SA: innovative resourcing mechanisms for climate adaptation
By Dhesigen Naidoo
Each month seems to herald a new record temperature, the latest being April 2024 as the hottest April ever. The trend seems unstoppable in the short term as many parts of the world are making U-turns on their commitments to reduce their carbon emissions.
In the meantime, we have to cope and adapt to a world characterised by extreme weather events and a much hotter operating environment. We need to adapt urgently. Climate adaptation is a much-needed but costly exercise in a very constrained fiscal environment, knowing that the cost of doing nothing is even more devastating.
Like other developing economies, South Africa must safeguard itself against resultant disasters, but also attempt to use these events and progressive climatic shifts as opportunities to adapt to more resilient, low-carbon growth pathways.
South Africa is particularly vulnerable to climate change due to factors such as its geographic location, the country’s dependency on carbon-intensive industries, high social inequality, and limitations on the country’s ability to adapt to the occurrence of extreme events and a changing climate.
The resilience and vulnerability of systems are complementary features and indicate how a system will respond to climate change challenges. Adaptation response must be channelled, as far as practically possible, to methods of improving resilience. Vulnerability and the building of resilience are important considerations in climate policy and financing of adaptation responses.
Addressing the adaptation gap
South Africa has created an adaptation gap which is “the difference between actual implemented adaptation and societally set goals, determined largely by preferences related to tolerated climate change impacts and reflecting resource limitations and competing priorities” (UN Environment Programme, 2023:vi).
This gap is fuelled by several factors including the mandate of funding, global interest in financing mitigation projects in the climate change space, and the complexity of adaptation projects.
In doing so the available resources to undertake this mammoth task of adaptation must be reassessed to establish mechanisms of accomplishing more with a constrained pool of resources. Resourcing mechanisms include but are not limited to funding and grants, legal and policy environments, technical and outreach capacities, institutional arrangements, and access to information and data.
The Presidential Climate Commission (PCC) has been exploring adaptation financing as an element of innovative resourcing mechanisms and will in this regard make initial recommendations on adaptation finance interventions.
What is emerging from these early recommendations is that this financing should improve resilience through the allocation of these resources and generate sufficient capital to address climate adaptation as a non-negotiable.
To be able to arrive at sound, realistic and actionable recommendations, the PCC has through this research:
– provided an overview of the climate financing landscape, with a focus on adaptation financing including the description of the current adaptation funding gap
– recommended and crafted the innovative financing strategy, approaches, mechanisms, and instruments for climate adaptation finance
– identified and documented barriers to climate adaptation financing.
State of climate financing in South Africa
New and innovative solutions and financing mechanisms must be either created or reimagined to plug this adaptation financing gap and help catalyse interventions and scale them up to build climate resilience.
South Africa has successfully attracted some international climate finance for adaptation from various sources. Development finance institutions have played a crucial role, with organisations like the African Development Bank contributing funds for adaptation initiatives. Additionally, global climate funds, such as Green Climate Fund, have been instrumental in providing financial support for South Africa's adaptation projects.
Globally, adaptation finance is estimated at 7% of the total climate finance investment made. Across Africa, adaptation interventions received 39% of total average climate finance and South Africa mirrors this trend whereby adaptation remains significantly underfunded. Adaptation finance needed is 10–18 times higher than current international public adaptation finance flows, which amounts to a significant shortfall compared to previous estimates (UNEP, 2023).
This deficit will continue rise if not effectively and efficiently addressed. Narrowing the adaptation finance gap is of particular importance because of the high benefits that investments in adaptation can offer in terms of reducing climate risks and improving equity and climate justice.
As it stands, funding for adaptation remains public-sector dominated, and a stronger business case for adaptation funding needs to be developed in South Africa. South Africa’s National Adaptation Strategy estimates approximately R300 billion is needed by 2030 for adaptation activities (NBI, 2022). However, given that adaptation needs remain difficult to measure, this figure will likely be substantially higher.
In the context of South Africa's adaptation financing landscape, a primary focus should be on fortifying existing mechanisms to comprehend the adaptation financing terrain, identify barriers, and uncover opportunities deeply rooted in local priorities, ensuring economic manageability and effectiveness.
We need to look beyond the traditional pots of public financing and the market, and take a fresh look at different blended finance options, crowdfunding toolboxes, better fiscal incentives, and community-based funding based on community-owned assets. Climate adaptation funding needs a combination of innovation and a new patience for return on invest. A lack thereof, unfortunately, will herald a rapid deterioration of our current economic dividends as we will have to spend more and more to recover from the frequent climate-related disasters.
Dhesigen Naidoo is the head Climate Adaptation, Presidential Climate Commission.
BUSINESS REPORT