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Read the full report at State and Trends in Adaptation Report 2022
Executive Summary
Accelerating Progress Toward a More Resilient Africa
THE BACKGROUND
Last year, the Global Center on Adaptation (GCA) published its State and Trends in Adaptation 2021 report (STA21). The report described the urgent need to adapt to climate change, as rising temperatures cause more extreme storms and floods, rising sea levels, more intense heatwaves, and longer and more severe droughts.
As the report documented, Africa is particularly vulnerable to these extreme impacts of climate change. It faces exponential collateral damage, posing systemic risks to its economies, infrastructure investments, water, and food systems, public health, agriculture, and livelihoods, threatening to undo its hard-won development and reverse decades of economic progress.
This year, the impacts of the conflict in Ukraine on agricultural exports and fertilizers, the resulting food price hikes, inflationary pressures, unsustainable debt levels for many countries, and the possible global economic recession are severely impacting African economies and communities.
Though the risks are great, so too are the opportunities that successful adaptation can bring. The 2021 report presented a comprehensive blueprint for how individuals and institutions in the African and international policy space can finance, design, and implement adaptation plans to best protect the lives and livelihoods of millions of African people from such disruptive change.
Moreover, the report showed, these adaptation measures are enormously cost-effective, working hand in hand with development to put Africa on a more resilient path to growth and to create a virtuous cycle. Even as adaptation measures protect people and communities from the impacts of climate change, they can also help lift people out of poverty, reduce hunger and undernourishment, raise incomes and living standards, fight diseases like cholera and dysentery, create jobs, reduce inequities, reduce the tensions that lead to conflicts, and empower women.
Those gains, in turn, further increase resilience, enabling communities to better cope with future extreme weather events or other climate change impacts. Most of the adaptation measures reviewed in this report have important climate mitigation, biodiversity, and sustainability benefits.
THE CURRENT CHALLENGE:
INCREASING THE PACE OF PROGRESS The 2021 report laid a strong foundation for creating a more resilient, more prosperous Africa.
This new 2022 State and Trends in Adaptation report is designed to build on that foundation, with a goal of accelerating the pace of progress while considering the challenging global and regional economic conditions. The 2022 report builds upon and complements the 2021 report. The first report includes topics ranging from food systems to gender and water that are not repeated here.
We recommend that readers view the two reports as an integrated review of climate adaptation for the region.
This report first updates the growing impacts of climate change on African nations. In 2021 and 2022, for example, major wildfires swept across Algeria; devastating floods stuck Niger, Sudan, South Sudan, and Mali; the Horn of Africa region was struck by drought; and three strong tropical cyclones hit Mozambique and other Southern African countries, destroying buildings, displacing thousands of people, flooding farmlands, and crippling economies. Such impacts pose increasing threats to food systems, ecosystems, water resources, human health, and economic growth.
The magnitude of many of these climate shocks can overwhelm communities, entire regions, or even small nations. The global humanitarian support system is stretched in its mission to help affected populations and economies.
The report then uses in-depth analyses and numerous case studies to identify innovative adaptation and resilience ideas, new solutions, the most effective regulatory and legal instruments, and new recommendations for action. Given the tight fiscal situation of most African nations and the economic challenges of their communities, the report pays special attention to adaptation actions with lower costs and significant benefits, including nature-based solutions (NBS) and locally led adaptation programs.
In particular, the report covers three major topics in its three sections.
The first point of focus is boosting the amount of finance that is available for adaptation and using that money in the most effective ways. Some of the key opportunities lie in the private sector, where companies can not only reduce their own risks from the impacts of climate change but also take advantage of new markets and new businesses in the adaptation space The second topic is how to accelerate progress on adaptation in individual sectors, such as agriculture or cities. This section also provides a comprehensive evaluation of the innovative Africa Adaptation Acceleration Program (AAAP), developed as an Africa-owned and Africa-led response to the climate crisis. The AAAP supports programs across multiple sectors.
The third section covers the themes and opportunities that cut across multiple sectors. They include improving education, empowering youth and stimulating entrepreneurship, improving security, and identifying further research to help unlock the many benefits of successful adaptation measures.
INCREASING FINANCE FOR ADAPTATION
The Finance Gap The Paris Agreement includes a global goal for adapting to the effects of climate change. At COP26, new financial pledges were made to support developing countries in achieving this goal.
Moreover, at COP26 new rules for the international carbon trading mechanisms (“Article 6”) were agreed upon to support adaptation funding.
While significant work is being done toward those goals, it remains clear that mitigation is still receiving considerably more attention and funding support than adaptation. Indeed, adaptation finance has remained at between 20 and 25 percent of committed concessional finance across all sources.
COP26 urged developed countries to at least double their aggregated provision of adaptation finance from 2019 levels by 2025, in order to achieve a fair balance between adaptation and mitigation.
The pressure to increase and deliver substantial adaptation financing is likely to continue in COP27 and beyond.
Analysis shows that current annual spending on adaptation across all of Africa is US$11.4 billion, which represents about 39 percent of total climate finance committed to Africa annually. This amount falls far short of what is needed. Simply meeting the goals set out in the Nationally Determined Contributions (NDCs) of African countries would require additional funding of US$41.3 billion each year. In addition, much of this adaptation finance (53 percent) comes from just one source—multilateral development finance institutions (DFIs)—with national governments a distant second at 23 percent.
There is thus a serious and urgent need to both dramatically increase the flow of adaptation finance in Africa and to develop new sources of financing.
Those could include commercial banks, private equity and venture capital, institutional investors, insurers, large corporations, national development banks, multilateral and national climate funds, foundations, and non-profits.
Closing the funding gap will not be easy. This report identifies and acknowledges numerous barriers to increasing the flow of adaptation dollars. To name just a few: Adaptation measures are complex. There are challenges in understanding and recovering the costs of projects. Reliable and accessible information about climate risk is often lacking. Regulatory incentives for crucial adaptation measures like climate-smart agriculture have yet to be developed and implemented. And given that every sector has many stakeholders, coming to an agreement on projects can be difficult.
In addition, these existing problems have been made more challenging by global strains and conflicts.
The COVID-19 crisis and the war in Ukraine have raised energy and food prices, for example, while also massively disrupting international trade and supply chains.
Lessons from Individual Countries and Regions To pinpoint specific barriers and initiatives that have been successful in increasing adaptation finance, in-depth studies of such finance in Ghana, Rwanda, Kenya, and Egypt were conducted. The analysis found, for instance, that while Ghana has created a promising Ghana Infrastructure Investment Fund and is now seeking Green Climate Fund (GCF) accreditation for it, the country may be missing out on US$1.2 billion annually in general tax revenues that could be used for climate finance because of misaligned tax incentives. Meanwhile, Kenya’s adaptation efforts could be improved by modernizing its public financial management system to enable better climate finance expenditure tracking.
In the four countries studied, one promising model that others might adopt is Egypt’s Green Sovereign Fund. Investor interest in the green bonds was so strong that the Egyptian Ministry of Finance increased the sale from the initial US$500 million to US$750 million. Of that, roughly US$400 million has been spent on 14 water and wastewater projects, and the rest on a clean monorail system that connects Cairo to the new capital. Three crucial ingredients have made the Fund successful: early involvement from key ministries; using the nation’s largest private bank to issue the green bond sale; and partnering with the World Bank and the International Finance Corporation (IFC).
The report also presents a detailed analysis of one important region of the continent—North Africa. The region faces an even larger financing gap than Africa as a whole, with total public climate finance between 2010 and 2020 at a level that is only 7 percent of that needed to meet NDC goals over the next 10 years. Moreover, only 20 percent of that finance went to pure adaptation projects. Making the task in the region even more challenging are the historically high and still rising debt service burdens.
One potentially effective strategy for this region (and other African countries as well) is using innovative debt-for-climate swaps, like one being piloted in Jordan. A task force, with members from the ministries of planning, finance, energy, environment, and water, has identified projects in areas like forest management, water supply, and energy efficiency that could be supported by the debt swap.
Recommendations for Increasing the Flow of Finance To mobilize the levels of investment needed to close the huge gap between current spending and the urgent need, and to increase the resilience impact of these investments, African nations can succeed by adopting three main strategies:
• Mainstream adaptation and resilience into all investment decision-making: That requires increasing access to climate information, such as groundwater data and precipitation predictions; building the capacities of financial institutions and governments to evaluate and act on climate risk; and requiring the disclosure of climate risk in line with the recommendations of the Task Force for Climate-related Financial Disclosures (TCFD) (see also next section on risk regulation). The International Monetary Fund’s (IMF) perspective on adaptation policies includes three pillars for mainstreaming adaptation—prevention, alleviation, and strategies for fiscal resilience.
• Build an enabling environment for adaptation investment: Only six countries in Africa have submitted National Adaptation Plans. Such plans are particularly important in mainstreaming climate adaptation into procurement plans to ensure that the construction of new infrastructure will build in resilience. Countries should also build capacity to make policies and projects sciencebased, and work to relieve existing debt burdens.
Mainstreaming climate considerations into public budgets and incorporating adaptation finance into all stages of the budgeting process can provide a direct channel of funding for dedicated climate adaptation projects. Also, multilateral development banks (MDBs) need to be more focused on adaptation finance and action. They have a critical role to play in the adaptation finance architecture.
• Deploy innovative financial instruments: One example is the AAAP, jointly developed by the GCA and the African Development Bank (AfDB), which provides upfront capital and makes projects more attractive to private investors by improving their risk-return profiles (see later section for more details). Another way to achieve this is for debtswap mechanisms to be scaled up, and by moving away from ad hoc bilateral deals for debt-foradaptation swaps to a more institutional approach.
Blended finance resources could incentivize institutional investors to invest in adaptation and could also unlock the potential of institutional investors such as pension funds, sovereign wealth funds, and insurance companies in scaling up climate adaptation finance.
Identifying and Regulating Climate Risks One of the general recommendations in the previous finance flow section—regulating climate risks—is so important that this report devotes a whole chapter to the impact of climate risks on African financial systems. It includes in-depth case studies on the Democratic Republic of the Congo (DRC), Egypt,
Ghana, Kenya, Mali, Mauritius, Morocco, Nigeria, Rwanda, South Africa, Tunisia, and Zimbabwe, supported by interviews and discussions with regulators and stakeholders in these countries.
African nations are among the most vulnerable in the world to climate risks. In 2019, five African nations ranked among the 10 countries around the globe most affected by extreme weather.
Topping the list was Mozambique, which was struck by two devastating cyclones and a severe long-lasting drought.
Such severe impacts not only take a huge toll in terms of human suffering, they also have major consequences for financial institutions and financial markets. Across all of Africa, climate change is already reducing economic growth and reversing hard-won gains, the Intergovernmental Panel on Climate Change (IPCC) reports. Unless banks and other institutions take action to identify and manage these risks, they will experience a damaging deterioration of credit quality and profitability.
There are two main types of climate risk: 1) property damage, business disruption, and other physical risks from such impacts as more severe floods and droughts; and 2) the transition risks from falling behind in the global effort to reduce greenhouse gas emissions. Those transition risks can include stranded fossil fuel assets and the need for increased capital spending on cleaner technologies.
Some Africans have recognized the need to identify and regulate such risks. The Bank of Ghana has issued voluntary “sustainable banking principles” as part of its environmental and social risk management, for example, while Kenya’s 2016 Climate Change Act provides both a regulatory framework that responds to climate change and a mechanism for climate finance. Moreover, interviews with finance officials show that climate risk is a top and urgent priority for almost all financial officials.
Yet the efforts to integrate climate risk in financial systems face significant challenges, including the lack of data on climate risks and the lack of internal capacity to develop regulations and guidelines. Key recommendations thus include:
• Develop the capabilities of public authorities and financial regulators, such as by highlighting best practices and offering training programs.
• Mandate minimum disclosure standards, covering governance, strategy, risk management, metrics, and targets.
• Identify both physical and transition risks and make the data more accessible.
Refocusing and Increasing Investment by the Private Sector Successful adaptation and resilience efforts will depend heavily on the involvement of the private sector. In Africa, the private sector currently is responsible for two-thirds of the continent’s investment. It generates 75 percent of the total economic output and provides 90 percent of the total employment.
Companies are also increasingly threatened by climate change. Floods, droughts, heatwaves, and more extreme storms are damaging factories, warehouses, and other assets; disrupting supply chains; reducing productivity; threatening workers’ wellbeing and safety; and raising insurance premiums, among many other consequences.
That is why it is important for companies to reduce their exposure by relocating their facilities or supplies away from high-risk areas, and to invest in projects that strengthen their resilience. For example, the OCP Group, a global fertilizer producer based in Morocco, has invested in desalination stations and wastewater recycling plants to reduce water pollution and to increase water supplies, bringing benefits both to its own production systems and to North African communities.
Such adaptation measures can also open new markets and businesses. In one example, the Swiss multinational Holcim and UK development finance institution British International Investment have created a joint venture called 14Trees that uses innovative construction technology, such as 3D printing, to rapidly build energy-efficient affordable housing in Africa, especially in response to damaging natural catastrophes. In addition, a survey of small and medium-sized businesses showed that 81 percent of them anticipated markets for new or more sustainable products, such as drought-resistant seeds, farm machinery powered by renewable electricity, enzymes for the food and beverage industries that reduce water consumption, more detailed weather predictions, and new insurance products.
Taking advantage of these new opportunities and reducing the harm from the impacts of climate change will require collaboration across the private sector, the public sector (with public– private partnerships), and the financial and insurance sectors.
Resilient Recovery in Senegal and Côte d’Ivoire
To illustrate how investments in adaptation and green sectors can deliver a sustainable and environmentally friendly recovery from the COVID-19 pandemic and from the stresses caused by the war between Russia and Ukraine, the report looks in detail at Senegal and Côte d’Ivoire, both of which have suffered large economic hits. In Senegal, 85 percent of households reported significant income losses in the first few months of the pandemic, and many businesses closed. In Côte d’Ivoire, sectors like education, tourism, restaurants and hotels, and financial services were hit especially hard. More than one-third of firms closed, some permanently.
Those countries now face a choice. They could try to recover from these stresses by investing in traditional approaches, such as stimulating the mining of gold, phosphate, and other metals and minerals.
Or they could use a green stimulus approach that boosts adaptation through investments in ecotourism services, coastal protection, climatesmart agriculture, ecosystem restoration, renewable energy, energy efficiency, electric vehicles and rapid transit, green buildings, flood mitigation, and wastewater treatment.
Modeling shows that the green stimulus approach is substantially better. Not only would it improve resilience to the impacts of climate change, it would also bring much higher economic returns—creating 700 percent higher returns over 20 years in Senegal and 265 percent higher in Côte d’Ivoire.
Lessons from the AAAP Technical Assistance Program (TAP)
As this report describes, filling the huge gap between the current level of adaptation funding and what is needed requires innovative financing approaches.
In one effort to close the gap, the United Nations Framework Convention on Climate Change created the GCF to help developing countries reduce their greenhouse gas emissions and adapt to climate change.
To access funds from the GCF, countries first must have an ambitious national climate strategy, a government institution capable of overseeing the use of the funds, and a pipeline of projects that meet the GCF’s requirements. To help African countries meet these conditions, the AAAP created a TAP to build capacities for adaptation planning and to promote large-scale transformational adaptation projects.
The TAP was launched just over a year ago in Burkina Faso, the DRC, Niger, Nigeria, Seychelles, Côte d’Ivoire, Senegal, and Ghana. In Ghana, for example, the program held two workshops with the staff of the Ghana Infrastructure Investment Fund; one to explain the accreditation process for the GCF and the second to discuss the details of the technical assistance offered. In another example, the program worked with Ethiopia, Guinea, Senegal, and Togo on an ambitious US$427 million proposal to create “staple crop processing zones” that promise to boost agricultural productivity, employment, and incomes, while reducing both greenhouse gas emissions and vulnerabilities to climate change.
To assess the performance of the TAP after a year, key officials, partners, and other stakeholders were interviewed. The feedback shows that the program is effective, but it also highlighted areas for improvement, such as maintaining a regular presence in partner countries, offering a roster of experts, and strengthening partnerships with other providers.
SECTORS The Africa Adaptation Acceleration Program (AAAP)
Launched in April 2021, the AAAP is the flagship program of an Africa-owned and Africa-led response to the threats from climate change and to the opportunities for more sustainable growth and development. It will mobilize US$25 billion by 2025 to accelerate adaptation action across multiple sectors, focusing in particular on investments that will bring large dividends. Those include improving productivity and reducing vulnerabilities in agriculture and the food supply chain, thus improving food security; making forestry more sustainable; reducing risks and vulnerabilities in both urban and rural areas through measures like more resilient infrastructure; restoring ecosystems and increasing biodiversity; empowering youth and creating jobs; and increasing climate finance.
The first set of projects under the AAAP are spread across multiple sectors in 18 countries: Senegal, Kenya, Uganda, The Gambia, Benin, Ghana, Tanzania, Liberia, Gabon, Guinea, Madagascar, Chad, Burundi, Burkina Faso, Mali, Mauritania, Niger, and Ethiopia. The targeted areas include renewable energy, transmission, and distribution; highways, railways, and ports; and water infrastructure, such as dams and treatment plants. In The Gambia, for example, the program is assessing the risks from sea level rise and flooding to the Port of Banjul—the vital gateway to the country’s economy—to ensure that planned increases in cargo handling and storage capabilities will make the operations less vulnerable to climate change impacts. Another study is aimed at improving resilience in Chad’s flood-prone capital city, N’Djamena. And a US$380 million “desert to power” initiative will finance renewable energy investments in Burkina Faso, Chad, Mali, Mauritania, and Niger (for details, see the Insert: Adaptation in the Desert to Power Program in the full report).
The success of the AAAP to date is leading the GCA to expand the number of its partners to scale up and accelerate the mainstreaming of climate adaptation in Africa and in other regions in the world, such as South Asia.
The needs and opportunities for adaptation in specific sectors were also analyzed, and are described in detail in subsequent individual chapters in this report.
Improving Productivity and Resilience with Livestock Raising livestock provides a living for millions of Africans. In Kenya, the dairy sector provides three million jobs—15 percent of the country’s labor force.
Overall, the livestock sector accounts for 55 percent of the household income in pastoral systems across Africa. The sector will become even more important as the demand for meat and dairy in Africa is predicted to triple by 2050.
These livestock systems and livelihoods are being increasingly threatened by rising temperatures, more extreme precipitation and droughts, and other climate change impacts. Just one impact—heat stress suffered by cattle—could reduce the production of milk and meat by hundreds of millions of dollars per year by 2085, modeling studies suggest. Climate change is also enabling pests like ticks to expand their ranges in Africa, and is reducing the productivity of the grasslands and agricultural crops that cattle, camels, and other animals need for feed.
There is thus is an urgent need for adaptation measures. Potentially effective interventions fall into several broad categories: breeding cattle and other livestock to be more heat- and drought-tolerant and disease-resistant; improving management of rangelands and croplands to make the feed supply more sustainable; developing better treatments for diseases; establishing feed inventories and feed stores; and providing both early-warning alerts and adaptive safety nets for herders and livestock farmers. One promising approach is adding trees to rangelands in “silvopastoral” systems, where the trees provide shade to reduce heat stresses. It may also be possible to boost local incomes through carbon credit trading and benefit sharing when rangelands are restored.
However, there currently is little direct information on the cost of implementing large-scale livestock adaptation programs in Africa, pointing to the need for more research and support.
Improving Productivity and Resilience in Agriculture Agriculture is the foundation of lives and livelihoods in Africa. More than 60 percent of Sub-Saharan Africans are smallholder farmers, and nearly a quarter of Africa’s GDP comes from agriculture.
As the State and Trends in Adaptation 2021 report described, however, farmers in Africa are already being harmed by extreme weather events, and a planetary warming of 3°C in the next 30 years would be catastrophic. At the same time, increases in yields are essential to meet the growing demand for food by a rapidly increasing African population.
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