage,which focuses on examining the private adaptation finance dataset to extract insights,trends,or other valuable information.We followed this approach to evaluate climate adaptation finance flows from the seven private instit

41、ution types we evaluate as most likely to be financing adaptation given their ubiquity in Tracking and Mobilizing Private Sector Climate Adaptation Finance5the financial markets,engagement with one another,and exposure to climate risk.While these institutions do engage with one another and while cap

42、ital flows between institution types,the analysis in this report is conducted at the institution level in order to more coherently assess each institutions involvement in adaptation finance.The private sector actors involved in adaptation finance we consider for this work are:commercial banks,asset

43、managers,private equity(PE)/venture capital(VC)firms,pension funds,insurers,corporations,and households and consumers.Through the methodological and data work represented in this analysis,we have increased the annual average tracked private adaptation finance for the period of 2019 to 2022 from our

44、prior finding of USD 1.0 billion to USD 4.7 billion.The most substantial improvements in tracking have come from data on asset managers,commercial FIs,individuals consumers and households,and corporations.Figure 1 summarizes the advancement in tracking achieved in this analysis.Figure 1:Private Adap

45、tation Finance as Tracked in the GLCF and in this Report and Extrapolative Analysis of Untracked Finance(annual average 2019-2022)Previously Tracked in the GLCF*Now TrackedCommercial FIsCorporationsPrivate EquityAsset ManagersConsumers and Households:Tracked(in Section 4.2.7)but not aggregated as no

46、t project level data.Venture Capital:Tracked(in Section 4.2.3)but not aggregated as not project level data.*excluding Philanthropy0.5755%0.4240%0.055%2.5253%1.9341%0.173%0.092%Extrapolative Untracked Private Finance:Unknown Amount1.Asset ManagersWe now track USD 165 million annually at project level

47、,likely a significant underestimate.5.InsuranceNone tracked significant gap.Without detailed reporting on coverage or investment of institutional capital,it remains difcult to gauge the extent of insurers current contribution.6.Pension FundsNone tracked significant gap.True scale of involvement is d

48、ifcult to assess from the current data environment(in the context of USD 47.9 trillion in pension assets across the major 22 pension markets in 2023).7.Private Equity/Venture CapitalNow tracked USD 92 million annually project level and USD 6.3 billion annually in venture-level investment.Likely sign

49、ificant underestimate of project-level PE investment and moderate underestimate of venture-level VC investment.2.Commercial FIsWe now track USD 2.52 billion annually at project level,which is likely close to accurate order of magnitude at project-level but is missing enterprise-level and intermediat

50、ed finance.3.Consumers and HouseholdsNo finance tracked at the project level,USD 48-61 billion(high likelihood adaptation)at transaction-level.Likely close to accurate order of magnitude at transaction-level.4.CorporationsWe now track USD 1.93 billion annually at project level,likely a moderate unde

51、restimate missing especially indirect corporate investment in supply chains,infrastructure upgrades,and internal process innovation.USD1 bnUSD 4.7 bn6Tracking and Mobilizing Private Sector Climate Adaptation FinanceUnder the new approach,for the first time,tracked adaptation finance from the private

52、 sector can also be disaggregated by the likelihood of adaptation relevance.We find that 5%of finance tracked has a high likelihood of being adaptation-relevant(per the approach described in Section 3.1.3),79%has a medium likelihood,and 16%has a low likelihood.We also find that a total of 27%of trac

53、ked finance holds potential for maladaptation or significant harm risk(described in Section 3.1.4),fairly proportionately distributed across the likelihood of adaptation relevance.As noted in Figure 1,even with the advancement made in this report,significant gaps remain in tracking private adaptatio

54、n finance,and a handful of institutionsmost notably insurers and pension fundsremain very difficult to track.The most significant data tracking challenge for each institution is captured below.1.Asset Managers:Difficulty in scoping and collecting data on asset manager investments in companies and li

55、nking that investment to the climate adaptation contribution of companies.2.Commercial FIs:Difficulty collecting data on corporate lending(and associated opacity of activities of recipient corporations).3.Consumers and Households:Because of the nature of consumer and household expenditures,aggregate

56、 project-level data collection is very difficult.Thus,non-project-based market size estimates are critical,but this type of data is challenging to validate and often prohibitively expensive to acquire.4.Corporations:Lack of transparency on climate adaptation-relevant activities funded via corporate

57、capital raising,management,and deployment.5.Insurance:There is very limited reporting on capital allocated from insurers in their role as major institutional investors towards e.g.,climate-resilient infrastructure,water management,and other adaptation-related projects.6.Pension Funds:Difficulty scop

58、ing and collecting any data on pension fund investments to link that investment to the climate adaptation contribution of activities or enterprises financed.7.PE/VC:There is a lack of available data on VC in emerging markets and developing economies(EMDEs)(most notably China,given the likely magnitu

59、de of flows).Tracking and Mobilizing Private Sector Climate Adaptation Finance7TABLE OF CONTENTS1.Introduction 82.Context:Analytical and methodological underpinnings 102.1 CPIs current approach:summary and limitations 102.2 Current taxonomies and reporting approaches and their limitations 122.3 Diff

60、erentiating the current public FI tracking approach from private tracking 133.Methodology 153.1 Taxonomical approach 153.2 Data approach 233.3 Future data collection beyond this work 244.Findings 254.1 Summary of findings 254.2 Institution group/type analysis 275.Next steps and conclusion 49Annexes

61、521.Alternative indicators of institutional progress beyond tracked finance flows 522.Examples of cross-institution flows 523.Tracking consumer and household adaptation finance 558Tracking and Mobilizing Private Sector Climate Adaptation Finance1.INTRODUCTIONAdaptation finance tracked in the Global

62、Landscape of Climate Finance(GLCF)in 2023 reached an all-time high of USD 63 billion annual average for 2021/22,growing 28%from the annual average in 2019/20.This growth still falls far short of the estimated needs for adaptation of USD 212 billion per year by 2030 for developing economies alone.Pub

63、lic actors dominate tracked adaptation finance:private sector adaptation finance tracked by CPI is approximately USD 1.5 billion,only 1.5%of the total USD 63 billion in tracked adaptation finance in 2021/22 on annual average.The actual amount of private sector investment in adaptation is likely sign

64、ificantly higher than the finance captured within CPIs tracking work.Severely limited reporting of private sector adaptation finance creates significant challenges in tracking overall adaptation flows.No climate adaptation finance tracking effort to date has successfully captured aggregate investmen

65、t in the following categories:adaptation-focused SMEs;finance from private equity(PE)/venture capital(VC)firms to adaptation-related early-stage companies;insurance premiums that incentivize resilient construction;consumer spending on adaptation solutions and technologies;or corporate balance sheet

66、finance for adaptation of corporate assets.As discussed in Section 4.1 Summary of Findings,these underreported categories are of special interest because there is anecdotal evidence that they attract adaptation finance,but no systematized method of tracking their financial flows.The lack of availabl

67、e data on private sector adaptation finance yields significant uncertainty regarding current progress on addressing climate vulnerabilities and leaves public and private decision makers without critical information about where to target investment.Limited data and reporting on private sector adaptat

68、ion finance also reinforce the common narrative that there are limited or no viable business models for adaptation.Public finance is critical,but if adaptation is framed as a public finance issue alone,we risk missing the potential to mobilize the private capital required to meet adaptation investme

69、nt needs.The limitations of tracking adaptation finance stem from its highly heterogeneous nature,which yields the following challenges:Context dependency,where an investments classification as adaptation finance is partly dependent on the local climate vulnerability context.This contrasts with the

70、tracking of mitigation finance,which is largely agnostic to the climate vulnerability of the geography in which it is deployed.A lack of standards and reporting requirements means that private actors are not incentivized(via regulation or public demand)to report adaptation finance and may not have t

71、he tools or capacity to identify it as such.Private sector companies do not currently identify their investments as“adaptation.”Those who invest in adaptation often do so without explicit climate-related intent,through revenue-oriented activities such as lowering water costs,reducing crop loss from

72、heat,and mitigating disaster-related losses.As a result,applying public sector approaches to adaptation tracking(discussed in Section 4)is virtually impossible for private actors.This is because public sector approaches have a process-based approach that typically requires both the identification of

73、 climate risks and a statement of intent for a project to be considered adaptation.Tracking and Mobilizing Private Sector Climate Adaptation Finance9In the absence of a central definition,this work defines private climate adaptation finance as financial flows to activities that aim to either:(a)Dire

74、ctly reduce the physical risks posed by climate change(i.e.,climate risks such as heat-resistant crops);or(b)Enable systems and people to better respond to those physical risks(e.g.,through parametric crop insurance).2Given the importance of accurate tracking of private sector adaptation finance and

75、 the challenges in doing so outlined above,the work represented in this report has two goals:1.Develop a taxonomy for private adaptation finance tracking that is comprehensive,descriptive,and in harmony with wider efforts in the community,building upon existing attempts to define and classify adapta

76、tion finance in both a public and private context.Structure the taxonomy so that it can be increasingly incorporated into CPIs existing tracking of climate financeincluding the GLCF.2.To build a machine learning model and dataset that expand the scope of trackable private adaptation finance.The mode

77、l(which is ultimately intended to be open source,via GitHub repository)will allow CPIand ultimately the broader community,including policymakers and capital allocators in the private sectorto more readily assess the adaptation relevance of investments.The dataset builds upon prior adaptation finance

78、 tracking approaches,with the inclusion of additional data sources and the application of machine learning tools to efficiently and accurately categorize finance flows according to the taxonomy developed.Until private actors are required to report on adaptation finance,tracking organizationsincludin

79、g CPImust develop and test a broad range of methods for sensibly estimating and assessing private sector adaptation finance.2 This definition of climate adaptation finance most closely follows that advanced by the MDBs in the Joint Methodology for Tracking Climate Change Adaptation Finance report(Jo

80、int MDB Working Group,2021).10Tracking and Mobilizing Private Sector Climate Adaptation Finance2.CONTEXT:ANALYTICAL AND METHODOLOGICAL UNDERPINNINGS2.1 CPIS CURRENT APPROACH:SUMMARY AND LIMITATIONSAccording to CPIs tracking of global adaptation finance flows for over a decade through the GLCF,almost

81、 all tracked investments(98%)are,and have been,from public actors.Of the limited private capital tracked at the project levela biennial average of USD 1.5 billion in 2021/22commercial financial institutions(FIs)provided 38%,philanthropies 31%,corporations 28%,and private funds 3%(see Figure 2).3 Thi

82、s limited pool of tracked private adaptation finance captured by the GLCF consists of:(i)Philanthropic grant funding to AFOLU(agriculture,forestry,and other land use)projects,as reported through the OECD-DAC climate finance database;and(ii)private commercial financing for water and wastewater-relate

83、d projects.Consistent with their mandate,some philanthropies channeled adaptation finance in the form of grants,almost all of which went to the AFOLU sector.The other private actors channeled their adaptation finance through project-level market rate debt(60%)and project-level equity(40%),exclusivel

84、y to the water and wastewater sector.This latter pool of adaptation investments is largely for the construction and operation of desalination plants which tend to be cost intensive.Figure 2:Overview of Tracked Private Adaptation Finance Flows(USD million,20212022)3 CPIs global climate finance tracki

85、ng methodology prioritizes primary data on project-level investment due to its relevance to impact on the real economy.Corporations$424Project-levelequity$421Project-levelmarket rate debt$638Commercial FI$588Unknown$14Funds$62Grants$466Philanthropies$465Water&Wastewater$1,065AFOLU$397Other&cross-sec

86、toral$67BN USD ANNUAL AVERAGE1529SOURCES AND INTERMEDIARIESWhich type of organizations are sources or intermediaries of capital for climate finance?INSTRUMENTSWhat mix of financial instruments are used?SECTORSWhat is thefinance used for?Tracking and Mobilizing Private Sector Climate Adaptation Finan

87、ce11Unlike public actors,which are increasingly expected to report their adaptation finance,there is no mandatory reporting mechanism around adaptation and resilience(A&R)for private actors.Though various private actors have signed up to reporting frameworks concerning decarbonization and net zero(s

88、uch as CDP and GRESB),no such framework exists for adaptation or broader investment in climate solutions.The lack of such an adaptation framework is largely due to the absence of universal outcome metrics for adaptation against which to measure and manage progress(unlike emissions reductions in the

89、mitigation context).In an alternative scenario,regulators would mandate reporting on adaptation activities by the private sector,particularly activities of primary investment into A&R solutions.Failing that,third-party organizations like CPI must continue to devise robust and meaningful methodologie

90、s for identifying private adaptation finance using whatever data is available.Recognizing the difficulties inherent to private sector adaptation finance tracking,we observed the following limitations in data collection due to a lack of standards and comparable data:1.Screening is based on limited pr

91、oject information:The data sources from which adaptation finance could be extracted,such as the World Banks PPI dataset or Green Bond post-issuance documentation,contain limited project-level descriptions.This makes it difficult to validate eligibility.Arguably,more substantive qualifying evidence s

92、hould be used alongside these limited project descriptions for robust classification of adaptation finance.For example,it would be useful to validate whether each project is located in an area facing a particular climate risk and,in turn,whether that project is expected to alleviate that identified

93、risk.2.Quantifying private adaptation finance is different fromthe approach taken by public actors:Public actors often report the cost of a particular project component or sub-component as the adaptation finance embodied within their wider investment.This is known as the incremental approach to quan

94、tifying adaptation finance.Other public actors will apply a set coefficient to the total investment cost,dependent upon whether adaptation was the primary or secondary objective of the project.This is known as the proportional approach to quantifying adaptation finance.4A primary goal of the data co

95、llection component in this assignment is to expand the limited pool of data sources and to develop a more sophisticated approach to capturing private adaptation finance.There is an opportunity to develop a distinct dataset and taxonomy for private adaptation finance which will allow CPI and others t

96、o provide a more nuanced assessment in subsequent climate finance tracking efforts and will facilitate stakeholders advocacy efforts to improve incentives for labeling private adaptation finance.4 For private data,the approach of CPI for the GLCF has been to take the full project investment cost of

97、any project classified by CPIs Taxonomy as adaptation finance.This is because the exact project component or sub-component associated with adaptation is unknown from the limited project information.This likely leads to a moderate overestimation of private adaptation finance for the projects tracked.

98、On the other hand,the large gap in the labeling of adaptation-relevant finance yields an underestimation of net private adaptation finance.12Tracking and Mobilizing Private Sector Climate Adaptation Finance2.2 CURRENT TAXONOMIES AND REPORTING APPROACHES AND THEIR LIMITATIONSAt the moment,only public

99、 FIs have harmonized principles for mandated reporting on adaptation finance,jointly established by the International Development Finance Club(IDFC)and multilateral development banks(MDBs)in 2015(MDBs&IDFC,2023).Broadly,these principles stipulate that adaptation finance must be qualified by:1.A cont

100、ext of climate risks,vulnerability,and impacts,2.Clear intent to address such issues,and3.Direct linkage between an investments activities and the aforementioned context.Where possible,self-reported public adaptation finance is further quantified based on a principle of“disaggregation”that is,only f

101、inancing that directly supports adaptation activities is included in reported amounts.While all of these principles are incorporated into the adaptation tracking and reporting methodologies implemented by IDFC members,MDBs,and governmental bodies following OECD-DAC Rio Markers guidance,5 the overall

102、 landscape of adaptation tracking remains fragmented.The IDFC principles lack sector-specific guidance and project-specific investment criteria.As a result,many FIs,especially private sector entities,do not directly follow these principles and instead rely on a fragmented landscape of adaptation inv

103、estment frameworks6 and taxonomies7 to inform and qualify their investments.A June 2024 study by Oxford Universitys Resilient Planet Finance Lab identified 36 unique adaptation investment frameworks,of which 26 were labeled as taxonomies(Spacey,et al.,2024).To some extent,these taxonomies build on t

104、he work of the IDFC and MDBs by offering sector-specific guidance and further adaptation evaluation criteria.For example,the EU Sustainable Investment Taxonomy helped mainstream the concepts of substantial contribution,do no significant harm,and minimum safeguards for adaptation taxonomies(EU Taxono

105、my,2020).However,these adaptation taxonomies and frameworks remain largely siloed,as illustrated in Table 2.Most do not include the same sectors,investment criteria,or evaluation standards and diverge in their classification of adaptation activities.Therefore,practices vary significantly at the inst

106、itution level.In particular,the criteria used to assess the context of climate risks,vulnerability,and impacts of adaptation projects may vary across institutions and can differ even further due to differences in data accessibility and quality.A reason for this divergence among taxonomies and framew

107、orks is differences in intended use cases which can include portfolio risk guidance,investment structuring,and financial flow tracking.Similarly,how adaptation finance is disaggregated is also subject to institutional differences in access to project-level information linking finance to specific ada

108、ptation activities.Where 5 See OECD DAC Rio Markers for Climate for specific guidance.6 Investment frameworks are sets of principles that help institutions direct and track their resources and achieve desired outcomes from their investments.7 Taxonomies are classification systems used to organize a

109、set of activities,objects,or other types of groupings.Adaptation taxonomies are usually normative and establish,either through a list or criteria,what should be considered as adaptation.Tracking and Mobilizing Private Sector Climate Adaptation Finance13this information is lacking,institutions are in

110、structed to use qualitative or experience-based assessments to implement conservative disaggregation.The European Bank for Reconstruction and Development(EBRD),for example,categorizes adaptation projects as either“adapted”(i.e.,direct management of climate risks)or“enabling”(i.e.,indirect facilitati

111、on of climate risk management),and then assigns a percentage share of the project financing as adaptation finance based on a secondary qualitative assessment of how extensively project activities address climate risks(EBRD,2023).Efforts,such as Climate Bond Initiatives Resilience Taxonomy Advisory G

112、roup,intend to bring convergence to the adaptation taxonomy space(CBI,2024).However,a lack of clear guidance from actors across the adaptation ecosystem prevents private sector actors from confidently understanding and reporting their adaptation activities,which inhibits most tracking efforts.Table

113、2:Examples of Adaptation Taxonomies and Frameworks8NameTypeOverviewIntended PurposeEU Sustainable Investment TaxonomyTaxonomyDetails economic activities that are aligned with a net zero trajectory and other environmental goals,including adaptation.To guide high carbon-emitting sectors on issues such

114、 as adaptation(notably excludes agrifood systems).Climate Resilience and Adaptation Financing Taxonomy(CRAFT)TaxonomyOffers a classification scheme to assess the adaptive nature of fiscal spending through a normative,three-point scale.To track adaptation fiscal spending deployed in response to COVID

115、-19.The Tailwind TaxonomyTaxonomyEstablishes a classification system for adaptation activities with sector-specific examples and key considerations for investments.To guide philanthropic and early-stage capital providers on investing in adaptation projects.Climate Bonds Initiatives Climate Resilienc

116、e PrinciplesInvestment FrameworkSets out guiding principles for resilience bond issuance and provides some sector-specific examples.To guide the integration of adaptation criteria into the Climate Bonds Standard.2.3 DIFFERENTIATING THE CURRENT PUBLIC FI TRACKING APPROACH FROM PRIVATE TRACKINGBecause

117、 private actors do not have a mandate to self-report adaptation investment,9 private adaptation finance must be tracked by top-down methods through qualifying adaptation investments based on available information.While the principles followed by public FIs reporting on adaptation finance could be br

118、oadly applicable to tracking private adaptation finance,in practice,data available to an external organization(i.e.,CPI)does not always contain the level of detail needed to replicate the internal assessments that public institutions carry out while self-reporting.8 These four taxonomies and framewo

119、rks were selected based on their frequency of use and to demonstrate the breadth of the universe of adaptation taxonomies and frameworks.9 Voluntary reporting guidelines(TCFD and ISSB S1,2)have suggested reporting green revenues or capex in climate positive investment,but this guideline is not widel

120、y adopted by the private sector.Moreover,these guidelines do not specify methods for reporting resilience-related investment.14Tracking and Mobilizing Private Sector Climate Adaptation FinanceAt best,context,intent,and linkages between tracked investments and climate risks can be inferred from good

121、quality data,but key qualifying information such as project description,and the intent of the investment to improve resilience is often subject to data gaps.For example,investing in air conditioning in regions with rising temperatures is a common practice,but there is often little information on whe

122、ther the explicit intent of the investment is climate adaptation.Disaggregation is also challenging to implement by organizations not directly involved in the project(s),as data collection is not always possible at the activity-level.External tracking of adaptation finance through top-down methods t

123、ypically requires a taxonomy to execute.For instance,the EU Sustainable Finance Taxonomy lists economic activities alongside a set of criteria for climate adaptation relevancy,which can allow investment into a given activity to be tracked as adaptation finance where it meets stated criteria.Across e

124、xisting taxonomies,tracked adaptation finance is at minimum linked to activities that substantially contribute to climate adaptation,and sometimes is qualified with additional factors that suggest relevant climate vulnerability context and intent to manage climate risks.Under this approach,while a t

125、op-down approach to tracking private adaptation finance may not completely replicate the comprehensiveness of public sector assessments for self-reported bottom-up adaptation investment data,when applied rigorously and with proper qualification,this approach can at least reasonably approximate the p

126、rinciples for tracking adaptation finance outlines by the IDFC and MDBs in 2015.Tracking and Mobilizing Private Sector Climate Adaptation Finance153.METHODOLOGY3.1 TAXONOMICAL APPROACHInformed by the context above regarding existing methodologies for tracking adaptation finance and their limitations

127、 for private tracking in practice,our approach tracks financing for an activity as adaptation finance if that activity meets all of the following criteria:1.The activitys end users or beneficiaries(people,assets,etc.)are located in a setting with material physical climate risks/impacts.2.The activit

128、y materially reduces physical climate risks to the project or investment in which the activity occurs,materially reduces physical climate risk in other economic activities,or addresses systemic barriers to adaptation.3.The contribution to adaptationi.e.,adaptation-related outcomescan be defined and

129、qualitatively and/or quantitatively measured.4.The activity adopts the best available knowledge to provide solutions that do not lead to maladaptation of the direct user or the system in which the user operates and that manage against significant harm to other social and environmental objectives.In

130、order to align with these principles and criteria,we have developed an adaptation taxonomy that can be used to track private adaptation finance.This classifies climate adaptation activities according to a set of seven themes,derived from the adaptation taxonomies developed by Tailwind and CBI and ar

131、e modified for the purpose of tracking financial flows.The intention here is to develop a consistent approach to identifying adaptation finance flows for private actors.The seven themes reflect the recommendations in the Global Goal on Adaptation Framework(COP28:CMA5,art.9)and are associated with br

132、oader objectives of the UN Sustainable Development Goals.Within each theme,the taxonomy identifies a set of adaptation sectors,subsectors,and activities.The activities are intended to be:(a)collectively exhaustive of all the adaptation activities that would potentially receive trackable private fina

133、ncing and(b)mutually exclusive from each other activity to the greatest extent possible.At the same time,the taxonomy is a living document that is malleable and open to revisions in structure as well as the addition of missing sectors,subsectors,or activities.16Tracking and Mobilizing Private Sector

134、 Climate Adaptation FinanceTable 3:Adaptation Themes and DefinitionsThemeType of activities coveredAgrifood SystemsActivities that improve the resilience of our food systems.Activities can be along the entire food system value chain and include primary production,processing,waste treatment,logistics

135、,storage,wholesaling,retail,and other support services.EcosystemsActivities that aim to protect or improve terrestrial,freshwater,coastal,or marine ecosystems.Activities include the protection of their biodiversity,natural capital,and ecosystem services.HealthActivities that either improve the resil

136、ience of our existing health systems or better allow us to respond to emerging health challenges and climate-related emergencies.Activities can occur along the health value chain and include facilities,products,and the delivery of treatment and care.Industry and CommerceActivities that improve the r

137、esilience of manufacturing operations,commercial trade,service-based industries,and other industrial activities.The risk hardening of extractive industries like mining is included but considered maladaptive or likely to cause significant harm.InfrastructureActivities that improve the resilience of o

138、ur buildings,urban space,transportation,information,waste,and energy systems.The risk hardening of fossil fuel-based systems is included but considered maladaptive or likely to cause significant harm.Social SystemsActivities that aim to protect or improve the social well-being of people.Activities c

139、an cover the protection of cultures,climate education,public administration,and social protection.Water and Sanitation Activities that either expand access to and improve the resilience of WASH(water,sanitation,and hygiene)services or better allow us to adapt to flooding and drought conditions.The t

140、axonomy then tags each activity with several additional elements:1.Secondary Theme2.Activity Type3.Cities Relevance4.Gender Relevance5.Mitigation Co-Benefit6.Adaptation Likelihood7.Maladaptation or Significant Harm Risk8.Climate Hazards9.Private ActorsAn example of this assessment applied to the“Imp

141、roved Cultivars”activity(e.g.,drought resilient or heat-resistant crops)is shown in Table 4,and details on each of the nine elements are provided in the subsections below.Tracking and Mobilizing Private Sector Climate Adaptation Finance17Table 4:Taxonomy Application to Improved CultivarsThemeSectorS

142、ubsectorsActivitySecondary ThemeActivity TypeCities RelevanceAgrifood SystemsAgricultural ProductionCrop ProductionImproved CultivarsNoProduct or ServicesNoGender RelevanceMitigation Co-BenefitAdaptation Likelihood Maladaptation or Significant Harm RiskClimate HazardsPrivate ActorsNoNoHighNoHeat Str

143、ess,Cold Stress,Water StressPE/VC,SMEs,Large Multinationals,Domestic Corporations3.1.1 SECONDARY THEMEEach activity is assigned to the theme in the taxonomy with the greatest amount of specificity,and according to where the activitys impacts most directly materialize.While each activity is assigned

144、one theme,in instances where an activity could reasonably belong to another,a secondary theme is also assigned.For example,the“Efficient Irrigation”activity under the“Agrifood Systems”theme has a secondary theme tag of“Water and Sanitation”to account for its role in water conservation and provision.

145、3.1.2 ACTIVITY TYPECPI classifies each climate adaptation activity as(a)a product or service,(b)an enabling activity,or(c)intelligence.a.Products and services respond to climate risk by directly reducing vulnerability or exposure to one or more climate hazard(s)and its impacts.These activities inclu

146、de pest management,forest protection,metal manufacturing risk hardening,and artificial water storage.b.Enabling activities respond to climate risk indirectly by building the capacity of systems to better respond to a climate hazard(s)and its impacts.These activities are associated with efforts like

147、public disaster response and recovery planning,public adaptation plans,and crop insurance.c.Intelligence is a subsect of enabling activities that indirectly responds to climate risk by providing information that enables better climate adaptation.Examples of these activities are flood forecasting sys

148、tems,disease monitoring and alert,and climate change news and public media.This classification enables CPI to generate more granular data in a structured manner and to align with other taxonomical efforts.It allows for a comparison between activities that actively embed climate resilience and those

149、that enable climate adaptation.This,in turn,can inform a more nuanced conversation on existing flows and finance gaps,and how these investment gaps can be most effectively closed.CPIs classification of activity type is just one of the various approaches to classifying adaptation efforts.Examples of

150、other breakdowns are shown in Table 5.18Tracking and Mobilizing Private Sector Climate Adaptation FinanceTable 5:Adaptation Activity Types(non-exhaustive)NameBreakdownClimate Bonds Initiative10Adapting Measure:Measures that make the activity in which they are implemented more climate resilient.Enabl

151、ing Measure:Measures that are implemented within an activity to make other activities more resilient.Adapted Activity:Activities that make just the activity itself more climate resilient.Enabling Activity:Activities that make the activity itself more climate resilient,as well as other activities.Bos

152、ton Consulting Group(BCG)11 Protect:Activities that safeguard value by either financing activities that protect against future losses or aligning investments with resilient companies.Grow:Activities that are direct investments in companies that are developing resilient solutions or product lines.Par

153、ticipate:Activities that represent collaboration with the public sector through either directly allocating capital to public adaptation or investing in financial vehicles that direct capital to resilience initiatives.Global Commission on Adaptation12Reduce and Prevent:Activities that shrink the clim

154、ate risk curve through climate-proofing infrastructure,land-use planning,and investments in R&D.Prepare and Respond:Activities that help communities react quickly to climate risks through early warning systems and strengthen response measures.Restore and Recover:Activities including other enabling m

155、easures that allow communities to endure climate risks such as insurance and build back better initiatives.3.1.3 ADAPTATION LIKELIHOODThe concept of adaptation likelihood aims to capture how likely an activity listed in the taxonomy is to meet our definition of adaptation,without any knowledge of lo

156、cal climate hazards.This indicator describes our confidence that a specific project that matches an activity in the taxonomy can be considered as adaptation without any further context.We tag according to scale of low,medium,and high,as defined in Table 6.To support our assessment of adaptation like

157、lihood,we have conducted a literature review for each activity to determine how that activity can help respond to climate hazards.For example,the activity of“desalination”is tagged as“high”since it helps respond to the climate hazard of drought in almost all contexts by augmenting additional water r

158、esources,whereas“improved breeds”is tagged as“low”since it can help respond to climate hazards in some circumstances(e.g.,heat-tolerant cows)but usually does not contribute to adaptation.Adaptation likelihood does not consider the intent behind an activity but only its effects.10 Climate Bonds Resil

159、ience Taxonomy Methodology,CBI,202411 BCG.(2023).From Risk to Reward.https:/www.globalresiliencepartnership.org/wp-content/uploads/2023/12/from-risk-to-reward-report.pdf12 GCA.(2019).Adapt Now:A Global Call for Leadership on Climate Resilience.https:/gca.org/wp-content/uploads/2019/09/GlobalCommissi

160、on_Report_FINAL.pdfTracking and Mobilizing Private Sector Climate Adaptation Finance19Table 6:Adaptive Likelihood DefinitionsAdaptive LikelihoodDefinitionHighThe activity helps respond to one or more climate hazards in almost all circumstances.If 10 randomly selected projects that match a certain ac

161、tivity were selected,8 or more could be considered as adaptation activities.MediumThe activity helps respond to one or more climate hazards in many circumstances.If 10 randomly selected projects that match a certain activity were selected,between 4 and 7 could be considered as adaptation activities.

162、LowThe activity helps respond to one or more climate hazards in some circumstances.If 10 randomly selected projects that match a certain activity were selected,3 or fewer could be considered as adaptation activities.3.1.4 MALADAPTIVE OR SIGNIFICANT HARM RISKThe tagging of Maladaptation or Significan

163、t Harm Risk identifies if an activity has a high potential of either:a.Being considered maladaptive,orb.Causing significant harm to other social and environmental objectiveseven when minimum compliance and industry standards are followed.For each activity in the taxonomy,maladaptation is assessed wi

164、th reference to IPCC AR6 definition13 and significant harm risk with reference to the EU Taxonomy.14Activities are defined as maladaptive15 if they significantly increase vulnerability to climate change through:1.Increasing social vulnerability or causing unintended harm to humans,2.Increasing clima

165、te-related impacts on ecosystems or ecosystem services,3.Worsening the present or future condition of marginalized groups like low-income households,ethnic minorities,and women,or4.Inhibiting deep and systemic change necessary for addressing climate change.Activities are defined as bearing significa

166、nt harm risk,as defined in the EU Taxonomy,16 if they significantly inhibit other social and environmental objectives,including:1.Climate change mitigation,2.Sustainable use and protection of water and marine resources,3.The transition to a circular economy,4.Pollution prevention and control,or13 IP

167、CC.(2021).Figure 17.10.https:/www.ipcc.ch/report/ar6/wg2/figures/chapter-17/figure-17-010 14 European Union.(2020).Document 32020R0852.https:/eur-lex.europa.eu/eli/reg/2020/852/oj15 In The IPCCs AR6,maladaptation includes“causing additional GHG emissions”,which is excluded from our definition since

168、it is captured in our definition of significant harm under criteria“(5)climate change mitigation”.16 In the EU Taxonomy,significant harm includes activities that harm“climate change adaptation”,which is excluded from our definition since it is captured in our broader definition of maladaptation.20Tr

169、acking and Mobilizing Private Sector Climate Adaptation Finance5.The protection and restoration of biodiversity and ecosystems.Maladaptation and Significant Harm Risk are not binaries but rather a continuum where universal thresholds are difficult to specify.Yet,we assess the potential for both as b

170、inaries in the taxonomy for simplicity.Future work could address this simplification and set more precise thresholds.3.1.5 CITIES RELEVANCESeveral taxonomies,such as the Tailwind Taxonomy17 and the Climate Bonds Resilience Taxonomy,18 include a separate theme for cities and human settlements.The CPI

171、 taxonomy does not because it is designed for tracking purposes and cities and human settlements is considered cross-cutting across all themes.To address this difference,CPI tags each activity for its relevance to cities.An activity is tagged as having cities relevance if it significantly enhances c

172、ities adaptive capacity and resilience to climate-related risks.Activities are included if they are usually located within city boundaries or aimed to address a climate risk faced by a city.Purely industrial activities such as manufacturing are excluded.Cities refer to functional urban areas,not adm

173、inistrative divisions,and encompass urban centers,towns,and suburbs but exclude villages and dispersed rural areas,as defined by the degree of urbanization definition.19 3.1.6 GENDER RELEVANCEOne objective that has a growing prevalence within climate finance is gender equity which is tagged across t

174、he activities in the taxonomy.The tagging of gender relevance corresponds to any activity that significantly and disproportionately benefits women or other marginalized genders.Almost all activities can be implemented in a way that is gender-responsive,but the tagging of gender relevance is intended

175、 to identify activities that nearly always contribute to gender equity.3.1.7 MITIGATION CO-BENEFITAn objective that is central to climate finance is the mitigation of GHG emissions,which is tagged across the activities in the taxonomy.Any activity that directly and significantly reduces the potentia

176、l release of GHG emissions(e.g.,wildfire management)or directly captures existing GHG emissions(e.g.,resilient soil management)is tagged as having a mitigation co-benefit.This is further categorized by the primary mitigation mechanism used;either(a)carbon sequestration or(b)avoided emissions.3.1.8 A

177、SSOCIATED CLIMATE HAZARDSThe labeling of climate-relevant hazards corresponds to the hazards that an activity either directly or indirectly addresses.The categories are based on the framing of climate-related 17 Tailwind.(2024).Tailwind Taxonomy for Adaptation and Resilience Investments.https:/ CBI.

178、(2024).Climate Bonds Resilience Taxonomy.19 GHLS.(2020).The Degree of Urbanisation,a new global definition of cities,urban and rural areas.https:/human-settlement.emergency.copernicus.eu/degurba.phpTracking and Mobilizing Private Sector Climate Adaptation Finance21hazards outlined in the EU Sustaina

179、ble Finance Taxonomy and Climate Bond Resilience Taxonomy.20,21 Each hazard example can be classified as either acute(high intensity over limited time periods)or chronic(slow-onset),since adaptation must account for both rapid and gradual changes in the climate.Associating each activity with the cli

180、mate hazard it is addressing will allow those using the taxonomy,including CPI,to comment upon the relative financial flows mitigating each risk,as well as providing important information for assessing adaptation relevance.For example,by cross-referencing the risks an activity addresses with the ris

181、ks present in the geography to which the investment is directed.Table 7:Climate HazardsClimate HazardSub-CategoriesAcute or ChronicHeat StressAverage surface temperature increaseChronicAverage ocean temperature increaseChronicExtreme heat eventsAcuteMarine heatwavesAcuteCold StressAverage surface te

182、mperature during winterChronicCold spellsAcuteSnowfall and ice stormsAcuteWater StressMeteorological droughtChronicHydrological droughtChronicGroundwater salinizationChronicStorm ConditionsWind speed during stormsAcuteTropical cyclonesAcuteSand and dust stormsAcuteFloodingRiparian floodingAcuteHeavy

183、 precipitation eventsAcuteCoastal floodingAcuteMass MovementLandslidesAcuteCoastal erosionChronicWildfire ConditionsWildfiresAcuteMarine ConditionsCoral reef bleachingChronicSea water acidificationChronic20 EU TEG.(2020).Taxonomy Report:Technical Annex.https:/finance.ec.europa.eu/system/files/2020-0

184、3/200309-sustainable-finance-teg-final-report-taxonomy-annexes_en.pdf21 CBI.(2024).Climate Bonds Resilience Taxonomy.22Tracking and Mobilizing Private Sector Climate Adaptation Finance3.1.9 LIKELY PRIVATE ACTORSThe taxonomy associates each activity with the private actors that are likely to signific

185、antly contribute to its investment.This assessment will facilitate more efficient data collection,as it will allow CPI to narrow the range of data sources investigated for each activity,as well as comment on the relative importance of each actor type in financing A&R.An exhaustive definition of each

186、 private actor type,as well as examples of the types of activities the private actor finances,can be found in Section 4 of this paper.3.1.10 ADDITIONAL ELEMENTS FOR FUTURE WORKSeveral descriptive elements were not included in this initial iteration of the private adaptation finance taxonomy due to s

187、coping constraints but should be evaluated in future revisions.These include normative assessments of the adaptive value of each adaptation activity and tagging for other overlapping environmental and social objectives.One element that should be prioritized for future work is the additionality of ad

188、aptation investments.The concept of additionality qualifies the incremental spending that would not have occurred if not for the presence of climate hazards.In other words,the assessment of additionality attempts to separate the amount of finance being spent in direct response to a climate hazard,wh

189、ether intentionally or not,from what would have been invested in the absence of a warming climate.For example,desalination activities help respond to the climate hazard of drought in almost all circumstances and are therefore labeled as having“high”adaptation likelihood.Yet,a significant amount of t

190、he total spending on desalination would still have occurred in a world without anthropogenic climate change,since most desalination plants are located in naturally water-scarce regions with growing populations.In this example,additionality qualifies the incremental amount of financing going towards

191、desalination specifically to address climate hazards,as opposed to business-as-usual desalination needs.On a macro scale,assessing the additionality of adaptation finance can help translate the identification of climate hazards into investments that address the corresponding risks.Namely,adaptation

192、activities that are evaluated as highly additional would then be targeted for investment support,given that they are less likely to be funded under business-as-usual conditions.However,the comparative analysis necessary for rigorously evaluating additionality on a project-by-project basis would requ

193、ire resources and data that are not within the scope of this project.Instead,a preliminary assessment of additionality likelihood can be used to assign a low,medium,or high value for each adaptation activity.The exact structure and criteria need to be further developed,but the inclusion of additiona

194、lity in future taxonomical work will be important for identifying the amount of finance being spent in direct response to climate change.3.1.11 TRACKING FINANCIAL FLOWS USING THE UPDATED TAXONOMYApplying the structure provided by the taxonomy,we sourced data on adaptation projects and then categoriz

195、ed their financial flows.We then used a large language machine learning model,developed by CPI and Vibrant Data Labs(VDL),to classify financial flows based on the activities Tracking and Mobilizing Private Sector Climate Adaptation Finance23in the taxonomy using project,company,and fund descriptions

196、.We then conducted an analysis on the investment tracked to determine:The current state of global private adaptation investment,The investment going to each activity,subsector,sector,and theme,Investment and reporting gaps revealed by the data gathered,and Recommendations on improvements in data col

197、lection,as well as reporting standards for private actors.By engaging with a broad range of actors focused on assessing the state of adaptation finance,both in a public and private context,and by aligning our own taxonomy with Tailwind and CBI,CPI aims to continue to use this initial taxonomy develo

198、pment and data collection effort to help build consensus on how adaptation is tracked and reported.Improved clarity will leave investors with greater confidence and help unlock capital that is seeking A&R-based investment,but as yet lacks assurance to deploy.Our data collection approach,as outlined

199、below,is limited by the quality of data available.As such,the data presented in this report is necessarily a subset of total private adaptation flows.It does,however,represent a significant improvement upon existing efforts to track private adaptation finance,as well as providing a basis for further

200、 development.3.2 DATA APPROACHDue to the challenges with collecting adaptation-related financial flows from private organizations outlined in Section 2.1,various approaches were combined to arrive at a reasonable estimate of global adaptation investment.Figure 3 visualizes these approaches,which are

201、 further detailed below.Figure 3:Data Approach FlowData ScopingData TaggingData CollectionClassification ModelDevelopmentProcess DataDevelop EstimationTechniquesAnalysisIdentify available data sources by:Theme Specific Activity Actor TypeIncluding data on direct financing,aggregated market data for

202、specific products and corporate A&R policies.Tag subset of data according to taxonomy for model training.Prioritize data by importance and scale of investment.Ingest raw data(data sharing agreements,direct download,web scraping).Develop Machine Learning Model for classifying projects,companies,and f

203、unds according to CPI private adaptation taxonomy.Standardize and combine data from all sources.Where suitable,develop estimation techniques for private adaptation activities.Analysis of private adaptation finance dataset.24Tracking and Mobilizing Private Sector Climate Adaptation FinanceThe process

204、 for creating the private adaptation finance dataset begins with Data Scoping,where available data sources are identified based on various criteria such as theme,specific activity,and actor type.This stage focuses on collecting comprehensive data,including direct financing information,aggregated mar

205、ket data for specific products,and corporate A&R policies.Data Sources identified include World Bank Private Participation in Infrastructure data,focusing on large-scale infrastructure projects;Luxembourg Green Exchange green bond posy issuance data;CPIs GLCF;Crunchbase for early-stage VC investment

206、;and CDP for assessment in corporate adaptation activities.Once the relevant data sources have been scoped,the next step is Data Collection.In this phase,data is prioritized by its importance and the scale of investment it represents.The collection involves ingesting raw data,which can be obtained t

207、hrough data sharing agreements,direct downloads,or web scraping.Following collection,a subset of this data is tagged according to a taxonomy to facilitate model training,a process referred to as Data Tagging.The tagged data then feeds into the Classification Model Development stage,where a machine l

208、earning model is developed to classify projects,companies,and funds according to the CPI private adaptation taxonomy.Simultaneously,Process Data involves standardizing and combining data from all sources to create a uniform dataset,including adaptation activity attribution.Upon completion of process

209、ing data sources into a cohesive dataset,the classification model is applied to project names and descriptions to classify projects according to the CPI adaptation taxonomy.In some cases,there is also a need to Develop Estimation Techniques,which involves creating methods to estimate private adaptat

210、ion activities where direct data may not be available.Finally,the processed and standardized data is analyzed in the Data Analysis stage,which is focused on examining the private adaptation finance dataset to extract insights,trends,or other valuable information.3.3 FUTURE DATA COLLECTION BEYOND THI

211、S WORKThrough this work,CPI has created a dataset of private adaptation as defined by the taxonomy outlined above.Because this is the first attempt at applying the taxonomy,and due to constraints on time,there will inevitably be gaps in data collection.Data collection in subsequent iterations of wor

212、k to track private sector adaptation finance will be informed by the information gathered in this work.The lack of rich textual sources to assess the adaptation activity a project,company,or investment belongs to has been the primary limiting factor.Through development CPI and our partners at VDL ha

213、ve refined the approach of applying the model as well as carried out extensive manual labeling.The dataset created for this report will be an invaluable basis for further model development.The expansion of CPIs collection of adaptation finance data is expected to come from multiple sources.Purchases

214、 of private datasets,as well as expanded use of AI to extract further relevant information from public sources are promising avenues to improve clarity to an opaque and nuanced area of climate finance.Additionally,as we collaborate with partners to disseminate the CPI taxonomy,and the Tailwind Taxon

215、omy on which it is based,we expect to facilitate a wider conversation and bring in additional expertise and data from these partners.This will allow CPI and others to further expand and refine the data collection process for private adaptation finance.Tracking and Mobilizing Private Sector Climate A

216、daptation Finance254.FINDINGS4.1 SUMMARY OF FINDINGSDue to the inherent difficulties of tracking climate adaptation investments in the private sector,this analysis combines multiple approaches to provide as comprehensive a view of these investments as is feasible.The analysis captured in this sectio

217、n involves widening the scope of assessed flows relative to prior adaptation tracking efforts,identifying not just investment at project level but also broader investment trends.For direct project-level investment,we have significantly advanced CPIs previous estimates of private adaptation finance.W

218、e have also advanced our ability to specify precisely the kind of adaptation activity the investments are supporting.Through the methodological and data work represented in this analysis,we have increased total tracked adaptation finance from the private sector from USD 1.0 billion annual average fr

219、om 2019 to 2022 in prior analysis to USD 4.7 billion annual average over the same period.The most substantial improvements in tracking have come from data on asset managers,commercial FIs,consumers and households,as well as corporations.Figure 4:Adaptation Investment Comparison of Prior and Current

220、TrackingWe find that the vast majority of project-level investment is directed toward the waste and wastewater sector,specifically WASH services,where efforts are directed at improving the efficiency and resilience of water management systems.201920202021202201,0002,0003,0004,0005,0006,0007,0008,000

221、9,0003971.18306.17514.97600(USD million)Prior estimateCurrent data26Tracking and Mobilizing Private Sector Climate Adaptation FinanceFigure 5:Adaptation Investment by ThemeTracked adaptation finance from the private sector under the approach captured in this report can be disaggregated by the likeli

222、hood of adaptation relevance.We find that 5%of finance tracked has a high likelihood of being adaptation(per the approach described in Section 3.1.3),79%has a medium likelihood,and 16%has a low likelihood.We also find that a total of 27%of finance tracked holds potential for maladaptation or signifi

223、cant harm risk(described in Section 3.1.4),fairly proportionately distributed across likelihood of adaptation.Figure 6:Private Adaptation Investment by Adaptation Likelihood201920202021202205001,0001,5002,0002,5003,0003,5004,0004,5005,0005,5006,0006,5003519.56444.95872.14852HealthIndustry and Commer

224、ceEcosystemsAgri-Food SystemsSocial SystemsInfrastructureWater and SanitationTheme(USD million)MediumLowAdaptationLikelihoodHighMaladaptation orSignificant Harm PotentialNo Maladaptation orSignificant Harm Potential2221,3172,8663538805Value in USD millionTracking and Mobilizing Private Sector Climat

225、e Adaptation Finance27Even with the advancement made in this report,significant gaps remain in tracking private adaptation finance,and a handful of institutionsmost notably insurers and pension fundsremain very difficult to track.Figure 7 summarizes finance tracked in the GLCF,newly tracked finance

226、per this analysis,and an extrapolative sketch of untracked private finance from seven key institution types,each then described in detail in Section 4.2.Figure 7:Private Adaptation Finance as Tracked in the GLCF and in this Report and Extrapolative Analysis of Untracked FinancePreviously Tracked in

227、the GLCF*Now TrackedCommercial FIsCorporationsPrivate EquityAsset ManagersConsumers and Households:Tracked(in Section 4.2.7)but not aggregated as not project level data.Venture Capital:Tracked(in Section 4.2.3)but not aggregated as not project level data.*excluding Philanthropy0.5755%0.4240%0.055%2.

228、5253%1.9341%0.173%0.092%Extrapolative Untracked Private Finance:Unknown Amount1.Asset ManagersWe now track USD 165 million annually at project level,likely a significant underestimate.5.InsuranceNone tracked significant gap.Without detailed reporting on coverage or investment of institutional capita

229、l,it remains difcult to gauge the extent of insurers current contribution.6.Pension FundsNone tracked significant gap.True scale of involvement is difcult to assess from the current data environment(in the context of USD 47.9 trillion in pension assets across the major 22 pension markets in 2023).7.

230、Private Equity/Venture CapitalNow tracked USD 92 million annually project level and USD 6.3 billion annually in venture-level investment.Likely significant underestimate of project-level PE investment and moderate underestimate of venture-level VC investment.2.Commercial FIsWe now track USD 2.52 bil

231、lion annually at project level,which is likely close to accurate order of magnitude at project-level but is missing enterprise-level and intermediated finance.3.Consumers and HouseholdsNo finance tracked at the project level,USD 48-61 billion(high likelihood adaptation)at transaction-level.Likely cl

232、ose to accurate order of magnitude at transaction-level.4.CorporationsWe now track USD 1.93 billion annually at project level,likely a moderate underestimate missing especially indirect corporate investment in supply chains,infrastructure upgrades,and internal process innovation.USD1 bnUSD 4.7 bn28T

233、racking and Mobilizing Private Sector Climate Adaptation Finance4.2 INSTITUTION GROUP/TYPE ANALYSISAs mentioned in Section 4.1,the private sector actors involved in adaptation finance we consider for this work are listed below.221.Commercial banks2.Asset managers3.Private equity(PE)/venture capital(

234、VE)firms4.Pension funds5.Insurers6.Corporations7.Households and consumersThese are the seven private institution types we evaluate as most likely to be currently and potentially financing adaptation given their ubiquity in financial markets,engagement with one another,and exposure to climate risk.Fu

235、rther details on cross-institution flows are provided in Annex 2.While these institutions do indeed engage with one another,and while capital flows between institution types,the analysis that follows has been conducted at the institution level in order to more coherently assess each institutions inv

236、olvement in adaptation finance across three parameters:a.Qualitative current and potential role in adaptation:Describing the institutions current and potential role in the adaptation finance ecosystem,the most common types of adaptation funded by that institution,and real economy examples of adaptat

237、ion finance when available.This analysis supplements quantitative data findings,particularly in instances where quantitative data is limited or lacking.b.Quantitative data findings:Capturing relevant findings of private adaptation finance tracked under the methodology outlined in Section 3,end emplo

238、ying new data sources.c.Gaps in analysis and what is needed to better understand how actors are financing adaptation:Highlighting what is still not known or trackable by institution type and pointing the way forward regarding next steps to improve understanding of institutional action.The point at w

239、hich these actors engage with investment opportunities is depicted in Figure 8.In general,private sector actors engage with adaptation investment opportunities once a given investment has reached the risk-return profile preferred by each respective actor type.Furthermore,the risk-return profile of t

240、he investment broadly corresponds to its level of commercial developmenti.e.,adaptation solutions and products that rely on newly developed technologies and/or have not been deployed at scale within their respective markets have a high potential to deliver returns to investors but often bear commens

241、urately larger risks.While some actors may engage outside of the ostensible range of their risk-return preferences on an individual investment basis,the general orientation of their overall engagement with adaptation investments can be understood within that context.22 Alongside institution-specific

242、 analysis,it is critical to assess how finance flows among different actors.An overview of the ways that finance flows between actors can be found in Annex 2.Tracking and Mobilizing Private Sector Climate Adaptation Finance29Figure 8:Adaptation Investment by Theme234.2.1 COMMERCIAL BANKS1.Qualitativ

243、e current and potential role of commercial banks in adaptation:The central role commercial banks can play in financing adaptation is likely to be via lending to businesses and consumers seeking to respond to climate hazards.From household loans for renovations addressing climate risks for homes to c

244、o-financing large-scale adaptation projects with public actors,these institutions can enable adaptation action using a number of different levers:Climate-resilient mortgages:The underlying climate risk associated with mortgage portfolios has been highlighted in bank stress testing exercises.Banks ca

245、n address this by routinely assessing and disclosing location-specific risks to properties(and their value)to inform potential borrowers and aid the formation of adaptation strategies.They can also develop innovative mortgage products to guide consumers toward climate-resilient home ownership.Banks

246、have a responsibility to work with insurers and policymakers to address high-risk areas such as flood zones.This coordination can help to ensure that risks are dealt with through adaptation whenever possible,minimizing the number of at-risk businesses and consumers being locked out of lending and in

247、surance and opening up valuable discussions on the balance of responsibility between governments and the private sector in these situations.23 Referencing CPI.(2018).Deep decarbonization by 2050:Rethinking the role of climate finance.https:/www.climatepolicyinitiative.org/wp-content/uploads/2018/07/

248、Deep-decarbonization-by-2050-rethinking-the-role-of-climate-finance.pdfTimeMarket PenetrationPublic ResearchGrantsPrivate ResearchGrants From FirmsClimate-LinkedSocial InsuranceRESEARCH&DEVELOPMENTDEMONSTRATIONTARGETEDDEPLOYMENTNICHE MARKET&SUPPORTED COMMERCIALFULLY COMMERCIALPhilanthropiesCrowdfund

249、ingVenture CapitalImprovedCultivarsOwn ProfitsOwn ProfitsOwn ProfitsPrivate EquityAsset ManagersDomestic CorporationsSMEsHouseholds/ConsumersCommercial BanksPension FundsInternational InsurersMultinationalCorporationsRisk/RewardCost of CapitalCommercial Development CurveDesalinizationGreen BuildingI

250、nfrastructure30Tracking and Mobilizing Private Sector Climate Adaptation Finance Borrower risk assessments:Where loans are being approved on a business case basis,banks should develop adequate frameworks that allow them to properly consider adaptation benefits.These benefits can be difficult to quan

251、tify,especially for consumers or small businesses,and banks can build up and share best practices to increase capacity.Banks should also be actively scanning for adaptation opportunities in new lending,particularly for situations where adding adaptation activities to a project would increase the upf

252、ront cost but lead to lower costs and risk of nonpayment over the life of the loan.Conversely,banks should also screen borrowers and projects for climate risk and ensure that climate risks are priced into lending products.Banks should complement risk assessmentsincluding exercises such as TCFD(Taskf

253、orce on Climate-Related Financial Disclosures)assessmentswith their own strategies for managing this risk.An example of this is requiring customers or clients to take certain actions to remain bankable if they add significant climate risk to the banks portfolio.Co-financing adaptation projects:Comme

254、rcial banks,particularly in emerging markets and developing economies(EMDEs),can be a good co-financing partner for public adaptation finance.They can co-lend for publicly supported projects,for example by providing bridge loans for contractors.Commercial banks may have local contacts and knowledge

255、that are particularly useful in an adaptation project setting.Addressing internal climate risk:Banks provide essential services including bank accounts,cash,deposits,and others.They must ensure that their exposure to hazards that may disrupt these services has been assessed across specific locations

256、 and that they have time-bound plans for addressing these through adaptation efforts.While commercial banks have been dealing with climate risk for many years,they have often grouped this with broader physical risk and have lacked specific solutions and targeted action.Commercial banks must make bet

257、ter use of the data they have on climate risk to ensure consistent pricing of this risk across borrowers and to improve institutional understanding of how adaptation benefits can be priced into risk assessments for new lending.There are few examples of innovative products,such as climate-resilient m

258、ortgages being offered by commercial banks today,but this is an area of future growth that can draw lessons from wider green lending.Banks must acknowledge their role in actively supporting and enabling adaptation.UNEP FI has set out detailed steps for how banks can move past physical risk managemen

259、t and towards driving adaptation action in the real economy with effective adaptation plans that cover both existing and future activity.Banks will need to work with other FIs,such as insurers and public banks,to ensure that businesses and households with high exposure to climate hazards are given a

260、dequate information and tools to pursue adaptation action,including relocation,and avoid being locked out of lending.Tracking and Mobilizing Private Sector Climate Adaptation Finance31Table 8:Commercial Bank Action and ExamplesType Examples Innovative productsThe Responsible Commodities Facility is

261、an initiative that aims to grow zero-deforestation supply chains for soy and incentivize farmers to redirect production to degraded lands,using low interest credit lines,crop financing and restoration loans.The facility raised funds with a USD 300 million bond issuance with underwriting support from

262、 HSBC.Co-financingAfrica Rural Climate Adaptation Finance Mechanism:Equity Bank Kenya are co-financing a facility with the International Fund for Agricultural Development(IFAD)to provide loans to agri-MSMEs in rural communities in Kenya,Uganda,Tanzania,and Rwanda to adapt to a changing climate.IFAD

263、and its funders are financing part of the first-loss and second-loss tranches of the facility.2.Quantitative data findings:CPIs analysis reveals significant investment in adaptation-related projects involving commercial banks,averaging USD 2.52 billion annually in 2019-22,with the water and sanitati

264、on sector accounting for around 95%of this.Our data highlights the critical role these institutions play in financing climate adaptation and infrastructure projects,especially in emerging markets.However,it also reflects a bias in existing data sources towards large-scale infrastructure projects.Fig

265、ure 9:Value of Commercial Bank Projects by Year and Theme Sectoral analysis:The water and sanitation sector represents the largest share of investments by commercial banks.These investments primarily focus on wastewater treatment,sanitation services,and industrial water reuse.The infrastructure unde

266、r these projects aims to enhance resilience to climate change impacts,particularly in regions that are vulnerable to water scarcity and sanitation challenges.Commercial banks are also heavily invested in related WASH services,with notable projects such as sewage treatment plant expansions and wastew

267、ater reuse 2019202020212022202305001,0001,5002,0002,5003,0003,5001867.72104.23192.52833.91338.4InfrastructureAgri-Food SystemsEcosystemsIndustry and CommerceWater and SanitationActivity(USD million)32Tracking and Mobilizing Private Sector Climate Adaptation Financeinitiatives.These activities align

268、with global climate adaptation goals,addressing critical needs for clean water access and improved sanitation in urban areas.We find that commercial banks focus primarily on activities such as:Wastewater treatment and reuse:ensuring sustainable management of water resources and reducing the environm

269、ental impact of industrial processes.Sanitation services:developing infrastructure to improve public health outcomes and resilience to climate-related water challenges.Commercial bank financing of water and sanitation is further captured in Figure 10.Figure 10:Commercial Bank Investment in Water and

270、 Sanitation by Subsector and Year Financial contributions:The financial value of investments by commercial banks is substantial,with multi-million-dollar projects contributing to climate resilience.These projects help bridge the gap between public sector initiatives and private sector capital flows,

271、facilitating large-scale infrastructure developments.Our data shows that commercial banks have invested roughly USD 11.5 billion from 2019 to 2023,accounting for half of all project-level investment tracked.Regional focus:Investments are concentrated in a few regions,most notably East Asia and the P

272、acific,where emerging economies require substantial funding to improve infrastructure and address climate adaptation needs.The involvement of commercial banks is essential to meet the financing requirements of these large-scale projects,particularly in non-OECD countries.05001,0001,5002,0002,5003,00

273、020192020202120221744.42077.52604.32813.4Activity(USD million)UnknownDrought ManagementWater SupplyTreatment Plant,Water UtilityPolicy&Capacity BuildingWater ServicesSanitation ServicesWater UtilityTreatment PlantTracking and Mobilizing Private Sector Climate Adaptation Finance333.Gaps in analysis a

274、nd what is needed to better understand how commercial banks are operating in financing adaptation:In a survey of around 140 banks,the UN Principles for Responsible Banking found that while 45%of respondents said they were investing in or financing A&R(with credit products making up 69%of this figure

275、),none of this finance is tracked,and the adaptation benefit is not defined.Only a few banks have published adaptation plans.These findings are supported by analysis of commercial banks annual reports by Climate X(2024),which suggests that most commercial banks are in the early stages of engaging wi

276、th adaptation.The majority of banks current adaptation activity is focused on physical risk assessment and management,with relatively little reported action on adaptation plan development,target setting for mitigating physical climate risks,or the creation of metrics to monitor the impact of their a

277、daptation investments.The progress seen in transition planning offers many useful lessons for the initial stages of creating adaptation plans.Wide uptake of adaptation plan development would significantly improve understanding of how banks consider both adaptation potential and climate risk across t

278、heir current and future business.4.2.2 ASSET MANAGERS1.Qualitative current and potential role of asset managers in adaptation:Asset managers are uniquely positioned to boost private financing of adaptation,given their role in allocating and overseeing large pools of capital and their influence in in

279、vestee companies.There is limited evidence that asset management companies are prioritizing A&R in their activities.The following actions can help asset managers to realize their potential to expand financing for adaptation:-Assessing climate risk of portfolios:Asset managers can utilize the highly

280、developed physical risk assessment tools they already use to also assess climate risk across their portfolios.This can help them understand the effects of current and future climate impacts on valuations,allowing for investment strategies to respond appropriately.These assessments,along with transpa

281、rent reporting through initiatives such as the TCFD,can also inform adaptation action in portfolio companies and improve risk awareness for asset owners.-Using voting power:There is growing expectation that asset managers use their voting power(in their shareholder capacity)to encourage and influenc

282、e action on areas including climate(Inside Track,2023).The Net Zero Asset Managers Initiative,for example,requires its members to develop engagement and stewardship strategies for portfolio companies that include voting and escalation policies.Such policies could push portfolio companies to consider

283、 climate risk when making investment decisions and to take steps to adapt and protect the long-term value of their assets.-Investing in adaptation solutions:Asset managers can invest in adaptation across public and PE and debt.The range of options is vast.Asset management companies can use their sub

284、stantial research expertise to identify companies contributing to adaptation,using or developing adaptation metrics and wider frameworks and taxonomies in conjunction with wider investment criteria to identify opportunities.This can include innovative financing 34Tracking and Mobilizing Private Sect

285、or Climate Adaptation Financeoptions such as resilience bonds.Many asset managers are invested in large infrastructure projects and could ensure future projects include the adaptation to current and future climate impacts from the start.Table 9:Asset Managers Adaptation ExampleExampleDescriptionMacq

286、uarie Asset Management and UK Government adaptation of Bhadla Solar Park in India Macquarie Asset Managements Green Investment Group and the UK Government have established a joint venture(UK Climate Investments)that has acquired a 40%stake in a 185 MW portfolio of solar parks in India.A smaller adap

287、tation investment(USD 900,000)has been made in robotic waterless cleaning technologies for one of the solar parks in Rajasthan,adapting to the increasing water scarcity in the area.2.Quantitative data findings:Asset manager project-level investment is focused in the 1)infrastructure and 2)water and

288、sanitation themes,amounting to USD 99 million and USD 564 million,respectively.Like other FI types analyzed,large-scale infrastructure projects draw the most investment from the private sector.This is in line with the typical model for asset managers,looking for lower-risk,long-duration assets to ba

289、lance their portfolios.Figure 11:Asset Manager Adaptation Investment by Activity InfrastructureWater and Sanitation010020030040050060099.2564.2Industrial Wastewater Treatment InfrastructureIndustrial Water Treatment and Reuse(excluding industrial)Potable Water Treatment and DelveryWastewater Treatme

290、nt and Reuse(excluding industrial)Activity(USD million)Tracking and Mobilizing Private Sector Climate Adaptation Finance353.Gaps in analysis and what is needed to better understand how asset managers are financing adaptation:The actual scale of asset manager investment in adaptation-related activiti

291、es is likely to be significantly larger than what current tracking suggests.While direct project investment is the most visible form of adaptation finance,it represents only a fraction of the overall investment picture.The bulk of asset manager investments are directed toward companies rather than i

292、ndividual projects.To capture the full scope of adaptation-related investment,it would be essential to assess the entire portfolios of asset managers and determine the extent to which these companies business activities contribute,either wholly or partially,to climate adaptation.For the climate fina

293、nce community,it is crucial to achieve a comprehensive understanding of these investment flows.By identifying how much capital is already directed toward adaptation through corporate channels,stakeholders can better understand the real scale of investment and determine where additional capital shoul

294、d be allocated to meet global adaptation needs.This effort would also allow asset managers to better align their investments with adaptation goals,which is critical for mobilizing private sector capital at the scale needed to address climate challenges.Currently,asset managers do not report in detai

295、l on their adaptation-related investments,with the exception of specific funds targeting adaptation activities.This lack of transparency obscures the scale of private capital going to adaptation efforts.Encouraging asset managers to compile and share more granular information on how their investment

296、s align with adaptation objectives would clarify this issue.This would not only help to quantify existing adaptation finance but also highlight critical gaps where further investment is needed.CPIs Adaptation Tracking Taxonomy could serve as a useful tool for asset managers to develop a better sense

297、 of which investments might qualify as adaptation and other important considerations like maladaptation.However,it is important that CPIs taxonomy complements investment-specific guidance such as that provided in the Climate Bonds Resilience Taxonomy.244.2.3 PRIVATE EQUITY AND VENTURE CAPITAL1.Quali

298、tative current and potential role of PE/VC in financing adaptation:VC funds are a pivotal source of adaptation finance,as they represent a critical segment of investors that focus on early-stage and high-risk investments in firms offering climate adaptation solutions.These investments are key for in

299、cubating companies that have the potential to scale and monetize the benefits of their adaptation solutions.They fill a unique niche by taking risks that other investors may not be taking,effectively acting as the bedrock for nurturing innovative adaptation solutions that can later attract broader f

300、inancial support once they reach full commercial scale.While VC investments do not limit themselves to a specific set of adaptation activities,there is a tendency to focus on sectors and markets such as food and agriculture,where rapid uptake of adaptation solutions is possible.The choice of sectors

301、 underscores a strategic approach to investment,selecting areas where the impact of adaptation solutions can be quickly realized and where the potential for scaling is high.24 Climate Bonds Resilience Taxonomy Methodology,CBI,202436Tracking and Mobilizing Private Sector Climate Adaptation FinanceVC

302、investors generally operate in market segments separate from other institutional investors.However,after VC investment successfully incubates adaptation firms,other institutions may provide co-financing at later stages.This transition from VC incubation to broader institutional investment is a vital

303、 pathway for scaling adaptation solutions to meet global needs.VC investors primarily invest in small and medium-sized enterprises(SMEs),which exist across all sectors of the global economy and are thus well embedded throughout the adaptation finance ecosystem.Because SMEs operate in varied sectors,

304、the range of adaptation activities that VCs can target through SME investment can be varied and tailored to the specific risks and opportunities of their respective contexts.This horizontal flexibilitycombined with an ability to intermediate capital deployed by upstream sourcesindicates a potential

305、area for enhancing the adaptation finance ecosystem.PE firms can also deliver or incentivize adaptation flows through tailoring their investment strategies and ensuring that portfolio companies are adapted to climate risk.The range of companies that PE firms hold stakes in can vary from public compa

306、nies acquired in leveraged buyouts to smaller,early-stage businesses with high growth potential,and often include organizations facing liquidity issues that can use capital to restructure.A common factor across these diverse business types is PE firms ability to finance adaptation action in stake co

307、mpanies that can lead to resilient growth.As PE firms tend to look for growth or transformation in their equity holdings,they are often working with slightly longer time horizons which can lend themselves well to adaptation investments.High-potential companies with difficult-to-finance adaptation re

308、quirements could look to PE firms for investment.PE investors can also develop investment strategies that build in considerations of A&R.The relatively longer time horizon of PE investments means that investors holdings are more likely to be affected by climate impacts as risks increase over time.Fo

309、cused investment strategies combined with incorporation of climate risk considerations into due diligence and company selection processes can ensure that investments are made into companies that are well-adapted to their climate risks,or that have the potential to become so.2.Quantitative data findi

310、ngsOver the 2019-22 period,venture capital invested USD 6.28 billion on average annually in adaptation-related companies.Agrifood systems is the dominant theme for VC investment,amounting to 83%of all VC investment in this period.Investments in general agtech declined by 44%between 2021 and 2022,but

311、 adaptation-related agrifood investment remained strong.25 2023,however,saw a steep decline,also in line with the wider sector,influenced by economic challenges such as inflation,geopolitical tensions,and supply chain disruptions.25 AgFunder.(2023).Global AgriFoodTech Investment Report 2023.https:/

312、and Mobilizing Private Sector Climate Adaptation Finance37Figure 12:VC Adaptation Investment by ThemeThe agrifood systems sector accounts for the largest share of investment across all years,with significant contributions toward improving agricultural resilience,food security,and sustainable farming

313、 practices.The rise in agrifood systems investments from USD 2.7 billion in 2019 to over USD 7.3 billion in 2021 underscores the critical role this sector plays in mitigating climate risks to food production,especially in emerging markets.Investments in ecosystems have seen notable increases,reflect

314、ing growing awareness of the need to protect natural resources and biodiversity as part of broader climate adaptation strategies.The sector saw consistent growth,peaking at over USD 570 million in 2023,with projects primarily focused on habitat restoration,biodiversity conservation,and sustainable l

315、and management practices.While the preponderance of investment is directed towards companies headquartered in developed countries,notably the US,recent years saw a substantial increase in investment going to adaptation-relevant companies located in developing countries,where climate risks are more a

316、cute.India and Indonesia received large amounts of investments over the period(USD 1,795 million and USD 580 million,respectively),with agribusiness marketplace activities performing strongly in both locales.Agrifood cold-chain storage companies in India received USD 544 million over the period,whil

317、e fishery production automation companies attracted USD 305 million in Indonesia.201920202021202201,0002,0003,0004,0005,0006,0007,0008,0009,000Water and SanitationSocial SystemsInfrastructureIndustry and CommerceHealthEcosystemsAgri-Food SystemsTheme(USD million)3077.944658791.28792.138Tracking and

318、Mobilizing Private Sector Climate Adaptation FinanceFigure 13:VC Adaptation Investment by Country 3.Gaps in analysis and what is needed to better understand how PE and VC is financing adaptation:Though this analysis substantially improves the tracking of PE and VC adaptation finance,a primary barrie

319、r to fully understanding their role is the lack of transparency and standardized reporting.Private firms and early-stage startups are not subject to the same reporting requirements as publicly traded companies,and as a result,their adaptation-related activities go untracked to an even greater extent

320、.This creates a significant data gap,making it difficult to assess the true scale of PE and VC investment in climate adaptation.To unlock the full potential of these financial actors,it is essential to push for greater disclosure on how their investments contribute to adaptation.This could involve e

321、ncouraging firms to report more granular information on the climate risks their portfolio companies face,as well as the measures being taken to address them.In the VC space,establishing clear definitions and metrics for adaptation-related innovation could help ensure that early-stage funding is dire

322、cted to solutions that build resilience to climate change.In analyzing finance from PE/VC to SMEs specifically,it is necessary to understand SMEs business activities in detail.Many SMEs adopt adaptation strategies to mitigate risks from climate change,such as investing in drought-resistant crops,flo

323、od-proof infrastructure,or water-efficient technologies.However,these activities are often classified as general business operations rather than climate adaptation,rendering an incomplete picture of their role in the broader landscape of adaptation finance.Collecting reliable data on SME investment

324、will be an ongoing challenge for the climate finance community.This is due to the relatively small scale of SMEs commercial activity and financing flows of each individual enterprise.Additionally,many SMEs will be situated in EMDEs,where data collection can be difficult.A key question for SMEs adapt

325、ation finance is to identify fit-for-purpose financing structures that can support A&R activities,considering they are likely to involve small ticket sizes and general SME challenges of accessing finance,particularly in EMDEs.2019202020212022202301,0002,0003,0004,0005,0006,0007,0008,0009,0003026.344

326、57.68732.18582.43986.4Countries(USD million)OtherCanadaChinaIndonesiaAustraliaGermanyIndiaUnited KingdomFranceUnited StatesTracking and Mobilizing Private Sector Climate Adaptation Finance394.2.4 PENSION FUNDS1.Qualitative current and potential role of pension funds in financing adaptation:Pension f

327、unds have large pools of stable capital that are particularly well suited to long-term and big-ticket projects such as resilient infrastructure developments.Pension funds can also deliver on adaptation objectives,whether through regularly assessing and disclosing the climate risks that are associate

328、d with their portfolios,or by practicing responsible stewardship of investee companies,encouraging them to take adaptation action to address any identified physical climate risks.Current pension fund adaptation action is mostly focused on climate risk assessments and disclosures.Trustees of large pe

329、nsion fundsparticularly in Europe and North Americaare increasingly required to report on their climate risk,and in some cases,to have effective policies in place to manage these risks.26 It is too early to judge whether these disclosures and policies are leading to investment in adaptation activiti

330、es.However,the regulatory changes represent an opportunity for trustees to develop strategies that help address the climate risk of existing investments and for funds asset managers to develop frameworks for assessing the embodied climate risk of future investments.Potential strategies for managing

331、climate risk can include exiting and engagement:that is,divesting from assets with high exposure to climate hazards,or engagement with investee companies to encourage in adaptation action that address the underlying causes of vulnerability and reduce climate risk.Despite pockets of action on adaptat

332、ion from pension funds,net finance flows from pension funds to adaptation appear limited.While large pension funds are beginning to designate climate investing allocations,those allocations to date have mainly focused on mitigation.Fund managers fiduciary duties to pursue stable,long-term returns me

333、an that not all adaptation investments will be immediately suitable.However,there are investment options such as large-scale climate-resilient infrastructure projects and emerging resilience bonds that could meet investment criteria as well as driving action on A&R.Table 10:Pension Fund Adaptation ExamplesExampleDescriptionKPA Pension investment in green bond targeted at regional action on adaptat