3. The role of development co-operation in supporting increased coherence in climate change adaptation and disaster risk reduction

This chapter examines the role of development co-operation in supporting developing countries in their efforts to enhance resilience through climate change adaptation and disaster risk reduction. The chapter first analyses the role of development co-operation in supporting more coherent implementation between the two policy areas at strategic, operational and technical levels. Second, it outlines different financial instruments and mechanisms which development co-operation uses to support each area. Finally the chapter provides a brief analysis of ways forward for development co-operation to more effectively support coherence in climate change adaptation and disaster risk reduction informed by the national approaches of Ghana, Peru and the Philippines.

    

Supporting coherence in CCA and DRR at different levels

Development co-operation plays an important role in supporting developing countries in enhancing coherence in planning and implementation of climate change adaptation (CCA) and disaster risk reduction (DRR). Providers of development co-operation here include, among others, bilateral and multilateral providers of development finance, donor agencies, intergovernmental organisations, philanthropic institutions, civil society organisations and research institutes.

National budgets play an important role in financing action to build climate and disaster resilience. Yet, some countries rely on international support to complement domestic resources, for instance, to finance infrastructure investments and to pilot and capitalise risk finance mechanisms for DRR and CCA (OECD/The World Bank, 2016[1]). Development co-operation also plays an increasingly important role in mobilising private finance to fill investment gaps in CCA and DRR (OECD, 2019[2]). Technical assistance can also support countries in putting in place enabling environments supportive of coherence in CCA and DRR, such as the formulation of policies, development of data and information systems, and for capacity development. Despite its importance, development co-operation can also create a barrier to coherence between CCA and DRR when the intersection of the two is not explicitly taken into account in the support provided, or when there is inadequate co-ordination between entities or providers of support for either CCA or DRR.

International processes and actors have been conducive in bringing CCA and DRR on the agenda and in incentivising and driving action by state and non-state actors on various levels. Chapter 1 frames the different levels of coherence as (i) strategic, (ii) operational, and (iii) technical. Development co-operation plays a particularly important role in supporting countries’ work towards operational and technical coherence between CCA and DRR, and to a lesser extent, strategic coherence, as demonstrated in the case studies of Ghana, Peru and the Philippines. More specifically, development co-operation often engages with partner countries to:

• Improve coherence in national goals and targets on CCA and DRR in line with relevant international agendas;

• Strengthen policy frameworks and institutional arrangements to pursue the goals and targets on CCA and DRR in a coherent manner;

• Facilitate exchange of technical expertise, knowledge, data and information to support such policy frameworks and institutional arrangements.

Strategic coherence: Development co-operation’s role in supporting national vision

Countries have agreed on collective goals on CCA and DRR with the adoption of the Paris Agreement on climate change and the Sendai Framework for Disaster Risk Reduction. The Paris Agreement requires each Party to prepare, communicate and raise ambitions of successive Nationally Determined Contributions (NDCs). While the Sendai Framework is a voluntary, non-binding agreement, it stresses that each country has the primary responsibility to prevent and reduce disaster risk (UNDRR, 2015[3]). By design, the Sendai Framework encourages a bottom-up approach as part of an all-of-society engagement and partnerships. This has driven individual countries’ effort to make their national goals more ambitious and coherent on CCA and DRR, while ensuring that they are aligned with the country’s broader development priorities.

Based on countries’ goals and targets, development co-operation can provide financial and technical support to countries in developing their strategic policy documents, such as NDCs and National Adaptation Plans (NAPs), as well as in taking CCA and DRR considerations into account in broader national development strategies. Development co-operation, in turn, incorporates the mandate of these international processes into their programmes and actions. Development co-operation, bilateral providers in particular, are also engaged in the international processes and bodies that play a prominent role in promoting CCA and DRR. Some providers of development co-operation also feed into discussions and negotiations at international fora such as the Conferences of the Parties to the UNFCCC and its subsidiary bodies.

Operational coherence: Development co-operation’s role in supporting national policies and institutional settings

Strategic coherence in CCA and DRR has driven the discourse on linking the two agendas, but countries also need to link implementation of CCA and DRR measures at the operational level. Development co-operation can support countries in bringing about such operational coherence through support for strengthened policy frameworks and institutional arrangements, maximising the efficiency of the human, technical and financial resources used to reach the common goals of CCA and DRR.

Development co-operation can also facilitate peer learning and exchange of good practice approaches by bringing together different countries and relevant stakeholders that, for instance, face similar climate risks, socio-economic situations, or hydro-metrological conditions. By sharing insights into CCA and DRR from experiences across different country contexts, development co-operation can also inform national policy dialogues and support effective policies (Benzie et al., 2018, p. 1[4]). This sharing can also be more systemic, for instance, through triangular co-operation, whereby a recipient country benefits from working together with a facilitating partner (typically a provider of development co-operation) and a pivotal country, which has solutions, technology and knowledge that may be applicable to the needs and capacity of the recipient country.

At the national level, either formally as part of national co-ordination mechanisms, or informally working closely with relevant stakeholders, development co-operation can support coherence in CCA and DRR in the design, update and implementation of countries’ policies. For instance, the government of Ghana worked closely with development partners such as the UNDP for the preparation of its National Climate Change Policy, which includes several policy areas directly linked to disaster risk reduction and management, and has become the key policy document for climate policies in the country (MESTI, 2013[5]). In Peru, the Ministry of Economy and Finance worked with the World Bank to develop the Comprehensive Strategy for Financial Protection against Natural Disasters. It outlines strategic actions for strengthening the management of contingent fiscal risks from disasters, including climate-related hydrometeorological events such as extreme rainfall, floods, droughts, El Niño phenomenon and strong winds (World Bank and Ministry of Economy and Finance, 2016[6]).

Development co-operation also supports sub-national governments through efforts to enhance local-level policy planning and implementation for CCA and DRR, either directly or through national governments. Such support, if appropriately designed, often significantly supports local actors to cope with human and financial resource constraints to implement actual operation of CCA and DRR measures. An associated challenge for national governments however is to monitor progress and evaluate effectiveness of development co-operation provided directly to local governments. This may lead to less transparency as to whether such direct support is in line with national priorities and strategic direction.

Technical coherence: Development co-operation’s role in supporting partners in bridging the gap between policy and implementation

Development co-operation can also play an instrumental role in supporting countries in enhancing their technical capabilities for taking a coherent approach to CCA and DRR at national and local levels. This can be through the development and dissemination of data and information, and provision of toolkits and guidance in areas, such as climate risk assessment, infrastructure planning, project appraisal, monitoring, evaluation and learning, among others. Development co-operation also often supports the piloting of innovative approaches that have the potential to bring CCA and DRR together, such as nature-based solutions and post-disaster reconstruction. Below examples of development co-operation that can lead to enhanced coherence between CCA and DRR at the technical level, as well as management of residual risks, are outlined.

Climate data and information

Good and reliable data and information on climate change and disaster risks are essential for informed policy processes and implementation on CCA and DRR. Data and information is also an area where further support of development co-operation can be effective. While the focus in some cases will be to put processes in place for generating good data and information, in others, the focus may instead be on scaling-up and maintaining data and information processes already in place. Further, development co-operation can support partner countries in making the data accessible to different stakeholders across local, national and even regional levels. Development co-operation is also well-placed to support users of the data and information through efforts aimed at strengthening their capacty to use different types of data and information available, especially at the local level.

There are already a number of good practices by development co-operation. For instance, Italy and 17 African countries in the Sahel are working to develop shared methodologies and mechanisms of knowledge management in the national meteorological and hydrological services and other relevant technical agencies (World Meteorological Organization, n.d.[7]). The Italian Ministry of Foreign Affairs and International Cooperation, the Italian Institute of Biometeorology (IBIMET-CNR) and the Permanent Interstate Committee for Drought Control in the Sahel participate in the programme. Further, the German Federal Ministry for Economic Cooperation and Development in cooperation with the Potsdam Institute for Climate Impact Research (PIK) is currently conducting in-depth climate risk analysis in Sub-Saharan African countries, aiming to provide a scientific base for informed decision-making for investors and politicians, at national and sub-national levels

Development co-operation has also supported countries in strengthening the capacities of relevant government agencies in charge of producing climate and weather data and information. For instance, USAID’s Office of Foreign Disaster Assistance and the U.S. National Weather Service, in partnership with the World Meteorological Organization and other participating national meteorological and hydrological services, has implemented the Weather Ready Nations project in South Africa, Barbados, El Salvador, Costa Rica, Guatemala and Indonesia. The project focuses on strengthening capacity of national meteorological and hydrological services and national disaster management agencies. This in turn also improves the availability and use of weather and climate related information for CCA and DRR (USAID, 2019[8]).

Enhancing capacity and tools for decision making

Development co-operation works with a range of national governments to develop guidelines and tools to incorporate climate-resilience consideration into public and private sector investments, early warning systems, disaster risk financing mechanisms, among others. Development co-operation also supports investment in enhancing local capacities and reducing vulnerability to climate and disaster risks. The French Development Agency (AFD) and the Asian Development Bank (ADB), for instance, have supported the decentralisation reform policy in the Philippines to empower Local Government Units and assist in their pursuit of improved institutional and technical capacity for disaster risk reduction at the local level (AFD, n.d.[9]). Empowering sub-national governments to strengthen disaster risk governance at various levels is a priority in the Sendai Framework (UNDRR, 2015[3]).

In Ghana, UNDP and the Ministry of Finance developed in 2015 the Climate Change Project Prioritization Tool and Guidelines that aims to provide guidance to relevant stakeholders on the prioritisation of policies, programmes and projects on climate change and green economy. The objective is to mobilise scaled up resources, especially from the Green Climate Fund (GCF) (Ministry of Finance, n.d.[10]). Further, the World Bank and the GCF have supported the Greater Accra Climate Resilient and Integrated Development project. Complementing the focus on infrastructure investments, one component of the project aims to strengthen the capacity of the city of Accra to: plan, co-ordinate, monitor and evaluate climate smart urban development planning; facilitate access to climate risk information; and improve co-ordination between government agencies, the Metropolitan, Municipal and District Assemblies in the Greater Accra area, and other relevant stakeholders (World Bank, 2018[11]).

In the Philippines, the Housing and Land Use Regulatory Board, the Climate Change Commission, Australian Aid and UNDP joined forces to develop the Supplemental Guidelines on Mainstreaming Climate Change and Disaster Risks in the Comprehensive Land Use Plan. The guidelines built on the National Economic Development Authority, Housing and Land Use Regulatory Board, UNDP, Australian Aid, and New Zealand Aid project on Integrating Disaster Risk Reduction and Climate Change Adaptation and Local Development Planning and Decision-making Process which piloted the mainstreaming of DRR and CCA in the CLUP and produced a Reference Manual on Mainstreaming DRR/CCA into CLUPs. The Guidelines provide LGUs with practical tools for climate and disaster risk assessment and formulation of a risk sensitive land use plan (HLURB, 2015[12]).

Piloting innovative and emerging solutions

Working with different stakeholders across sectors and countries, development co-operation often provides technical and financial assistance to pilot new initiatives to CCA and DRR, and to scale up and replicate successful approaches. For example, the Consultative Group on International Agricultural Research (CGIAR), a global research partnership for better food security, works to bridge academic research in climate smart agriculture. CGIAR’s co-operation includes a farmer-led experimentation model, supporting local solutions for different locations. This, for example, includes learning through facilitated workshops on timely seasonal weather forecasts and information on agricultural management options with meteorological and agricultural extension experts in Western and Eastern African regions (Kristjanson and Jost, 2014[13]).

Similarly, in several countries development co-operation is supporting pilot initiatives that use nature-based solutions (NBS) to complement ‘grey’ infrastructure for CCA and DRR. NBS also aim to achieve other social benefits, while protecting, sustainably managing and restoring natural or modified ecosystems. The World Bank has implemented over 100 NBS projects in 60 countries (World Bank, 2019[14]). AFD and other partners have funded NBS projects, including the Sponge Cities project. Shenzhen, the world’s first Sponge City, is proving to be more resilient to floods and landslides that have been increasing with climate change. At the same time, water supply for local residents is increased while excess water has been reduced by 65% (AFD, 2019[15]). Some countries have embraced NBS (e.g. multiple references are made to NBS in Peru’s Climate Change Law), while others still see numerous barriers to embarking on it, including higher costs and knowledge gaps. Development co-operation can contribute towards the identification of low-cost solutions, using its experience in other countries and building on the country’s vision on climate action and disaster risk reduction.

Post-disaster reconstruction

By supporting governments financially and technically to build back stronger, faster and more inclusively following a disaster, development co-operation can contribute to more resilient development and limit asset and non-asset losses (Hallegatte, Rentschler and Walsh, 2018[16]). Building back better faces several challenges in practice, which include a lack of technical know-how (leading to longer lead-time for decision making), social and cultural preference for infrastructure types that existed before a disaster, affordability and availability of construction materials, and existing technical restrictions, among others (Haris, Cheema and Subasinghe, 2019[17]). There is also a tendency that affected populations are in many cases reluctant to relocate to a new place even if it is less risky, also seen in Peru and the Philippines. One factor is that it can be difficult to find available land for people to relocate to, or that is near to the traditional sources of their livelihoods. Such challenges can lead to trade-offs between quick recovery and building back in a way that is more resilient than before the disasters.

Development co-operation has an important role to play in addressing such trade-offs by bridging technical and financial gaps. For instance, when Tonga was hit by Tropical Cyclone Ian in January 2014, development providers, such as the World Bank and the Asian Development Bank provided financial and technical support to assess the damages and to institute a new recovery and reconstruction policy to build back better through repairs, retrofitting and the creation of a public grievance system (UNDRR, 2017[18]). As climate disasters threaten human settlements and urban development, development agencies such as UN-Habitat, have worked with the private sector (AXA) to develop guidelines for governments, development co-operation, construction sector and disaster-affected communities to build back better (AXA and UN Habitat, 2019[19]).

Private sector engagement

Development co-operation is increasingly engaging with private-sector actors in supporting efforts to manage negative impacts of climate change and disasters on their business operations, and where relevant, seize opportunities emerging from climate change (e.g. supplying technologies, products, and services that support CCA and DRR) (Schaer and Kuruppu, 2018_[20]; Tähtinen, Ravikumar and Kellet, n.d._[28]). Some private-sector actors, irrespective of their size, have engaged on CCA and DRR, and consider climate and disaster resilience an integral part of their business plan. The majority, however, still lack awareness of climate risks, suited measures, or the capacity to implement them. Governments and development co-operation therefore play an important role in enhancing the awareness and capacity of private-sector actors to deal with climate and disaster risks, while ensuring business continuity and building the resilience of vulnerable communities (Schaer and Kuruppu, 2018_[20]) (Noble et al., 2014_[21]).

Development co-operation actively engages with the private sector in facilitating their input in national policy dialogues. Some have also created platforms dedicated to private enterprises. One example is the Connecting Business Initiatives, in which UNDRR provides technical advice on DRR and UNDP and UN Human Rights operational support to enhance private sector’s engagement before, during and after crises (Tähtinen, Ravikumar and Kellet, n.d._[28]).

Development co-operation also supports the private sector in managing climate risks and contributing to local resilience by improving access to data, providing decision-support tools, guiding the use of financial instruments (including insurance products), and involving them in national or local dialogues for exchange of good practices. Moreover, development co-operation can assist governments in developing policy frameworks to incentivise private sector to take CCA and DRR actions, such as economic instruments, regulatory policies and grants for capacity development and purchase of necessary equipment (Schaer and Kuruppu, 2018[20]). This can help align private sector priorities with the governments’ long-term development goals, given the focus of most private sector entities on profit-maximisation (Linnenluecke, Griffiths and Winn, 2013[21]).

Development finance for climate change adaptation and disaster risk reduction

Governments have a key role to play in investing in, and incentivising, CCA and DRR measures. Public finance tends to withstand a degree of investment risks that the private sector cannot. It is also often challenging for the private sector to find CCA and DRR activities that lead to robust financing flows and payback streams. Yet, facing competing development priorities, the availability of domestic sources of finance does not always meet the needs for CCA and DRR in many developing countries. It is in those cases that development finance acts as a crucial source of funding.

Financing instruments for climate and disaster risks

A variety of sources of development finance exists for CCA and disaster risk reduction and management, here defined as DRR and the management of residual risks. This includes multilateral and bilateral development finance institutions, donor governments, multilateral climate funds, private sector facilities and philanthropic funding. Development co-operation also provides finance for CCA and disaster risk reduction and management through different financial instruments, some of which are provided through development co-operation providers’ own initiatives, while others are provided with co-finance by national governments or the private sector. Table 3.1 provides an overview of different financial instruments that providers of development co-operation use to finance CCA and disaster risk reduction and management. It illustrates that the suitability of different financial instruments is determined by the type of CCA or disaster risk reduction and management activities being financed, as well as the climate and disaster risk profiles of partner countries. The table outlines the challenges and opportunities of different instruments, with further details provided below.

Table 3.1. Overview of financing instruments for CCA and disaster risk reduction and management
Instrument		Potential activities	Prevalence, Challenges and Potential
Grants	Ex ante	Improvement of climate and weather information Structural measures for climate adaptation and disaster risk preventions and preparedness (e.g. infrastructure) Non-structural measures (e.g. improved policies, public awareness, training and education, etc.) Early warning systems Evacuation facilities, training and contingency plans	Prevalent use Increased finance to CCA could provide opportunities for disaster risk preparedness and reduction
	Ex post	Response (after disasters) Reconstruction	Prevalent use Challenges for middle-income countries “graduating” from ODA-eligibility to humanitarian aid flows
Debt finance instruments	Ex ante (loans, green and climate bonds)	Structural measures for climate adaptation and disaster risk preventions and preparedness	Generally used for measures that have revenue streams
	Ex post (contingent loans and credit lines, and catastrophe bonds)	Response Reconstruction, primarily of physical infrastructure	Prevalent use Must be repaid, e.g. potentially not well suited for irreversible and permanent loss and damage Not well suited for slow-onset events
Risk financing	Ex-post (disaster risk insurance and re-insurance)	Rapid response (risk pooling, innovative risk transfer) Reconstruction activities (risk transfer through traditional insurance)	Limited prevalence Potential affordability barriers to joining existing risk pools or purchasing climate and disaster risk finance and insurance more generally. (Especially for the most vulnerable, disaster-prone countries, development partners have provided further funding to support the uptake of disaster risk financing instruments, including insurance). Challenges for private-sector insurance products, such as low consumer risk awareness/demand and ability of insurers to provide low-cost coverage given data gaps and lack of sufficient pooling.
Source: Authors

Grants

A grant is a transfer in cash, goods or services for which no repayment is required. This is an important characteristic for enhancing the resilience to current climate variability and future climate change, as well as to respond to residual risks, while mitigating risks for high indebtedness to those affected by disasters. Financing for immediate relief from a catastrophic disaster usually comes through humanitarian aid in the form of grants. Grants for technical assistance also support developing countries in enhancing operational and technical coherence in CCA and DRR. These include developing policy frameworks that strengthen CCA and DRR and enhance coherence between the two agendas, establishing data and information systems, strengthening stakeholder capacity, and supporting specific actions such as the establishment of early warning systems.

Debt finance instruments

Development co-operation also provides debt finance, such as concessional and non-concessional loans as well as bonds, particularly relevant for structural measures such as climate-resilient infrastructure. Loans are also often provided in the form of co-financing with domestic financial sources or private-sector actors. Apart from loans, some providers of development co-operation have started to explore the use of debt capital instruments for their infrastructure investments that takes into account climate-related risks. A recent example is a four-year climate resilience bond, issued by the European Bank for Reconstruction and Development to invest in climate resilient infrastructure, business and commercial operations, and agriculture and ecological systems, amounting to USD 700 million for their first issuance (EBRD, 2019[22]).

Even with substantive investments in CCA and DRR, no government can fully protect itself from the cost of extreme events. Contingent credit lines are another common debt instrument, often used for ex post disaster risk management. Contingent credit lines are credit arrangements that have been negotiated and established before an event has occurred, with the objective of supporting countries in dealing with risks that are difficult to mitigate ex-ante. Contingent credit lines provide rapid access to funding following a disaster related to natural hazards. Their purpose is to reduce financing delays, and associated loss escalation, after a disaster hits.

Peru, for instance, has agreed on several contingent credit lines, called Catastrophe Deferred Drawdown Option (CAT-DDO), with different development co-operation providers such as Development Bank of Latin America (CAF), the Inter-American Development Bank (IDB), Japan and the World Bank. The total contingent credit lines agreed upon between 2010 and 2015 amounted to about USD 4 billion (OECD/The World Bank, 2019[23]). The Philippines has also benefited from CAT-DDO. The World Bank disbursed CAT-DDO to the Philippines in December 2011 after Tropical Storm Sendong (Washi), and approved another USD 500 million of CAT-DDO (CAT-DDO 2) in December 2015. The Philippines can access the new credit line following “a state of calamity” related to a tropical storm declared by the President.

Risk financing instruments

Development co-operation also supports countries in establishing and operationalising climate and disaster risk finance and insurance instruments. These allow governments to share certain weather and climate-related risks (risk sharing and pooling) or to transfer them to third parties in exchange for regular premium payments (risk transfer). Several donor-supported insurance facilities are already in place, such as the African Risk Capacity (ARC) and the Caribbean Catastrophe Risk Insurance Facility (CCRIF). These are regional risk pooling initiatives, provided in collaboration with governments in the respective regions. The ARC, for instance, provides parametric insurance coverage to African countries affected by severe droughts. Development co-operation partners also provide technical and financial support for the creation of insurance facilities through, for example, the Disaster Risk Financing and Insurance Program led by the World Bank Group. Another example is the InsuResilience Global Partnership (IGP) that provides a global platform to co-ordinate donor contributions and aims to address challenges to applying insurance products, such as low consumer risk awareness or demand and insufficient ability of insurers to provide low-cost coverage given data gaps and lack of sufficient pooling, among others.

While climate and disaster risk finance and insurance have shown to provide benefits, the uptake of such financial instruments still faces several technical and political challenges. Ghana, for instance, has been signatory to the ARC since 2016. Preparations for formally entering the parametric insurance scheme have been led by the National Disaster Management Organisation and the Ministry of Finance. The formalisation, however, has been delayed by parliament, in part due to limited willingness by lawmakers to pay the premium. While this may be due to lack of awareness of the benefit of such sovereign disaster risk insurance schemes, competing development priorities also make it difficult for government officials to justify the relatively high upfront premiums with uncertain returns. More generally, as climate events increase in frequency and intensity, related premiums may rise, decreasing the viability of insurance mechanisms and increasing downside risks (Hallegatte et al., 2016[24]). In the case of the Philippines, efforts towards climate and disaster risk financing were initiated but have not been sustained. Through the Ministry of Finance, the national government has engaged in parametric insurance to cover risks of 25 provinces that are highly vulnerable to typhoon and earthquake. In 2017 and 2018, the Congress allocated PHP 1 billion and PHP 2 billion budget respectively, to provide insurance coverage for government facilities against natural calamities. In 2019, however, no similar budget was appropriated.

Concessional finance (e.g. premium subsidies for crop insurance and government support in emergency responses) has an important role to play in promoting instruments for climate and disaster risk finance and insurance by mitigating economic and political barriers to dissemination. At the same time, such financial support, if poorly designed, might also provide a false sense of security that could weaken incentives for reducing risks, and lead to significant economic cost and inefficiency (Hazell, Sberro-Kessler and Varangis, 2017[25]). It is therefore important that development co-operation works with governments to strengthen linkages between risk financing and other risk management approaches, such as CCA, introduction of early warning systems, and the appropriate enforcement of regulations related to urban planning or environmental protection.

State of development finance for CCA and disaster risk reduction and management

This section illustrates development finance available at the intersection of disaster risk reduction and management and CCA through different financial instruments that fall under the broad definition of development finance. The analysis draws on data reported by bilateral and multilateral providers of development co-operation into the OECD Creditor Reporting System (CRS) (see Box 3.1). Data are collected on individual project and programme commitments and differentiated here by the purpose of the support, namely:

1. 1. Disaster risk prevention and preparedness,

2. 2. Flood prevention and control,

3. 3. Reconstruction, relief and rehabilitation.

Box 3.1. OECD Creditor Reporting System

The OECD Creditor Reporting System (CRS) collects data on development co-operation. Data are collected on individual projects and programmes from bilateral and multilateral providers. Reporting is mandatory for members of the OECD Development Assistance Committee (DAC). In their reporting to the CRS, development co-operation providers include information on the purpose of the support provided through the use of sector and sub-sector codes.

Further, the CRS includes a policy marker system that facilitates the monitoring of members’ activities in support of the objectives of the 1992 Rio Conventions on climate change, biodiversity and desertification1, using the so-called “Rio markers”. Reporting on CCA became mandatory for members of the DAC in 2010.

For each activity reported, DAC members (and other bilateral providers) indicate whether it targets the objectives of the Rio Conventions as a ‘principal’ or ‘significant’ objective. Activities marked ‘principal’ would not have been funded but for that policy objective; activities marked ‘significant’ have other prime objectives but have been formulated or adjusted to help meet the policy objective. This differentiation provides an indication of the degree of mainstreaming of environmental considerations into development co-operation portfolios.

Seven large Multilateral Development Banks (MDBs) and a few climate-specific funds and programmes also report project-level data on their climate-related development finance to the DAC. This allows for the publication of consolidated activity-level data for bilateral and multilateral climate-related development finance from 2013 onwards. Note that while the climate-related funds apply the Rio marker methodology, the MDBs only report the climate components within projects, based on a joint MDB methodology (EBRD, 2017[26]).

In 2018, a new policy marker on disaster risk reduction was approved. Reporting on this marker started in 2019 on 2018 flows. This will in the future facilitate analysis of activities that at the same time include a focus on CCA and DRR. In the absence of this data for 2013-2017, analysis on development finance in support of DRR can draw on data reported on three sub-sector codes focused on aspects of DRR:

• Flood prevention/control;

• Disaster prevention and preparedness;

• Reconstruction relief and rehabilitation.

In general, activities reported under the sub-sector category Reconstruction relief and rehabilitation would likely qualify as ex post financing mechanism, whereas the others either explicitly (Flood prevention/control and Disaster prevention and preparedness) or implicitly (broader development sectors that integrate CCA and DRR considerations) would be ex ante approaches.

Source: (OECD, n.d.[27])

Figure 3.1 and Figure 3.2 illustrate how providers of development finance supported activities at the intersection of CCA, DRR and disaster risk management over the period between 2013 and 2017. Figure 3.1 provides data reported by bilateral and relevant climate-related funds and programmes2 (henceforth, other multilateral providers), while Figure 3.2 shows data provided by multilateral development banks (MDBs), applying the joint MDB reporting methodology. The focus of finance committed by bilateral and other multilateral providers to activities at the intersection of CCA, DRR and disaster risk management has remained relatively constant across the three categories over the period 2013 and 2017, with the largest share committed in support of disaster risk prevention and preparedness (Figure 3.1). The exception in 2014 is in large part explained by a loan provided by Japan to the Philippines following Hurricane Haiyan3. Over half of the commitments (52%) by bilateral and other multilateral providers were provided in the form of grants over the period 2013-17. Over the period, the majority (52%) of the commitments focused on Lower-Middle Income Countries (LMICs), followed by Least Developed Countries (LDCs) and other Low Income Countries (LICs) (24%), and Upper Middle Income Countries (UMICs) (11%).

Figure 3.1. Adaptation-related commitments by bilateral and other multilateral providers for activities in support of disaster risk reduction and management, by year and focus

Source: (OECD, n.d.[27]).

MDBs committed a relatively large share of their support to flood prevention and control, with a substantial share also focused on disaster risk prevention and preparedness over the period between 2013 and 2017 (Figure 3.2). Nearly all commitments by MDBs were provided in the form of loans (over 99%) across all income groups. It should be noted that the data is limited to the World Bank, Asian Development Bank, Asian Infrastructure and Investment Bank (2017 data only), Inter-American Development Bank, and Islamic Development Bank (2013 data only). The majority of commitments by MDBs (52%) was committed to LMICs, followed by UMIC (24%) and LDCs (23%).

Figure 3.2. Adaptation-related commitments by MDBs for activities in support of disaster risk reduction and management, by year and focus

Source: (OECD, n.d.[27]).

Finally, it is important to note that in order to ensure sustainability, all development finance must be responsive to both their direct and indirect impacts of climate change. For some projects, this is already the case, without such projects explicitly being recognised or reported as CCA in the CRS. This suggests that the commitments reported at the intersection of CCA and disaster risk reduction and management do not provide the full picture.

In addition to the three sub-sectors that provide an explicit link between CCA, DRR and disaster risk management, there are a number of other sectors for which the inclusion of CCA, DRR and disaster risk management considerations reduces vulnerability to climate risks, in turn enhancing the sustainability of the support provided. These sectors and underlying assumptions include:

• While most infrastructure investments, including in support of urban development, undergo some climate risk screening, a more explicit focus on disaster risk reduction may be needed;

• Social welfare services and support for agricultural services are mechanisms that can both enhance people’s resilience to shocks – included those related to climate change – and help them recover from adverse impacts from climate change;

• Noting that many disasters include a natural resource component, which will only increase with climate change, the inclusion of climate considerations in emergency response is important.

• The focus here is less on the absolute numbers and instead on the level of mainstreaming and on the types of funding available for these areas.

Effective development co-operation for coherence in CCA and DRR

This chapter has demonstrated that development co-operation is supporting countries in addressing climate and disaster risks through a range of activities. This includes provision of different financial resources to investment projects, technical assistance and investment-related risk mitigation, piloting of innovative technologies and activities, and establishing disaster risk finance mechanisms. Development co-operation can also support partner countries in achieving the different types of coherence introduced in chapter 2 – strategic, operational and technical – aligned to partner countries’ visions and priorities.

At the strategic level, development co-operation can support countries in aligning their visions and targets with those under the Paris Agreement and the Sendai Framework. At the same time such efforts should be guided by partner countries’ own priorities. In Peru, for instance, the Ministry of Environment plans to convene meetings with different development co-operation providers to discuss their initiatives and to have a clear understanding of how they are aligned with the country’s development priorities.

Development co-operation plays an important role in piloting CCA and DRR initiatives. The case study countries, however, noted that due consideration is not always given at the outset to the replication or scale-up potentials of pilots. The time required for the full benefits of pilots to mature also does not always match with their relatively shorter project cycles before a decision is made whether to scale-up, replicate, or terminate them. Further, the focus of development co-operation on piloting innovative initiatives in a country should not undermine the needs of that country for support in more basic capacity building and policy development support, in areas such as enforcement of land-use or environmental regulations and capacities in accessing and using available data and information for CCA and DRR.

Coherence in CCA and DRR is contingent on technical capacities to understand the risks and opportunities, to assess and prioritise measures, and to finance them, all of which development co-operation can support. The three country case studies have all put in place national funding mechanisms for CCA and DRR and worked with international providers of development finance. Yet, all three countries consider that domestic capacity in developing robust project proposals remains a major challenge to accessing such funding. Capacity development support in this area should factor in adequate time to ensure that the stakeholders involved can assimilate the new skills.

Finance is an essential enabler for CCA and DRR. While CCA and DRR measures often are financed through national budgets, many developing countries, particularly LDCs, are seeking resources from external sources to cover the additional costs associated with managing the impacts of climate change. Development co-operation provides a range of ex-ante and ex-post support. No single financial instrument addresses all risks, and national agencies such as ministries of finance can further benefit from support of development co-operation in identifying and developing financial solutions that are aligned with the country’s overall approach to climate resilience. The identification and formulation of suitable financial instruments hinges on the availability and quality of data and information, which development co-operation can also support with.

References

[15] AFD (2019), “Nature-Based Solutions”: Making Nature an Ally, https://www.afd.fr/en/nature-based-solutions-making-nature-ally (accessed on 2 September 2019).

[9] AFD (n.d.), Supporting the decentralization policy and improving natural risk management in the Philippines, https://www.afd.fr/en/supporting-decentralization-policy-and-improving-natural-risk-management-philippines (accessed on 10 October 2019).

[19] AXA and UN Habitat (2019), Taking on the challenge of post-disaster reconstruction, https://group.axa.com/en/newsroom/news/taking-on-the-challenge-of-post-disaster-reconstruction (accessed on 2 September 2019).

[4] Benzie, M. et al. (2018), Meeting the global challenge of adaptation by addressing transboundary climate risk, SEI, IDDRI, ODI, https://www.sei.org/wp-content/uploads/2018/04/meetingtheglobalchallengeofadaptation.pdf (accessed on 2 September 2019).

[22] EBRD (2019), World’s first dedicated climate resilience bond, for US$ 700m, is issued by EBRD, The European Bank for Reconstruction and Development (EBRD), https://www.ebrd.com/news/2019/worlds-first-dedicated-climate-resilience-bond-for-us-700m-is-issued-by-ebrd-.html (accessed on 24 September 2019).

[26] EBRD (2017), 2016 Joint Report on Multilateral Development Banks’ Climate Finance, The European Bank for Reconstruction and Development (EBRD), https://www.ebrd.com/2016-joint-report-on-mdbs-climate-finance.pdf.

[16] Hallegatte, S., J. Rentschler and B. Walsh (2018), Building Back Better: Achieving resilience through stronger, faster, and more inclusive post-disaster reconstruction, GFDRR, Washington DC, https://www.gfdrr.org/sites/default/files/publication/Building%20Back%20Better.pdf (accessed on 10 October 2019).

[24] Hallegatte, S. et al. (2016), Unbreakable: Building the Resilience of the Poor in the Face of Natural Disasters, The World Bank, https://doi.org/10.1596/978-1-4648-1003-9.

[17] Haris, M., A. Cheema and C. Subasinghe (2019), “Why lessons learnt are lost”, Disaster Prevention and Management: An International Journal, Vol. 28/5, pp. 677-690, https://doi.org/10.1108/DPM-04-2019-0103.

[25] Hazell, P., R. Sberro-Kessler and P. Varangis (2017), When and How Should Agricultural Insurance be Subsidized? Issues And Good Practices, World Bank Group, Washington, DC, https://doi.org/10.1596/31438 (accessed on 13 December 2019).

[12] HLURB (2015), the Supplemental Guidelines on Mainstreaming Climate Change and Disaster Risks in the Comprehensive Land Use Plan, Housing and Land Use Regulatory Board (HLURB), https://tuewas-asia.org/wp-content/uploads/2017/06/Supplemental-Guidelines-on-Mainstreaming-Climate-Change-and-Disaster.pdf (accessed on 16 October 2019).

[13] Kristjanson and Jost (2014), Tackling Innovation in Climate Change Research, presentation by Chris Jost and Patti Kristjanson, ICRAF Research Seminar Nairobi (20 May 2014), https://www.slideshare.net/cgiarclimate/tackling-innovation-in-climate-change-research-presentation-by-chris-jost-and-patti-kristjanson-ccafs.

[21] Linnenluecke, M., A. Griffiths and M. Winn (2013), “Firm and industry adaptation to climate change: a review of climate adaptation studies in the business and management field”, Wiley Interdisciplinary Reviews: Climate Change, Vol. 4/5, pp. 397-416, https://doi.org/10.1002/wcc.214.

[5] MESTI (2013), Ghana National Climate Change Policy, Ministry of Environment, Science, Technology and Innovation (MESTI), https://www.un-page.org/files/public/ghanaclimatechangepolicy.pdf (accessed on 2 September 2019).

[10] Ministry of Finance (n.d.), Natural Resources, Environment and Climate Change (NREC) Unit | Ministry of Finance | Ghana, https://www.mofep.gov.gh/divisions/rsd/climate-change (accessed on 26 July 2019).

[29] Noble, I. et al. (2014), Adaptation Needs and Options, Intergovernmental Panel on Climate Change, Cambridge University Press, Cambridge, New York, https://www.ipcc.ch/site/assets/uploads/2018/02/WGIIAR5-Chap14_FINAL.pdf (accessed on 5 September 2019).

[2] OECD (2019), Making Blended Finance Work for Water and Sanitation: Unlocking Commercial Finance for SDG 6, OECD Studies on Water, OECD Publishing, Paris, https://dx.doi.org/10.1787/5efc8950-en.

[27] OECD (n.d.), OECD Creditor Reporting System, https://stats.oecd.org/Index.aspx?DataSetCode=CRS1 (accessed on 23 March 2020).

[23] OECD/The World Bank (2019), Fiscal Resilience to Natural Disasters: Lessons from Country Experiences, OECD Publishing, Paris, https://dx.doi.org/10.1787/27a4198a-en.

[1] OECD/The World Bank (2016), Climate and Disaster Resilience Financing in Small Island Developing States, OECD Publishing, Paris, https://doi.org/10.1787/9789264266919-en.

[20] Schaer, C. and N. Kuruppu (2018), Private-sector action in adaptation: Perspectives on the role of micro, small and medium size enterprises, UNEP DTU, Copenhagen, https://orbit.dtu.dk/ws/files/162053774/MSME_Adaptation_updated_WEB.pdf (accessed on 6 September 2019).

[28] Tähtinen, J., U. Ravikumar and J. Kellet (n.d.), UNDP and the Private Sector: 25 Years of Partnership on Climate Change, Disaster Risk Reduction and Sustainable Energy, UNDP, https://www.undp.org/content/dam/geneva/docs/UNDPGeneva_UNDP_PrivateSector_Report.pdf (accessed on 10 October 2019).

[18] UNDRR (2017), Build Back Better in recovery, rehabilitation and reconstruction, UNDRR, Geneva, https://www.unisdr.org/files/53213_bbb.pdf (accessed on 14 October 2019).

[3] UNDRR (2015), Sendai Framework for Disaster Risk Reduction 2015 - 2030, UNDRR, Geneva, https://www.unisdr.org/files/43291_sendaiframeworkfordrren.pdf (accessed on 6 September 2019).

[8] USAID (2019), Weather Ready Nations, USAID, Washington D.C., https://www.weather.gov/wrn/wrns (accessed on 31 January 2020).

[14] World Bank (2019), Nature-based Solutions: a Cost-effective Approach for Disaster Risk and Water Resource Management, https://www.worldbank.org/en/topic/disasterriskmanagement/brief/nature-based-solutions-cost-effective-approach-for-disaster-risk-and-water-resource-management (accessed on 10 October 2019).

[11] World Bank (2018), “Concept Note: Greater Accra Climate Resilient and Integrated Development Project”, https://www.greenclimate.fund/document/greater-accra-climate-resilient-and-integrated-development-project (accessed on 15 October 2019).

[6] World Bank and Ministry of Economy and Finance (2016), Peru: the Comprehensive Strategy for Financial Protection against Natural Disasters, Wprld Bank, Washington DC, http://documents.worldbank.org/curated/en/718281475183108912/Peru-a-comprehensive-strategy-for-financial-protection-against-natural-disasters (accessed on 23 March 2020).

[7] World Meteorological Organization (n.d.), Training Programme on Climate Change Adaptation and Disaster Risk Reduction in Agriculture (PACC/RCC), World Meteorological Organization, https://public.wmo.int/en/projects/training-programme-climate-change-adaptation-and-disaster-risk-reduction-agriculture (accessed on 2 September 2019).

← 1. .United Nations Framework Convention on Climate Change (UNFCCC), the Convention on Biological Diversity (CBD), and the United Nations Convention to Combat Desertification (UNCCD).

← 2. They include: Adaptation Fund, Climate Investment Funds (CIFs), Green Climate Fund (GCF), Global Environment Facility (GEF), Global Green Growth Institute (GGGI), International Fund for Agricultural Development (IFAD) and Nordic Development Fund (NDF), as reported into OECD Development Assistance Committee’s (DACs) Creditor Reporting System (CRS)

← 3. It is specified in the project description that this is a post-disaster stand-by loan of over USD 470 million, provided with the objective of enhancing domestic capacity for disaster risk reduction and management.