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Funding gap in climate financing: Why 'adaptation' is neglected


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There was this interesting analogy about Actions against Climate Change: you are on a boat which has experienced a sudden leakage, and water is rushing in. Now your priority is plugging the hole, but what of the water that is already in? You must act on two fronts to combat this problem and stay afloat. 

The actions against Climate Change are quite like that, being broadly divided into two main categories: Adaptation and Mitigation. 

Mitigation refers to the actions that reduce the impact of Climate Change by investing in cleaner technology, more sustainable options and an environmentally friendly lifestyle. It is to reduce the impacts of climate change in the future.

Adaptation refers to the actions that are imperative right now. This could include building disaster-resilient infrastructure and increasing access to healthcare and education. 

Both of them, in their own rights, are significantly important for the present and future of our world. But from 2015-2020, only 23 per cent of the climate funds delivered were meant for adaptation. If both of them are so important, why the disparity? 

Mitigation vs Adaptation: The impacts

A study from Brown University states that between 1980 and 2002, a cumulative 45.51 per cent of the population was homeless by Climate Disasters in Bangladesh, the second highest in the world, only after Tonga at 50.51 per cent. 

The fact that Bangladesh is one of the ground zeroes for the most extreme impacts of climate change is well known.

According to a study from IIED (International Institute for Environment and Development), rural people in Bangladesh are forced to spend US$ 2 billion every year (209 Billion Tk in 2023 rates) for climate adaptive purposes. 

The report also states that this amount is 12 times what Bangladesh receives in Multilateral International Funding.

The Gap in funding

The Copenhagen pledge, taken in 2009, was a promise by wealthy nations to provide US$100 billion in Climate Funding yearly by 2020. 

Even though some countries like Japan and France paid their share, countries like Australia, Canada and especially the USA have lagged significantly. 

The fund saw slow growth till 2019, when it was just US$80 Billion. From 2013-2017 the fund barely hung around the 50-70 Billion mark. And even these estimates are generally thought to be exaggerations. Oxfam puts their estimate at 1/4th of the official one, stating that only funds given at below-market rates should be counted. 

A UNEP report states that the cost of adaptation will grow to US$ 300 Billion yearly by 2030 in the developing world. In contrast, global adaptation finance flows were only US$ 46 billion in 2020, with only 60 per cent of that going to the developing world. This leaves a gap of almost more than 90 per cent, which must be plugged soon. 

Why is mitigation funding so much more?

Giving money to vulnerable people for building disaster-resilient shelters doesn’t have a high return on investment. Climate financing isn’t just granted; in fact, only a small share of it comes as grants. 

Most of the funds (almost 75 per cent between 2016 to 2020) came through other instruments, prominently (96 per cent on average) through loans that are at market value. As such, most of these funds are directed towards mitigation projects like building new energy infrastructure and innovating sustainable alternatives. 

These projects have high returns on investments for the financiers and have quantified and measurable success. Thus, they are favoured by policymakers, who can show clear-cut progress through the projects they greenlit. 

On the other hand, adaptation deals with disbursing capital to the most vulnerable. And such activities rarely have quantifiable success, let alone generate returns. 

The path ahead

The developing world needs to adapt much more than it needs to mitigate, especially the V20 (Vulnerable 20) and SIDS (Small Island Developing States). 

From 2000 to 2019, the V20 lost an aggregate of US$ 525 billion or 20 per cent of their wealth due to changing climatic patterns. These countries must focus on their vulnerable populace first if they want to survive climate change. 

Even though adaptation does not have quantifiable success or economic returns in the short run, sustainable development is achieved in the long run through increasing access to housing and other basic needs. And for the world must unite to deliver a balanced solution for mitigation and adaptation. 

Returning to our sinking boat analogy, one could take away excess water the entire day without plugging the leak, which won’t save his boat. Conversely, one could plug the hole, but if he doesn’t take steps to throw away the excess water, he’ll drown anyway.

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