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Co-funded by the European Union

Investment Climate Reform and the Adaptation Finance Gap

Investment Climate Reform and the Adaptation Finance Gap

Many ACP countries are highly vulnerable to climate change and yet face shortfalls in funding for adaptation. Engaging the private sector and mobilising its investment is therefore vital to deliver climate adaptation in these countries. ACP countries typically have weak investment climates, however, hindering the private sector from playing a role in climate adaptation and putting at risk the countries’ ability to achieve their sustainable development challenges.

In theory, enterprises can benefit from investing in adaptation either (a) by using adaptation solutions to manage risk and maintain business continuity—that is, as consumers of adaptation solutions—or (b) by fulfilling others’ growing need for new technology products and services—that is, becoming producers of adaptation solutions. In practice, however, private sector investment in climate adaptation faces many, often overlapping economy-wide barriers. This report shows how investment climate reform and climate change adaptation can be complementary, supporting delivery of the objectives of each and ultimately accelerating the achievement of Sustainable Development Goals in ACP countries.

Key Findings:

  • More investment is needed to support climate change adaptation in ACP countries, and most of that investment will need to come from the private sector.
  • Many barriers to private sector engagement and investment in adaptation have roots in general private sector development issues, including the need for investment climate reform, business environment reform, and access to finance. Enhancing cooperation and learning between adaptation and private sector development efforts can increase the efficacy of both.
  • To prioritise their efforts to remove barriers to private investment in adaptation, ACP countries must better understand the motivations, opportunities, and barriers that enterprises face in the context of the countries’ specific economies and adaptation needs.
  • Access to finance and lack of supportive financial ecosystems are serious bottlenecks impeding private sector investment.
  • Given ACP countries’ vulnerability to climate change and their weak investment climates, increased development assistance should be made available to support them on the specific issue of mobilising private finance for adaptation.
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