Inventory of Innovative Financial Instruments for Climate Change Adaptation

Closing the gap between available financing for climate change adaptation and the needs of developing countries requires looking beyond traditional sources of finance—i.e., grants and (concessional) loans—to innovative financial instruments and mechanisms that can unlock (private) investment. These instruments are increasingly viewed as a means to scale up the investment needed for countries to achieve their climate adaptation goals.

“Innovative financial instruments for climate change adaptation” include mechanisms and approaches that can be used to acquire, structure, govern, and allocate financial resources toward adaptation priorities. They can enable access to financial resources from financial institutions, private investors, institutional investors (such as pension funds), impact investors, foundations, and other philanthropists, and may be blended with traditional sources of financing.

This inventory provides information on a range of innovative financial instruments that have been used, or potentially could be used, to finance the implementation of climate change adaptation measures, including the national priorities identified in National Adaptation Plans (NAPs). It includes

  • mature instruments – instruments that have been used for many years for other purposes and that could be adjusted to finance climate change adaptation;
  • emerging instruments – newer instruments that may or may not have been developed specifically to finance climate adaptation; and
  • pilot instruments – instruments that are currently being developed to finance climate adaptation and that may be applied in the near future.

The inventory is intended to inform governments, project developers, and financiers about available instruments and how they have been used, or could be used, to increase resilience to climate change. It

  • describes each of the instruments;
  • identifies sectors in which the instruments currently or potentially could be used to support the implementation of climate adaptation measures and actions;
  • presents considerations for their use (by developing countries); and
  • provides illustrative examples of how they have been used to support climate adaptation.

A summary provides an overview of the included instruments, the sectors in which they might be applied, and where they have been used.

Please select a category of financial instruments

(Parametric) Catastrophe Bonds

Case Studies

  • A catastrophe bond (CAT bond) is a high-yield debt instrument that was initially designed for insurance/reinsurance companies but is increasingly used by government bodies and other businesses to protect themselves against catastrophe-linked losses. A CAT bond mitigates the impacts of large payouts in the event of a natural disaster by allowing the issuer (such as the insurance company) to receive funding from the bond only if a specific predefined catastrophic event occurs, such as a hurricane causing USD 500 million in losses.

    If the event occurs, the insurance company retains the bond proceeds to cover the cost of the catastrophe damages, and its obligation to pay interest and repay the principal to the buyer of the bond is either deferred or completely forgiven. If the event does not occur, the investor (buyer of the bond) receives interest and full principal repayments.

    CAT bonds tend to cover short time periods (3 to 5 years). Buyers of CAT bonds tend to be hedge funds, pension funds, and other institutional investors. These investors usually seek diversification in their investment portfolios and are willing to accept the default risk in return for higher interest payments.

    Parametric CAT bonds can also be issued by multilateral development banks and sovereign governments. For example, the World Bank has issued CAT bonds that provide insurance for protection against natural disasters and weather events in countries such as Mexico, the Philippines, and Jamaica. Some countries, such as the Philippines, have both catastrophe bonds that are triggered by established parameters (such as modelled loss, wind speeds, and precipitation) and Deferred Drawdown Options for Catastrophe Risks financing that is designed to be accessible before the CAT bond.

     

    Current or potential adaptation-relevant sector applications:

    • disaster risk reduction.

     

    Additional insights:

    • This is a mature instrument, introduced in the 1990s when the American insurance industry was coping with a series of costly catastrophes resulting mainly from devastating hurricanes.
    • Mexico was the first country to utilize CAT bonds, in 2006.

     

    Considerations for issuing a CAT bond:

    • Many developing countries have received support from multilateral development banks and bilateral donors to structure and issue CAT bonds.
    • CAT bonds require long structuring periods, legal expertise, and the definition of strict terms and conditions.
    • Generally, CAT bonds are complex investment vehicles and have relatively higher transaction costs than other financial instruments.

     

    Adapted from the following sources:

    Henry, P. (2021). Explainer: How catastrophe bonds help manage the risk of climate change. World Economic Forum. https://www.weforum.org/agenda/2021/11/catastrophe-bond-finance-insurance-climate-change-natural-disaster/

    Rabener, N. (2021, June 21). Avoiding disaster with catastrophe bonds? CFA Institute. https://blogs.cfainstitute.org/investor/2021/06/21/avoiding-disaster-with-catastrophe-bonds/

    White, S. A., Blake, D, Koch A. C., Goring, K., Tumuluru, K., Radki, A., & Pal, R. (2022, August 16). The G7 takes on climate change: Are catastrophe bonds an answer? Millliman. https://www.milliman.com/en/insight/meeting-the-g7-commitment-to-disaster-financing-with-catastrophe-bonds

    World Bank. (2021, July 19). World Bank catastrophe bond provides Jamaica $185 million in storm protection [Press release]. https://www.worldbank.org/en/news/press-release/2021/07/19/world-bank-catastrophe-bond-provides-jamaica-185-million-in-storm-protection

  • Extreme Climate Facility (XCF) of the African Risk Capacity

    In 2014, the African Risk Capacity (ARC) (a mutual insurance facility of the African Union) launched the concept of the Extreme Capacity Facility (XCF). It has since continued to work toward establishing the facility as a multi-year funding mechanism issuing CAT bonds to provide additional financing to ARC members to enable them to manage climate risks. These bonds will be used to blend private capital for climate change adaptation/resilience projects into the XCF funds in eligible African countries. The ARC programs offer protection against droughts, wind hazards, storm surges and wave damage, and flood risks.

    Adapted from the following sources:

    African Risk Capacity. (2018). Extreme Climate Facility. https://www.arc.int/extreme-climate-facility

    Evans, S. (2019, October 23). ARC progresses climate cat bond facility XCF, signs up UN support. Artemis. https://www.artemis.bm/news/arc-progresses-climate-cat-bond-facility-xcf-signs-up-un-support/

  • World Bank Catastrophe Bond in Jamaica

    In 2021, the World Bank issued a CAT bond that provided the Government of Jamaica with financial protection of up to USD 185 million against losses from named storms for three Atlantic tropical cyclone seasons ending in December 2023. Payouts to Jamaica would have been triggered when a named storm event met the parametric criteria for location and severity set forth in the bond terms. The transaction included an innovative reporting feature resulting in a quick payout calculation within weeks of a qualifying named storm.

    Adapted from the following source:

    World Bank. (2021). World Bank catastrophe bond provides Jamaica with financial protection against tropical cyclones [Case study]. https://thedocs.worldbank.org/en/doc/43a111757d3b1ff1cabde80ee7eb0535-0340012021/original/Case-Study-Jamaica-Cat-Bond.pdf

  • Residential Reinsurance

    USAA Insurance, which provides financial services to U.S. military veterans, issued its 38th catastrophic bond in 2021. The USD 300 million special purpose Residential Reinsurance catastrophe bond would provide USAA with 4 years of reinsurance protection against losses from a range of perils, including many that address climate-related hazards such as tropical cyclones, severe thunderstorms, winter storms, and wildfires. The money raised with the bond is set aside to cover potential losses. If triggers are reached, such as insured losses from a hurricane hitting a specific level, USAA Insurance can use the money to offset what is to be paid out to policyholders.

    Adapted from the following source:

    Artemis. (2022). Residential Reinsurance 2021 Limited (Series 2021-2). https://www.artemis.bm/deal-directory/residential-reinsurance-2021-limited-series-2021-2/

Adaptation Benefits Mechanism

Case Studies

  • The African Development Bank is piloting the Adaptation Benefits Mechanism, a program in which reputable international organizations will be able to certify the benefits of specific adaptation activities (Certified Adaptation Benefits) to project developers and/or governments. These project developers and/or governments will transfer these certificates to donors or climate change financiers based on pre-existing off-take agreements. The pre-existing off-take agreements are beneficial, as they allow the project proponent to use the agreement as extra security, or collateral, when seeking upfront loans or equity investments. This ability to use certificates as collateral may allow for projects to draw needed initial investors when they would not otherwise have found the investment opportunity to be attractive.

    The Adaptation Benefits Mechanism is designed to be a non-market mechanism under Article 6.8 of the Paris Agreement that aims to boost private sector investment and the commercial viability of adaptation projects across developing countries.

     

    Potential adaptation-relevant sector applications:

    • crop and food production – including agroforestry; livestock production; fisheries (marine, freshwater, and aquaculture); irrigation;
    • ecological services and management – forest management (including afforestation and reforestation); wetlands; ecosystem and biodiversity protection, conservation, and enhancement;
    • water supply (infrastructure) – water storage; water harvesting; water management;
    • disaster risk reduction – early warning and observation systems; and
    • energy infrastructure.

     

    Additional insights:

    • This tool is at the pilot stage, and launched in 2019. Two pilot projects were under development in 2023: climate-resilient cocoa in Côte d’Ivoire and rapid-deployment dams to counter flooding in Lagos, Nigeria.

     

    Considerations for using the Adaptation Benefits Mechanism: 

    • The Adaptation Benefits Mechanism needs agreed-upon methodologies to capture the impact of adaptation activities.
    • The mechanism requires adequate means of monitoring and verifying delivery.
    • The mechanism must have buyers/investors willing to purchase Certified Adaptation Benefits.
    • Interest has been expressed in projects ranging from USD 1 million to USD 50 million.

     

    Adapted from the following sources:

    African Development Bank. (n.d.). Adaptation Benefits Mechanism: Giving resilience a value: Pilot phase information note. https://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/ABM_-_Giving_resilience_a_value_-_Pilot_phase_information_note.pdf

    African Development Bank. (2023, May 31). African Development Bank driving innovation to scale up climate adaptation. https://www.afdb.org/en/news-and-events/african-development-bank-driving-innovation-scale-climate-adaptation-61646

    African Development Bank & Climate Investment Funds. (2021). Market study on the willingness to use and demand for adaptation benefits to support adaptation to climate change in Africa: Final report. https://www.afdb.org/en/documents/market-study-willingness-use-and-demand-adaptation-benefits-support-adaptation-climate-change-africa

  • No examples yet, as this program is still in the pilot phase.

Biodiversity Credits

Case Studies

  • Biodiversity credits are an economic instrument that can finance actions that result in positive, measurable biodiversity-related outcomes. The credits are “verifiable, quantifiable and tradeable units of restored or preserved biodiversity over a fixed period” that “offer a potentially robust and scalable mechanism for increasing nature positive investment” (World Economic Forum, 2023, p. 4). The voluntary biodiversity credits markets represent a significant opportunity for private sector finance to contribute to the protection and recovery of nature by supporting measurable and verifiable biodiversity outcomes.

    The credits function as tradeable units that can be exchanged in a market space to incentivize investments in biodiversity. The approach begins with the measurement of anticipated outcomes, which can include protection, regeneration, stewardship, and adaptation to climate change impacts. An agreed methodology is used to translate the benefits into credits, and investors transfer capital to beneficiaries against an expected return. The final stage includes third-party verification and a specific agreed value of the biodiversity credit issued to the implementor/beneficiaries, which can include Indigenous groups, local communities, landowners, and governments. The credits can then be bought by the private sector, governments, development partners, and philanthropies.

    While no emerging schemes in 2023 had adaptation explicitly as an intended outcome, “it is likely credits with this intended outcome will emerge in the future” (Pollination, 2023, p. 14). Biodiversity underpins climate change adaptation by regulating climate and protecting natural systems from the impacts of climate change, which can improve the resilience of these systems and human communities. Therefore, actions to enhance and conserve biodiversity, if designed in a way that allows ecosystems themselves to adapt, can also help people adapt to climate change. Ecosystem-based adaptation provides a framework to help developers of biodiversity credit programs consider approaches that reduce communities’ vulnerability to climate change.

     

    Current or potential adaptation-relevant sector applications:

    • ecological services and management – forest management (including afforestation and reforestation); wetlands; ecosystem and biodiversity protection, conservation, and enhancement; fire management.

     

    Additional insights:

    • This is an emerging instrument at a very early stage of development. The first biodiversity credit transaction took place in 2023 when a Swedish bank bought credits from a forest cooperative.
    • At least 30 programs, with a concentration in Australia and Europe, were underway in 2023 to design biodiversity credits and test the fast-emerging market for these credits, including the development of guidance and methodologies for project developers and buyers.

     

    Considerations for using biodiversity credits:

    • Strong governance is critical in the design of credits and market architecture, which requires transparent and standardized information. The instrument’s success is dependent on the integrity of the credits and the markets.
    • Biodiversity credits require standard metrics for trading, including robust methodologies to set consistent values for resilience and to measure success. Developers need to show that investment in biodiversity credits leads to the desired results and that investors can have confidence in the credits.
    • A range of participants will need to be engaged to scale up biodiversity credits, including private sector actors, government, investors, development partners, and civil society groups.

     

    Adapted from the following sources:

    Biodiversity and Climate Change Adaptation Expert Group under the Nairobi Work Programme on Impacts, Vulnerability and Adaptation to climate change & Least Developed Countries Expert Group. (2023). Promoting synergies between climate change adaptation and biodiversity through the National Adaptation Plan and national biodiversity strategy and action plan processes [Technical brief]. https://unfccc.int/sites/default/files/resource/UNFCCC-NWP_synergies_NAP-NBSAP_technical-brief.pdf

    Pollination. (2023). Voluntary biodiversity credit markets: A review of biodiversity credit schemes. https://pollinationgroup.com/wp-content/uploads/2023/10/Global-Review-of-Biodiversity-Credit-Schemes-Pollination-October-2023.pdf

    Sarmiento, M., & Morgan, S. (2023, February 20). Biodiversity credits: An opportunity to create a new financing framework (commentary). Mongabay. https://news.mongabay.com/2023/02/biodiversity-credits-an-opportunity-to-create-a-new-crediting-framework-commentary/#ref5

    Terton, A., & Greenwalt, J. (2020). Building resilience with nature: Ecosystem-based adaptation in National Adaptation Plan processes: An analysis. NAP Global Network. https://napglobalnetwork.org/wp-content/uploads/2020/11/napgn-en-2020-ecosystem-based-adaptation-in-naps.pdf

    World Economic Forum. (2023). Biodiversity credits: Unlocking financial markets for nature-positive outcomes [Briefing paper]. https://www3.weforum.org/docs/WEF_Biodiversity_Credit_Market_2022.pdf

  • Natureplus, Australia

    Green Collar, an environmental market developer and investor in Australia, developed Natureplus, a biodiversity credit scheme. In 2023, during the pilot phase of the program, 20 projects were registered, and one project was issuing credits. The Natureplus standard sets out a means to account for and monetize changes in environmental conditions, which provides value for the restoration and conservation of nature. Credits, with one credit equal to 1 hectare of active restoration or conservation of habitat or species, are awarded to projects with third-party audits and verification.

    Adapted from the following source:

    Natureplus. (n.d.). Natureplus: A scheme helping to drive investment into global conservation outcomes. https://naturepluscredits.com

  • ValueNature biocredit scheme, South Africa

    ValueNature, a South African start-up, was facilitating biodiversity credit projects in 2023 through initiatives in South Africa, Uganda, and Zambia. The biodiversity credits scale up capital for the conservation and protection of landscapes and seascapes. A voluntary biodiversity credit represents a measured unit of biodiversity gain, which is determined by evaluating the minimum amount required to adequately ensure the persistence of biodiversity in an agreed area with decent management for a 10-year period. Eighty percent of the agreed sale price will go the biodiversity custodians (such as local communities, Indigenous groups, local governments, and landowners), with the remaining 20% being allocated to biodiversity assessments, reporting, verification, and the trading of credits. ValueNature’s pilot project in Uganda has received grant funding from the Government of the United Kingdom and private investment from a Swedish firm.

    Adapted from the following sources:

    Gordon, O. (2023, October 17). Can biodiversity credits stem the extinction cascade? Energy Monitor. https://www.energymonitor.ai/sustainable-finance/can-biodiversity-credits-stem-the-extinction-cascade/?cf-view

    ValueNature. (2024). Transparent, quantifiable return on investment through tangible environmental and social improvements. https://valuenature.earth/#project-facilitation

Blue Bonds

Case Studies

  • Blue bonds are a type of green bond that focuses on the betterment of marine resources. Blue bonds can be used to finance projects with adaptation benefits, such as the restoration of mangrove forests (which also has mitigation benefits), the expansion of marine protected areas, improved water management, and flood risk reduction. To date, the most common objective of these bonds is to finance marine and ocean projects by directing bond proceeds to support ocean health and blue economies.

    The guidelines for blue bonds, released in 2023 by the International Finance Corporation and the Asian Development Bank, provide information on the components of launching a blue bond and identify blue project categories and key impact indicators. The blue project categories that can meet climate change adaptation objectives include

    • coastal climate adaptation and resilience – “projects that support ecological and community resilience and adaptation to climate change including nature-based solutions” (primary contribution to adaptation objective);
    • marine pollution (secondary contribution to adaptation objective);
    • marine ecosystem management, conservation, and restoration (tertiary contribution to adaptation objective);
    • sustainable marine value chains (tertiary contribution to adaptation objective); and
    • sustainable ports (tertiary contribution to adaptation objective). (Asian Development Bank & International Finance Corporation, 2023)

    Some debt-for-nature swaps have combined debt relief with a blue bond structure.

     

    Current or potential adaptation-relevant sector applications:

    • crop and food production – fisheries (marine, freshwater, and aquaculture);
    • coastal and riverine protection and management – coastal defences or flood protection barriers; river flood protection measures;
    • ecological services and management – wetlands; ecosystem and biodiversity protection, conservation, and enhancement; and
    • water supply (infrastructure) – water storage; water harvesting; water management.

     

    Additional insights:

    • This is an emerging instrument, with the first sovereign blue bond issued in 2018.
    • Blue bond transactions reached a total of USD 5 billion between 2018 and 2022.

     

    Considerations for issuing blue bonds:

    • A robust pipeline of blue projects is needed for proceeds from the blue bond to fund.
    • Bonds are not appropriate for all borrowers/issuers, especially in countries that may not be able to take on additional debt.
    • Guarantees may be needed to increase investors’ confidence in blue bonds issued in developing countries.

     

    Adapted from the following sources:

    Asian Development Bank. (2021). Green and blue bond framework. https://www.adb.org/sites/default/files/publication/731026/adb-green-blue-bond-framework.pdf

    Asian Development Bank & International Finance Corporation. (2023). Bonds to finance the sustainable blue economy: A practitioner’s guide. International Capital Market Association, United Nations Environment Programme Finance Initiative, and United Nations Global Compact. https://www.adb.org/publications/bonds-finance-sustainable-blue-economy-practitioners-guide

  • Indonesia

    Indonesia issued a sovereign blue bond in May 2023, raising USD 150 million in the Japanese debt capital market. The bond issuance is aligned with International Capital Market Association principles and was issued with both 7-year and 10-year maturity periods, with 1.2% and 1.43% coupon rates, respectively. The proceeds from the bond issuance will be used for conservation projects, many of which also provide adaptation benefits, such as coastal protection and mangrove rehabilitation.

    Adapted from the following source:

    United Nations Development Programme. (2023, June 25). Indonesia launches the world’s first publicly offered sovereign blue bond with UNDP’s support. https://www.undp.org/indonesia/blog/indonesia-launches-worlds-first-publicly-offered-sovereign-blue-bond-undps-support

  • Nordic-Baltic Bond

    The Nordic Investment Bank had issued EUR 355 million in blue bonds as of 2021. The proceeds of the blue bonds were to be used by the Nordic Investment Bank to provide lending to wastewater treatment and water pollution prevention projects, as well as water-related climate change adaptation projects such as stormwater systems and flood protection, protection of water resources, and protection and restoration of water and marine ecosystems. The first issuance in 2019 was a 5-year SEK 2 billion bond with a 0.375% coupon. It was oversubscribed twice. A second blue bond of SEK 1.5 billion was issued in 2020.

    Adapted from the following source:

    Nordic Investment Bank. (2023). NIB environmental bonds. https://www.nib.int/investors/environmental-bonds

  • Seychelles Blue Bond

    The Republic of Seychelles launched the world’s first sovereign blue bond in 2018. The bond’s objective was to raise capital for financing sustainable marine resources. The issuance raised USD 15 million from international investors through a 10-year bond with a 6.5% coupon. The proceeds of the bond issuance were earmarked to support the expansion of marine protected areas, improve the governance of priority fisheries, and develop the national blue economy. The World Bank helped with the design of the bond and provided a partial guarantee of USD 5 million. The Global Environment Facility provided a USD 5 million concessional loan to partially cover the interest payments of the bond, reducing the effective interest rate to 2.8%. Bond proceeds have been deployed via the Blue Grants Fund and Blue Investment Fund, which are managed by Seychelles’ Conservation and Climate Adaptation Trust and the Development Bank of Seychelles, respectively.

    Adapted from the following sources:

    Labonte, D. (2021, July 6–7). Blue bond: The Seychelles experience. CABRI Virtual Policy Dialogue on Raising and Managing Public Debt for Post-COVID Recovery. Collaborative Africa Budget Reform Initiative (CARI) Policy Dialogue. https://www.cabri-sbo.org/uploads/files/Documents/Session-3-Presentation-of-Dick-Labonte-Seychelles.pdf

    The Commonwealth. (2020). Case study: Innovative financing – Debt for conservation swap, Seychelles’ Conservation and Climate Adaptation Trust and the Blue Bonds Plan, Seychelles (ongoing). https://thecommonwealth.org/case-study/case-study-innovative-financing-debt-conservation-swap-seychelles-conservation-and

Climate Resilience Bonds

Case Studies

  • Climate resilience bonds are green bonds where the issuer commits to dedicating a portion (or all) of the proceeds raised by the bond issuance to investments that support climate change adaptation and resilience-related assets, projects, and activities (Climate Bonds Initiative, 2021). Most climate resilience bonds are use-of-proceeds bonds issued by governments or multinational banks. The Climate Bonds Standard issued by the Climate Bonds Initiative sets out voluntary guidelines for the structuring and management of these bonds.

    The Climate Bonds Initiative launched the Climate Resilience Principles in 2019 to provide guidance on how to integrate climate adaptation and resilience criteria into the Climate Bonds Standard. The principles focus on investments that deal with physical climate risks either by increasing the climate resilience of hard infrastructure or by advancing soft processes (e.g., operational improvements, technology development). The principles require that the issuer/borrower demonstrate that they “understand the climate risks faced by the asset, activity or system in question; have addressed those risks” through the design and implementation of the project; and are regularly monitoring and making adjustments to maintain the asset’s and/or system’s resilience over time (Climate Bonds Initiative, Climate Resilience Consulting, & World Resources Institute, 2019, p. 5).

     

    Current or potential adaptation-relevant sector applications:

    • crop and food production – including agroforestry; livestock production; fisheries (marine, freshwater, and aquaculture); irrigation;
    • ecological services and management – forest management (including afforestation and reforestation); wetlands; ecosystem and biodiversity protection, conservation, and enhancement;
    • water supply (infrastructure) – water management;
    • disaster risk reduction – early warning and observation systems;
    • energy infrastructure – energy generation (including renewables);
    • transport infrastructure;
    • other built environment and infrastructure – urban development; tourism (infrastructure);
    • social infrastructure – education; health facilities; and
    • industry and manufacturing.

     

    Additional insights:

    • This is an emerging instrument, with the first climate resilience bond issued by the European Bank for Reconstruction and Development in 2020.
    • The Climate Bond Initiative (2021) reported that 1,265 green bonds, or 16.4% of green bond deals, that had been issued as of September 2020 included climate resilience components, mostly in the water and water-related sectors. Only 6% of these issuances were from developing countries.

     

    Considerations for issuing climate resilience bonds:

    • The bond’s proceeds need a robust pipeline of adaptation and resilience projects, and it can be challenging to identify eligible projects.
    • Government engagement is required to prioritize adaptation actions. A robust national adaptation plan can assist with establishing a pipeline of investments.
    • Bonds are not appropriate for all borrowers/issuers, especially in countries that may not be able to take on additional debt.
    • Guarantees may be needed to increase investors’ confidence in bonds issued in developing countries.
    • Most bond issuances in developing countries with links to climate resilience have been undertaken with technical assistance support from development partners.
    • While there have been significant advances in the identification, evaluation, and reporting of climate resilience-related investments, continued work is needed to further these practices, which are necessary to raise finance through the green bond market.

     

    Adapted from the following sources:

    Climate Bonds Initiative. (2021). Green bonds for climate resilience: State of play and roadmap to scale. Global Center on Adaptation and European Bank for Reconstruction and Development. https://gca.org/reports/green-bonds-for-climate-resilience-state-of-play-and-roadmap-to-scale/

    Climate Bonds Initiative, Climate Resilience Consulting, & World Resources Institute. (2019). Climate resilience principles: A framework for assessing climate resilience investments. https://www.climatebonds.net/files/page/files/climate-resilience-principles-climate-bonds-initiative-20190917-.pdf

    Organisation for Economic Co-operation and Development. (2022). Green, social, sustainability and sustainability-linked bonds in developing countries: How can donors support public sector issuances? OECD Publishing. https://www.oecd.org/dac/green-social-sustainability-and-sustainability-linked-bonds.pdf

  • European Bank for Reconstruction and Development Climate Resilience Bond

    The European Bank for Reconstruction and Development issued the first-ever dedicated climate resilience bond in 2019. The 5-year bond raised USD 700 million at issuance. The proceeds are to finance the bank’s existing and new climate-resilience projects in a manner consistent with the Climate Bond Initiative’s Climate Resilience Principles. These projects included climate-resilient infrastructure, agriculture, and ecological systems in addition to climate-resilient business and commercial operations.

    Adapted from the following source:

    European Bank for Reconstruction and Development. (2019, September). Climate Resilience Bonds/Green Bond Programme information template. https://www.ebrd.com/documents/treasury/framework-for-climate-resilient-bonds.pdf

  • Fideicomisos Instituidos en Relación con la Agricultura/Trust Funds for Agricultural Development (FIRA), Mexico

    FIRA is a development bank established by the Government of Mexico to promote rural development and provide credit and support to the agricultural and fisheries sectors. In 2023, FIRA issued Mexico’s first green bond linked to climate resilience. The bond proceeds, totalling USD 155 million, will be used to build the resilience of farmer communities to climate change risks. FIRA worked with the French Development Agency, the Global Green Growth Institute, and UKPact Mexico to identify investment projects focused on increasing climate change resilience in the food and agriculture sector.

    This resilience bond follows on three earlier green bond issuances totalling USD 418 million that financed hundreds of small, medium, and large projects with adaptation co-benefits, including those focused on sustainable/protected agriculture, water-efficient irrigation systems, and sustainable forestry. Cooperation between FIRA, the Inter-American Development Bank, and the Climate Bonds Institute was key to labelling these bonds as green.

     

    Adapted from the following sources:

    Climate Bonds Initiatives. (n.d.). FIRA FEFA. https://www.climatebonds.net/certification/fira_fefa

    Galeana, E. (2023, April 27). FIRA places first green resilience bond in Latin America. Mexico Business News. https://mexicobusiness.news/agribusiness/news/fira-places-first-green-resilience-bond-latin-america

Conservation Impact Bonds

Case Studies

  • Conservation impact bonds (CIBs) are pay-for-success, outcome-based financial structures that can strengthen conservation efforts. They connect key conservation and finance stakeholders, aiming to transfer the risk of funding conservation from governments, communities, businesses, and donors (in developing countries) to impact investors.

    The core model is based on bringing together groups that place a monetary value on and are willing to pay for nature-based services with impact investors that provide funds for conservation and nature-based projects. Different models are emerging for repayment to investors, including one in which investors are paid their principal plus a return on investment if outcomes are achieved but no return on investment if the outcomes are not successful. Outcomes are measured using predetermined data that can include social, economic, ecological, and climate change metrics.

    These bonds can help both to address biodiversity loss and to support actions to enhance the ability of natural systems to adapt to climate change. Projects with potential adaptation benefits include restoring waterways, restoring watersheds, growing native plants, and implementing nature-smart climate solutions.

     

    Current or potential adaptation-relevant sector applications:

    • ecological services and management – forest management (including afforestation and reforestation); wetlands; ecosystem and biodiversity protection, conservation, and enhancement; fire management.

     

    Additional insights:

    • This is an emerging instrument, with a prototype for a CIB for healthy landscapes having been launched in Canada in 2020.
    • Long-term support for CIBs requires that early projects demonstrate financial viability and the ability to deliver measurable results.

     

    Considerations for using a CIB:

    • CIBs are place specific, and structuring the bond can be time-intensive and costly.
    • CIBs often require a third party to design and implement the bond as well as to bring together necessary stakeholders.
    • Government or development partner support has been a critical element in the launching of early iterations of CIBs. There is uncertainty as to whether some projects funded through the issuance of this kind of bond can generate profit and deliver the returns necessary to attract private sector investors.
    • Issuance of a CIB can be an important step in demonstrating whether or not private funders may be willing to finance a certain type of project.
    • CIBs need specific targets or goals against which to measure success and issue payment. Determining the additionality of environmental outcomes and the timeframes required for achieving demonstrable impacts poses challenges in measuring success.

     

    Adapted from the following sources:

    Lynch, M., & Kanter, M. (2022). Conservation impact bond: An innovative new tool for scaling collaboration and investment for landscape-scale conservation [Briefing note]. Ivey Centre for Building Sustainable Value & Carolinian Canada Coalition. https://www.ivey.uwo.ca/media/3797473/cib-policy-brief-february-2022.pdf

    Thompson, B. S. (2023). Impact investing in biodiversity conservation with bonds: An analysis of financial and environmental risk. Business Strategy and the Environment, 32(1), 353–368. https://onlinelibrary.wiley.com/doi/10.1002/bse.3135

  • Deshkan Zibi Conservation Impact Bond

    The Deshkan Zibi Conservation Impact Bond, launched in Ontario, Canada, in March 2020, is the prototype of the CIB model. As of April 2023, the bond was supporting 54 landscape/habitat projects that were delivered by habitat partners, including First Nations communities, landowners, municipalities, and businesses. The projects had specific outcome metrics (e.g., hectares of natural assets/climate-smart habitat that have been improved, number of native plants used in habitat improvements) that formed the basis of the bond’s financial returns mechanism. Investors are paid their principal plus a return on investment if outcomes are achieved; but if the outcomes are not successful, only the principal is repaid. The impact investor, VERGE Capital, provided CAD 130,000 through a loan with a 5% interest rate and a 3-year repayment schedule. 3M Canada (a multinational corporation) and Pollinators Canada (a non-profit) were the outcome payers. A CAD 150,000 grant from the Canadian government supported the development of the concept and the project portfolio, which was overseen by Carolinian Canada, an environmental charity. Implementation was undertaken in partnership with local Indigenous communities, the Oneida Nation of the Thames and the Chippewas of the Thames First Nation. A second phase was starting up in 2023. The Deshkan Zibi Conservation Impact Bond received the 2022 Finance for the Future Climate Leader Award.

    Adapted from the following sources:

    Carolinian Canada. (2023). Conservation impact bond (CIB). https://caroliniancanada.ca/cib

    Deshkan Ziibi Conservation Impact Bond Leadership Team. (2021). The Deshkan Ziibi Conservation Impact Bond Project: On conservation finance, decolonization, and community-based participatory research. Western University, London, Canada. https://online.flippingbook.com/view/751128259/6/

Contingent Line of Credit – Liquidity facility

Case Studies

  • Contingent lines of credit are loans that provide countries with immediate financial liquidity following a defined event. They can help countries face natural disasters, including extreme weather events such as droughts, hurricanes, and typhoons. They have also been used to address health crises, such as the COVID-19 pandemic.

    The Asian Development Bank, Inter-American Development Bank, and World Bank have contingent credit facilities for natural disaster emergencies that disburse funds to countries that are impacted by a verifiable disaster event. The terms of the loan are negotiated in advance to enable the borrower to rapidly meet its financing requirements during times of shortfall due to disasters. The terms include the types of natural disasters that are covered (such as hurricanes and floods), the parametric triggers used to confirm that a disaster has occurred, the payout, and the timeline of the payout.

    Current or potential adaptation-relevant sector applications:

    • disaster risk reduction – early warning and observation systems, and
    • social infrastructure – health facilities.

     

    Additional insights:

    • This is a mature instrument introduced by the World Bank in 2008.

     

    Considerations for using liquidity facilities:

    • Multilateral development banks typically require that other measures be in place, such as a disaster risk management program, to mitigate the probability of accessing the facility.
    • Recipients require an adequate macroeconomic policy framework and satisfactory disaster risk management program.

     

    Adapted from the following sources:

    Bruce, G. L. (2019, September 10). What is the Contingent Credit Facility? Inter-American Development Bank. https://blogs.iadb.org/caribbean-dev-trends/en/what-is-the-contingent-credit-facility/

    Development Asia. (2018). Explainer: Mobilizing contingency funds for climate-related disasters. https://development.asia/explainer/mobilizing-contingency-funds-climate-related-disasters

    Lu, X., & Abrigo, R. (2019). Contingent disaster financing under policy-based lending in response to natural hazards. Asian Development Bank. https://www.adb.org/sites/default/files/institutional-document/518061/disaster-financing-policy-paper.pdf

  • Development Policy Loan with a Catastrophe Deferred Drawdown Option

    A development policy loan with a catastrophe deferred drawdown option (Cat DDO) is a financing and risk management instrument provided by the World Bank to help clients address economic shocks. It is a contingent credit line allowing a borrower to rapidly meet its financing requirements following a shortfall in resources due to either a health-related crisis (e.g., the COVID-19 pandemic) or a natural disaster (e.g., drought, hurricane, or typhoon). It is intended to provide immediate liquidity until a country can secure additional financing through either loans or bilateral aid. Access to the line of credit is contingent upon the occurrence of a defined major event, typically the client country’s declaration of a state of emergency.

    A Cat DDO enables eligible World Bank borrowers to activate up to USD 250 million or 0.5% of GDP, whichever is lower, per country from the International Development Association. Countries that sign up for the Cat DDO must have an adequate hazard risk management program in place that is monitored by the World Bank.

    DDOs are being used by developing countries to respond to climate-related and other natural disasters. For example, Sri Lanka accessed the Cat DDO loan in 2016 following the declaration of a state of emergency after torrential rainfall caused floods and landslides. The Cat DDO agreements with Colombia, the Dominican Republic, Kenya, and the Philippines specifically mention risks from climate shocks and extreme climatic events.

    Adapted from the following sources:

    World Bank. (2021). WB approves credit line for managing risks from climate change, natural disasters and disease outbreaks. https://www.worldbank.org/en/news/press-release/2021/11/17/wb-approves-credit-line-for-managing-risks-from-climate-change-natural-disasters-and-disease-outbreaks

    World Bank. (2023). IBRD Catastrophe Deferred Drawdown Option (Cat DDO) [Product note]. https://thedocs.worldbank.org/en/doc/1820b53ad5cba038ff885cc3758ba59f-0340012021/original/Cat-DDO-IBRD-Product-Note.pdf

    World Bank. (2023). IDA Catastrophe Deferred Drawdown (Cat DDO). https://thedocs.worldbank.org/en/doc/ab4dba2d33ec13b86a413fcd3bf0a26f-0340012023/original/IDA-CAT-DDO-Product-Note.pdf

Credit Guarantees

Case Studies

  • Credit guarantees have been described as “mechanisms in which a third party—the guarantor—pledges to repay some or the entire loan amount to the lender in case of borrower defaults” (Gozzi & Schmukler, 2016). This reduces the lender’s expected credit losses, even if the probability of default remains unchanged, acting as a form of insurance against default. In other words, guarantees seek to augment the risk/return calculations of lenders to make project loans more attractive.

    Guarantees in developing countries are most popular in structuring financing in which a multilateral development bank, bilateral development partner, or government entity will guarantee the repayment of a loan taken by a project developer. In essence, the guarantor indicates to the lender, usually a financial institution, that it will pay on behalf of the developer if the developer is unable to repay the loan. Multilateral development banks, bilateral development partners, and government entities undertake this risk to incentivize more lending and investment in sectors and countries in which lending from financial institutions is constrained and/or less common. In some instances, guarantees will be paired with technical assistance to further enhance the chances of repayment.

    Guarantees could be especially crucial for adaptation projects that have less of a track record and are unfamiliar to investors, or adaptation projects that are predicted to have lower or more volatile returns on investment. In addition, credit guarantee schemes that make investment financing available and affordable for small and medium enterprises can be used to encourage investment in adaptation actions that help these enterprises prepare for weather disasters, drought, and rising sea levels. They can also provide emergency finance for small and medium enterprises impacted by climate-related disasters.

     

    Current or potential adaptation-relevant sector applications:

    • crop and food production – crop production (including agroforestry); livestock production; fisheries (marine, freshwater, and aquaculture); irrigation;
    • ecological services and management – forest management (including afforestation and reforestation); wetlands; ecosystem and biodiversity protection, conservation, and enhancement;
    • water supply (infrastructure) – water storage; water harvesting; water management;
    • coastal and riverine protection and management – coastal defences or flood protection barriers; river flood protection measures;
    • disaster risk reduction – early warning and observation systems;
    • energy infrastructure – energy generation (including renewables);
    • transport infrastructure;
    • other built environment and infrastructure – urban development;
    • social infrastructure – education; health facilities; and
    • industry and manufacturing.

     

    Additional insights:

    • This is a mature instrument that first emerged in the 19th and early 20th centuries. It is widely used in over 100 countries.

     

    Considerations for using credit guarantees:

    • The project/initiative should be close to being “fundable” without the guarantee, to avoid situations in which the amount of the required guarantee is so large that no third party (e.g., a multilateral development bank) will offer it.
    • Guarantees are normally held on guarantor balance sheets for the full amount and thus, from the perspective of the guarantor, are less popular than other instruments (i.e., loans) because they generate fewer fees and offer less collateral.

     

    Adapted from the following sources:

    Gozzi, J. C., & Schmukler, S. (2015, October 23). Public credit guarantees and access to finance. European Economy. https://european-economy.eu/leading-articles/public-credit-guarantees-and-access-to-finance/

    International Institute for Sustainable Development & MAVA Fondation pour la Nature. (2020). Credit enhancement instruments for infrastructure. https://www.iisd.org/credit-enhancement-instruments/

    Organisation for Economic Co-operation and Development. (n.d.). Facilitating access to finance: Discussion paper on credit guarantee schemes. https://www.oecd.org/global-relations/45324327.pdf

    World Bank. (2022). Guidelines for integrating climate change mitigation and adaptation in public credit guarantee schemes for small and medium enterprises. World Bank Group. https://documents.worldbank.org/en/publication/documents-reports/documentdetail/099512111082215393/idu0ef1c33d00fa6c04e180991a0e47a751befcb

  • The Green Guarantee Company

    The Green Guarantee Company, announced in 2022, is the first privately run guarantee company committed to catalyzing climate bonds and loans in developing countries. The company institutionalizes credit enhancement with the aim of attracting investment into climate projects. The company will provide guarantees to mobilize USD 1.6 billion in climate finance for about 40 large-scale climate adaptation and mitigation investment projects in countries that are eligible for official development assistance. The GCF and the United States have provided seed funding for the Green Guarantee Company, which is being implemented in partnership with MUFG Bank Ltd, with the Development Guarantee Group acting as the executing entity. The United Kingdom is providing funding for a linked technical assistance facility, and European financial institutions and national development banks will implement the investment projects.

    Adapted from the following source:

    The Green Guarantee Company. (2023). Guarantees for a greener world. https://greenguarantee.co

  • Tanzania Agriculture Climate Adaptation Technology Deployment Programme

    The Tanzania Agriculture Climate Adaptation Technology Deployment Programme was initiated to increase access to agricultural technologies for climate adaptation. Supported by a USD 70 million concessional loan from the GCF, the program includes the establishment of a lending and de-risking facility to increase access to affordable technologies, as well as to provide technical support and raise awareness of climate change risks within the private sector and government.

    The lending and de-risking facility is developing customized financial products that support climate adaptation and resilience in agriculture in Tanzania, particularly for smallholder farmers. Blended financing from the GCF and the CRDB (an African commercial bank) creates a credit line for CRDB’s Agriculture Resilience and Adaptation lending program, which eases lending for smallholder farmers looking to invest in adaptation and resilience technologies. CRDB will also collaborate with insurance companies to create a resilience and adaptation insurance scheme for smallholder farmers. The success of innovative technologies that result from this program is expected to justify further scale-up and attract private investment, which will help to proliferate both resilience and adaptation technologies and financing products throughout the country.

    Adapted from the following source:

    Green Climate Fund. (n.d.). Tanzania Climate Adaptation Technology Deployment Programme (TACATDP). https://www.greenclimate.fund/project/fp179

  • Water and Waste Disposal Loan Guarantees

    The United States Department of Agriculture has a water and wastewater loan guarantee program that aims to increase private investment in rural businesses and economic development projects. The program provides an 80% guarantee for loans to approved entities to construct or improve facilities for drinking water, sewers, solid waste disposal, and stormwater disposal systems. The program helps private lenders provide affordable financing to public bodies, non-profit businesses, and Indigenous groups.

    Adapted from the following source:

    United States Department of Agriculture. (n.d.). Water & waste disposal loan guarantees. https://www.rd.usda.gov/programs-services/water-environmental-programs/water-waste-disposal-loan-guarantees

Crowdfunding and Investment Platforms

Case Studies

  • Crowdfunding platforms can serve to connect (individual) private investors with projects and entrepreneurs that need (upfront) capital to start or scale their impact-driven venture. Crowdfunding and the investment platforms described here refer to the financing of profitable projects that are able to pay back borrowed capital with interest (as opposed to fundraising donations for non-profits).

    The value of crowdfunding platforms lies in their function to aggregate capital from multiple investors (small private investors, investment funds, donors—each of whom provides a relatively small amount of money) and channel the capital into multiple projects and businesses seeking investment. Project selection (eligible borrowers), risk assessment, and due diligence are done by the crowdfunding platform provider or a partner company. These platforms typically operate as an Internet-based platform and often function without standard financial intermediaries. The platform presents information about the projects to be funded, such as their credit risk rating, financing needs, return on investment, and positive environmental or social impacts.

    The platform operator enters into a loan agreement under commercial terms with the selected borrower and allocates raised funds to these borrowers. The borrower is usually required to pay an administration fee for setting up the funding scheme and interest payments, depending on the risk profile and financing period. However, fees and interest payments are usually lower than conditions at commercial banks. The crowdfunding provider will pay out the principal and return on investment to investors according to the terms of projects they decided to finance via the platform.

    Sustainability-oriented crowdfunding platforms have used various models including loans, rewards, donations, and a hybrid combining the various approaches. All types of platforms could support adaptation projects, with the reward and donation platforms tending to support small, community-oriented projects.

     

    Current or potential adaptation-relevant sector applications:

    • crop and food production – including agroforestry; livestock production; fisheries (marine, freshwater, and aquaculture); irrigation;
    • water supply (infrastructure) – water storage; water harvesting; water management;
    • coastal and riverine protection and management – coastal defences or flood protection barriers; river flood protection measures;
    • other built environment and infrastructure – urban development; and
    • social infrastructure – education; health facilities.

     

    Additional insights:

    • This is an emerging instrument. Crowdfunding is beginning to be used to scale up finance for climate adaptation.
    • The term “crowdfunding” first appeared in 2006.

     

    Considerations for using crowdfunding and investment platforms:

    • Crowdfunding typically helps entrepreneurs of new technologies fund their projects before getting a loan or supports small-scale community or local initiatives.
    • It has been used mostly for small-scale interventions.
    • The newness of the technology may not be appealing to all investors and may be open to increasing regulation.
    • Crowdfunding requires a large number of donors/funders.
    • Attracting the attention of potential donors/funders to an initiative among the many on these platforms can be challenging.
    • Projects funding public goods such as adaptation benefits may benefit from financial and non-financial government support to ensure success.

     

    Adapted from the following sources:

    Maehle, N., Otte, P. P., & Drozdova, N. (2020). Crowdfunding sustainability. In R. Shneor, L. Zhao, & B.-T. Flåten (Eds.), Advances in crowdfunding: Research and practice (pp. 393–422). https://link.springer.com/chapter/10.1007/978-3-030-46309-0_17

    von Ritter, K., & Black-Layne, D. (2013). Crowdfunding for climate change: A new source of finance for climate action at the local level? European Capacity Building Initiative. https://unfccc.int/files/cooperation_and_support/financial_mechanism/standing_committee/application/pdf/paper_-_microfinancing_.pdf

  • European Institute of Innovation and Technology Climate Knowledge and Innovation Community

    The European Institute of Innovation and Technology Climate Knowledge and Innovation Community has initiated a new start-up investment program—“Found by us, funded by you”—to enable innovators to transform early-stage start-ups that apply commercial logic to tackle climate change. The program provides them with the equity investment they need to grow and take risks as they work toward a net-zero and resilient economy. The program seeks interesting clean-tech start-ups and provides investors with climate-aligned investment opportunities. The program is co-funded by the European Union and hosted by the Seedrs platform. The platform provides access to detailed information about featured start-ups, including their terms, pitch decks, and founder questions and answers. Seedrs also allows start-ups to close funding rounds faster, which allows them to focus on developing their core business.

    Adapted from the following source:

    European Institute of Innovation and Technology Climate Knowledge and Innovation Community. (n.d.). Home page. https://www.climate-kic.org/

  • Ghent Crowdfunding Platform

    The City of Ghent, Belgium, developed a crowdfunding platform in 2015 to finance the climate change measures proposed by its citizens. The city provides a fund of EUR 55,000 per year, and people who provide a minimum donation of EUR 5 to a project are known as supporters. The platform has produced two successful climate adaptation projects: Lekker dichtbij! and Edible Street. The first project supports mini green spaces on balconies in social housing complexes, which help to mitigate extreme temperatures in these urban spaces. Edible Street sees traditional stone facades transformed into vertical green spaces that stimulate local food production. The crowdfunding platform has performed as an excellent instrument to pilot climate adaptation projects and measure their potential to be scaled up.

    Adapted from the following source:

    Climate ADAPT. (2023, December 12). Ghent crowdfunding platform realising climate change adaptation through urban greening, Belgium. https://climate-adapt.eea.europa.eu/metadata/case-studies/ghent-crowdfunding-platform-realising-climate-change-adaptation-through-urban-greening

  • One Earth Project Marketplace

    One Earth, a non-profit organization headquartered in California, established the One Earth Project Marketplace, which is an online platform for climate change projects that require funding. The projects are identified and vetted by a network of partners in three areas: renewable energy, nature conservation, and regenerative agriculture. The platform aims to scale up climate philanthropy and has an emphasis on projects led by women, Indigenous peoples, and leaders of colour.

    Adapted from the following source:

    One Earth. (n.d.). One Earth Project Marketplace. https://www.oneearth.org/project-marketplace/

Debt-for-Nature Swaps

Case Studies

  • In a debt-for-nature swap, a country that has received development finance can cancel its debt if it agrees to earmark the funds it would have paid for debt servicing for financing programs that protect biodiversity. This arrangement supports biodiversity conservation in emerging and developing economies.

    Debt-for-nature swaps can be structured in two ways (Perera et al., 2018, p. 42):

    • “The creditor government waives all or a part of their credit rights, and the debtor government invests the equivalent value in biodiversity conservation.”
    • “The creditor government sells all or a part of the debt outstanding to an organization with the expertise to carry out biodiversity conservation work in the debtor country.” The debt is usually sold by the creditor government to the third-party organization at a price lower than its face value. The debtor country then repays the outstanding debt to the third party, who in turn uses the payments to fund biodiversity conservation efforts.

    In the first option, it is important to establish a fund into which the proceeds from the debt-for-nature swap will be invested. The establishment of a fund demonstrates the long-term commitment of the debtor government to using the debt-for-nature swap proceedings for conservation and enables the creditor government to monitor progress. It is best if the debtor government invests the proceeds in an environmental trust fund set up in their country. Grants or loans from the trust can then be used to finance the maintenance of the country’s protected areas and the conservation of biodiversity. Alternatively, proceeds from the debt-for-nature swap could be invested in an endowment fund that will ensure long-term, annual funding for projects. Typically, the trust fund or endowment fund is independent of government, although government representatives often sit on their boards of directors.

    There is also an adjusted debt-for-nature swap instrument called a subsidized debt swap. In this case, a non-governmental organization (potentially the organization implementing conservation projects) commits to providing complementary financial resources in addition to the debt-reduction commitment of a creditor government. This commitment can increase the overall financial volume and incentivize the implementing organization to use resources wisely and impactfully.

    Debt-for-climate swaps are an adjacent concept in which debt is exchanged for investment in climate change projects, although these are not necessarily strictly adaptation focused. There have only been a few small-scale climate-related debt-for-nature swaps, including Italy fulfilling EUR 38 million of its fast-start climate finance commitments via debt-for-nature swaps in Vietnam, Ecuador, and the Philippines.

     

    Current or potential adaptation-relevant sector applications:

    • ecological services and management – forest management (including afforestation and reforestation); wetlands; ecosystem and biodiversity protection, conservation, and enhancement;
    • water supply (infrastructure) – water management;
    • coastal and riverine protection and management – coastal defences or flood protection barriers; river flood protection measures; and
    • disaster risk reduction – early warning and observation systems.

     

    Additional insights:

    • This is a mature instrument. It first emerged in 1987 to help address the Latin American debt crisis.
    • Debt-for-nature swaps had been used in over 30 countries and had restructured USD 2.5 billion of debt and released USD 1.2 billion into conservation projects by 2022. In 2022, debt-for-nature swaps were under evaluation for Gabon, Sri Lanka, Cape Verde, and Laos (United Nations Development Programme, 2023).
    • The average size and total volume of debt-for-nature transactions have been relatively small, and they typically have not been pursued to address debt sustainability, but rather to create fiscal scope to address nature and conservation priorities. Recent transactions in Belize (2021) and Ecuador (2023) may represent a scaling-up in volume.
    • There is renewed interest in debt-for-climate swaps, but the International Monetary Fund argues that the economic case is narrow. For example, debt-for-nature swaps may be worth pursuing if they can increase fiscal space for adaptation actions when grants are not available.

     

    Considerations for using Debt-for-Nature Swaps:

    • Legal certainty must be established by the creditor governments to assure that debt-for-nature swaps indeed lower the debt burden to the extent agreed.
    • Some donor countries have established eligibility criteria for debtor countries that include financial, political, economic, and/or environmental requirements.
    • Feasibility studies and due diligence commonly take place to prepare new debt-for-nature swaps. These are undertaken to identify the share of debt eligible for a debt-for-nature swap and the creditor’s willingness to swap, as well as to select financial vehicles to receive the newly available funds and terms for receiving proceeds.
    • The risk of corruption needs to be eliminated. The fund structure (financial vehicle) and a reliable implementation organization need to be carefully selected. The financial vehicle might also have a board consisting of members from the creditor and debtor countries.
    • Clear conservation targets need to be established and potential indicators defined to monitor performance and impact.

     

    Adapted from the following sources:

    Chamon, M., Klok, E., Thakoor, V. V., & Zettelmeyer, J. (2022). Debt-for-climate swaps: Analysis, design and implementation (IMF working paper). International Monetary Fund. https://www.imf.org/en/Publications/WP/Issues/2022/08/11/Debt-for-Climate-Swaps-Analysis-Design-and-Implementation-522184

    Fuller, F., Zamarioli, L., Kretschmer, B., Thomas, A., & De Marez, L. (2018). Debt for climate swaps: Caribbean outlook. Climate Analytics. https://climateanalytics.org/media/debt_for_climate_swap_impact_briefing.pdf

    Perera, O., Wuennenberg, L., Uzsoki, D., & Cuéllar, A. (2018, July). Financing soil remediation: Exploring the use of financing instruments to blend public and private capital. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/financing-soil-remediation.pdf

    United Nations Development Programme. (2023). (Re)orienting sovereign debt to support nature and the SDGs: Instruments and their application in Asia-Pacific developing economies. https://www.undp.org/publications/reorienting-sovereign-debt-support-nature-and-sdgs-instruments-and-their-application-asia-pacific-developing-economies

  • Belize

    A debt-for-nature swap involving the government of Belize, The Nature Conservancy (TNC), the U.S. Development Finance Corporation, commercial creditors, and other partners took place in 2021. A TNC subsidiary lent funds to Belize to buy back a sovereign bond with a face value of USD 533 million (about 30% of Belize’s GDP) at a discounted rate of 55 cents per U.S. dollar. This was financed by issuing USD 364 million in blue bonds. The U.S. Development Finance Corporation provided political risk insurance to lower the credit risk and the cost of the blue bond. This allowed the loan to have a low interest rate, a 10-year grace period during which no principal is paid, and a long maturity of 19 years.

    In return, Belize agreed to use about USD 4 million per year to 2041 on marine conservation, to allocate a portion of the debt relief to pre-fund a USD 23.4 million marine conservation trust, and to double its marine-protection parks from 15.9% of oceans to 30% by 2026. An endowment fund of USD 23.5 million will finance ocean conservation and increase to an estimated USD 92 million by 2041. Because Belize owed creditors a large amount of money relative to GDP, the impact on the country’s overall debt-to-GDP ratio was significant.

    Adapted from the following sources:

    The Nature Conservancy. (n.d.). Case study: Belize blue bonds for ocean conservation. https://www.nature.org/content/dam/tnc/nature/en/documents/TNC-Belize-Debt-Conversion-Case-Study.pdf

    Owen, N. (2022, May 4). Belize: Swapping debt for nature. International Monetary Fund. https://www.imf.org/en/News/Articles/2022/05/03/CF-Belize-swapping-debt-for-nature

  • Seychelles

    In 2018, Seychelles became the first country to undertake a debt-for-nature swap to encourage marine conservation. The deal enabled Seychelles to swap USD 21.6 million in debt in exchange for the creation of two major marine reserves, helping the country achieve its goal of 30% marine protection. This is an example of a debt-for-nature swap where debt was sold at a discounted rate, and different organizations chipped in to fund conservation and climate adaptation projects. The Nature Conservancy’s low-interest loan of USD 15.2 million mobilized USD 5 million in grants from philanthropic foundations to buy the outstanding debt on behalf of Seychelles. The estimated savings for Seychelles were about USD 2 million per annum due to reduced debt service charges.

    The Government of Seychelles used proceeds from the debt conversion to capitalize the Seychelles Conservation and Climate Adaptation Trust. The trust, with additional resources mobilized from the Global Environment Facility and the United Nations Development Programme, provides funds to support marine protected areas, sustainable fisheries, and initiatives that contribute to the conservation and protection of biodiversity and climate change adaptation. This includes projects dealing with coral bleaching, examining the influence of oceans on select species, rehabilitating wetlands, mainstreaming disaster risk reduction, monitoring climate, and installing rainwater collection barrels. The trust distributes grant funding through the Blue Grants Fund and provides a loan scheme to improve fisheries management through the Blue Investment Fund, which is managed by the Development Bank of Seychelles.

    Adapted from the following sources:

    Payet, P. (n.d.). Debt for nature swap and blue bond. Ministry of Finance, Economic Planning and Trade. https://production-new-commonwealth-files.s3.eu-west-2.amazonaws.com/s3fs-public/2022-04/Patrick%20Payet_Seychelles-DfN%20Swap%20&%20Blue%20Bonds.pdf?VersionId=D66L_sebyWWujpMCt5RPdgbT0ikVFu1N

    Seychelles Conservation and Climate Adaptation Trust. (2024). Welcome to SeyCCAT. https://seyccat.org

  • Antigua and Barbuda

    As a result of the Finance for Acting on Climate in the Eastern Caribbean project funded by a grant from the Open Society Foundation, Antigua and Barbuda is being used as a pilot country for a debt-for-climate swap program. It is expected that the debt-for-climate swap will equal approximately USD 245 million, or 20% of the country’s public debt. The intention is that the pilot will be scaled to other small island developing states across the Eastern Caribbean.

    Adapted from the following sources:

    Alliance of Small Island States. (n.d.). Innovative AOSIS–OSF climate partnership aims to reduce island debt. https://www.aosis.org/innovative-aosis-osf-climate-partnership-aims-to-reduce-island-debt-2/

    The Commonwealth. (2022, July 22). Navigating climate finance as a small island state: Lessons from Antigua and Barbuda. https://thecommonwealth.org/news/navigating-climate-finance-small-island-state-lessons-antigua-and-barbuda

Environmental Impact Bonds

Case Studies

  • Environmental impact bonds (EIBs) use a pay-for-success approach to provide upfront capital from private investors for environmental projects. Traditionally, they are issued for one project or initiative, unlike other bonds that may be used for multiple investments. EIBs are used to pilot riskier investments or to scale up solutions that have already been tested in a pilot program. Investors pay for the costs of deploying environmental solutions. Payers such as public agencies or private institutions repay investors based on achievement (or not) of the agreed-upon environmental outcomes at the end of the program’s closing evaluation. The bond acts as a contractual arrangement between the project/initiative developer and the payer. The main difference between EIBs and traditional bonds is that the latter are often repaid with the general revenue of the issuer of the bond, while EIBs tie repayment to the revenue or cost savings generated by the successful environmental project or initiative.

    EIBs could be particularly useful in cases where a project delivers climate change adaptation benefits but lacks traditional revenue streams to attract investors interested in both a financial return and environmental impact. The issuer can work with a bilateral donor or foundation to structure an EIB to ensure the project is completed. For example, an artificial wetland could be constructed with funds derived from an EIB, and then the payment of interest and repayment of principal is based on demonstrated biodiversity or flood protection gains in the area. The borrower could repay more or less than the original amount of the loan based on the level of gains as defined in the EIB contract.

     

    Current or potential adaptation-relevant sector applications:

    • ecological services and management – forest management (including afforestation and reforestation); wetlands; ecosystem and biodiversity protection, conservation, and enhancement; fire management;
    • water supply (infrastructure) – water storage; water harvesting; water management;
    • coastal and riverine protection and management – coastal defences or flood protection barriers; river flood protection measures; and
    • other built environment and infrastructure – urban development.

     

    Additional insights:

    • This is an emerging instrument, with the first EIB closing in 2016.
    • As of 2021, the only EIBs proposed and released were in the United States.

     

    Considerations for using an environmental impact bond:

    • The payer is usually a public institution (often a municipal government) or philanthropic foundation—organizations willing to take on more risk without a guarantee of financial return.
    • Many EIBs require a third party—a foundation—to fund the structuring costs of the EIB.
    • A project needs to be larger than USD 5 million.
    • EIBs are case-specific, and structuring the bond is time-intensive and costly.
    • The issuance of an EIB can be an important step in demonstrating whether or not private funders may be willing to finance a certain type of project.
    • EIBs need specific targets/goals against which to measure success and payment.

     

    Adapted from the following sources:

    Brand, M. W., Seipp, K. Q., Saksa, P., Ulibarri, N., Bomblies, A., Mandle, L., Allaire, M., Wing, O., Tobin-de la Puente, J., Parker, E. A., Nay, J., Sanders, B. F., Rosowsky, D., Lee, J., Johnson, K., Gudino-Elizondo, N., Ajami, N., Wobbrock, N., Adriaens, P., … Gibbons, J. P. (2021). Environmental impact bonds: A common framework and looking ahead. Environmental Research: Infrastructure and Sustainability, 1(2), Article 023001. https://iopscience.iop.org/article/10.1088/2634-4505/ac0b2c

    Quantified Ventures. (2018, October 31). Sharing risk, rewarding outcomes: The environmental impact bond. https://www.quantifiedventures.com/blog/what-is-an-environmental-impact-bond

    Thompson, A. (2020, July 2). Environmental impact bonds: Where are they now? Environmental Finance Blog. University of North Carolina, School of Government. https://efc.web.unc.edu/2020/07/02/environmental-impact-bonds-where-are-they-now/

  • Forest Resilience Bond: Yuba Project

    Blue Forest Conservation, in partnership with the World Resources Institute and the United States Forest Service, initiated the creation of forest resilience bonds, a type of EIB. The EIB provided an opportunity for private investors to support public land management, forest restoration, and wildfire risk reductions. In 2018, the first bond raised USD 4 million in private capital from AAA Insurance of California, Calvert Impact Capital, the Rockefeller Foundation, and the Gordon and Betty Moore Foundation. Upon completing the project outcomes (ecological restoration across 15,000 acres in the Yuba River Watershed by Blue Forest Conservation), the paying beneficiaries (the State of California and the Yuba Water Agency) were responsible for repaying investors. The Yuba Water Agency and partners launched a second bond in 2021 that leveraged USD 25 million in total funding.

    Adapted from the following sources:

    Brand, M. W., Seipp, K. Q., Saksa, P., Ulibarri, N., Bomblies, A., Mandle, L., Allaire, M., Wing, O., Tobin-de la Puente, J., Parker, E. A., Nay, J., Sanders, B. F., Rosowsky, D., Lee, J., Johnson, K., Gudino-Elizondo, N., Ajami, N., Wobbrock, N., Adriaens, P., … Gibbons, J. P. (2021). Environmental Impact Bonds: A common framework and looking ahead. Environmental Research: Infrastructure and Sustainability 1(2), Article 023001. https://www.researchgate.net/publication/352385450_Environmental_Impact_Bonds_A_common_framework_and_looking_ahead

    World Resources Institute. (2021). New Forest Resilience Bond will finance $25 million of restoration to reduce wildfire risk in the Tahoe National Forest in California [Press release]. https://www.wri.org/news/release-new-forest-resilience-bond-will-finance-25-million-restoration-reduce-wildfire-risk

    Yuba Water Agency. (n.d). Forest Resilience Bond. https://www.yubawater.org/256/Forest-Resilience-Bond

  • Stormwater Management in the United States

    EIBs have been used to fund stormwater management projects in the United States. These bonds are comparable to traditional public municipal bond offerings and are priced competitively. Proceeds from the bonds fund innovative green infrastructure projects, such as those addressing flooding and water quality issues as well as stormwater runoff.

    The first EIB in the United States was issued in 2016 by the District of Columbia Water and Sewer Authority (DC Water), which wanted to pilot the use of green infrastructure to reduce the risk of combined sewer overflows polluting local watersheds—particularly as rainfall events become more frequent and intense due to climate change. This pay-for-success EIB was privately purchased by Goldman Sachs and the Calvert Foundation (the investors) for USD 25 million. Financing from the EIB was used by DC Water to cover the cost of implementing green infrastructure solutions such as rain gardens and permeable pavement. DC Water achieved the bonds’ expected performance objectives, determining that the construction of 77 green infrastructure practices reduced stormwater runoff by nearly 20% from previous levels. This result was within the expected outcome range established in the EIB, so no outcome payment from DC Water for outperforming expectations was due to investors and no risk share or underperformance penalty was due from the investors to DC Water.

    More recently, the Chesapeake Bay Foundation issued an EIB to finance three projects in the City of Hampton, Virginia. The city was facing a greater risk of tidal- and storm-related flooding in different locations, as well as requirements to reduce the level of nitrogen, phosphorous, and sediment pollution loads entering the Chesapeake Bay by 60% by 2025. After developing a plan to address these concerns, the city issued a bond solicitation on the open market with a short competitive process to raise USD 12 million. The selected bids collectively presented the city with an interest rate on the bond offering of less than 2%. The finance raised was used to implement three projects focused on reducing flooding and stormwater runoff within a local watershed and emphasized the use of natural infrastructure solutions in combination with traditional water infrastructure.

    Adapted from the following sources:

    Chesapeake Bay Foundation. (n.d.). Environmental impact bonds. https://www.cbf.org/how-we-save-the-bay/programs-initiatives/environmental-impact-bonds.html

    DC Water. (2021). Fact sheet: DC Water environmental impact bond results – Successful. https://www.dcwater.com/sites/default/files/finance/eib-factsheet.pdf

    Epstein, L. R. (n.d.). Using environmental impact bonds to finance green stormwater infrastructure in the Chesapeake Bay watershed: A case study. Chesapeake Bay Foundation. https://www.cbf.org/document-library/cbf-publications-brochures-articles/eib-whitepaper.pdf

    Goldman Sachs, DC Water, & Calvert Foundation. (n.d.). Fact sheet: DC Water Environmental Impact Bond. https://www.goldmansachs.com/media-relations/press-releases/current/dc-water-environmental-impact-bond-fact-sheet.pdf

Green Bonds

Case Studies

  • A bond is a type of loan in which the issuer borrows money from the bondholder or buyer of the bond. The issuer repays the loan sum plus interest on an agreed-upon schedule.

    Green bonds are bonds in which the issuer commits to investing the proceeds raised by the bond issuance to investments in projects with environmental benefits, also referred to as green projects.

    The Green Bond Principles issued by the International Capital Markets Association, are voluntary guidelines for the structure and management of green bonds. As outlined in the principles, a core component of a green bond is the use of its proceeds for projects that have clear environmental benefits, which are to be assessed and, if possible, quantified by the borrower/bond issuer. The use of proceeds should be described in a legal document that clearly identifies the types of projects eligible to be funded from the bond proceeds. Adaptation-aligned project categories from the Green Bond Principles include the following (International Capital Market Association, 2021):

    • Environmentally sustainable management of living natural resources and land use (including environmentally sustainable agriculture; environmentally sustainable animal husbandry; climate-smart farm inputs such as biological crop protection or drip-irrigation; environmentally sustainable fishery and aquaculture; environmentally sustainable forestry, including afforestation or reforestation, and preservation or restoration of natural landscapes);
    • Terrestrial and aquatic biodiversity conservation (including the protection of coastal, marine and watershed environments); (…)
    • Sustainable water and wastewater management (including sustainable infrastructure for clean and/or drinking water, wastewater treatment, sustainable urban drainage systems and river training and other forms of flooding mitigation); [and]
    • Climate change adaptation (including efforts to make infrastructure more resilient to impacts of climate change, as well as information support systems, such as climate observation and early warning systems). (pp. 4–5)

    Other types of eligible projects under the Green Bond Principles that could provide climate adaptation benefits are listed below.

    Current or potential adaptation-relevant sector applications:

    • crop and food production—including agroforestry; livestock production; fisheries (marine, freshwater, and aquaculture); irrigation;
    • ecological services and management—forest management (including afforestation and reforestation); wetlands; ecosystem and biodiversity protection, conservation, and enhancement;
    • water supply (infrastructure)—water storage; water harvesting; water management;
    • coastal and riverine protection and management—coastal defences or flood protection barriers; river flood protection measures;
    • disaster risk reduction—early warning and observation systems;
    • energy infrastructure—energy generation (including renewables);
    • transport infrastructure;
    • other built environment and infrastructure—urban development; tourism (infrastructure); wastewater systems;
    • social infrastructure—education; health facilities; and
    • industry and manufacturing.

    Additional insights:

    • This is the most mature of the sustainability-related bonds. The European Investment Bank issued the first green bond, branded as a Climate Awareness Bond, in 2007 to respond to growing interest in committing capital to address green challenges.
    • Other labels, such as blue bonds, climate resilience bonds, social bonds, and sustainability bonds, are green bonds that set out specific objectives and signal to investors their focus on specific objectives. The frameworks for some green, social, and sustainability bond issuances define eligible projects as including adaptation or climate resilience. As such, these types of bonds can support climate resilience investments.
    • The frameworks for many sovereign bond issuances define eligible green projects as including adaptation or climate resilience (e.g., sustainable water management, sustainable agriculture, irrigation). For example, Argentina, Egypt, France, Indonesia, the Netherlands, and the Philippines have included adaptation components in their green bond frameworks.
    • Green bonds have started to gain traction across developed country markets. However, they are still considered a niche market, with green, social, and sustainability-related bonds making up about 8.9% of all bond issuances in 2022 (Organisation for Economic Co-operation and Development [OECD], 2023).
    • Developing countries are lagging with respect to the use of targeted bond issuances; in 2022 only 13% of green, social, and sustainability-related bonds were from issuers in developing countries (with the figure declining to about 5% if China is not included) (OECD, 2023).

    Considerations for issuing green bonds:

    • A robust pipeline of green projects must be available for proceeds of the green bond to fund.
    • Bonds are not appropriate for all borrowers/issuers, especially in countries that may not be able to take on additional debt.
    • Guarantees may be needed, or a higher rate of return offered, to offset (real or perceived) risk and increase investors’ confidence in bonds in developing countries.
    • Most green bond issuances in developing countries have technical assistance support from multilateral development banks that act as market enablers.

    Adapted from the following sources:

    Climate Bonds Initiative. (2021). Green bonds for climate resilience: State of play and roadmap to scale. Global Center on Adaptation and European Bank for Reconstruction and Development. https://gca.org/wp-content/uploads/2021/10/Green-Bonds-for-Climate-Resilience_State-of-Play-and-Roadmap-to-Scale.pdf   

    International Capital Market Association. (2022, June). Green bond principles: Voluntary process guidelines for issuing green bonds. https://www.icmagroup.org/assets/documents/Sustainable-finance/2022-updates/Green-Bond-Principles-June-2022-060623.pdf

    Organisation for Economic Co-operation and Development. (2023). Green, social, sustainability and sustainability-linked bonds in developing countries: The case for increased donor co-ordination. OECD Publishing. https://www.oecd.org/dac/green-social-sustainability-bonds-developing-countries-donor-co-ordination.pdf

  • Cape Town’s Green Bond

    The bond issuance raised funds for green projects that included adaptation projects related to water resilience and coastal structure protection and rehabilitation. The issuance was a response to financing needs that arose due to the severe drought suffered by South Africa from 2015 to 2017.

    Adapted from the following source:

    Global Infrastructure Hub. (2021, November 1). Cape Town green bond. https://www.gihub.org/innovative-funding-and-financing/case-studies/cape-town-green-bond/

  • Egypt’s Green Bond

    Egypt issued the first sovereign green bond in the Middle East and North Africa region in 2020. The bond issuance raised USD 750 million on a coupon rate of 5.25% over a 5-year period. Proceeds from the bond were used to fund a portfolio of projects, including adaptation projects in sustainable water and wastewater management (e.g., wastewater reuse for irrigation and desalination of seawater to meet drinking water needs).

    Adapted from the following source:

    Green Finance Working Group. (2021). Egypt sovereign green bond allocation and impact report: 2021. https://assets.mof.gov.eg/files/a3362b50-574c-11ec-9145-6f33c8bd6a26.pdf

  • Fiji Sovereign Green Bond

    To help raise additional financing to fill its climate resilience development needs, the Fijian government issued the FJD 100 million Fiji Sovereign Green Bond in November 2017. Over 90% of the proceeds were allocated to climate adaptation projects that were selected from the national budget. The issuance was intended to help address the adverse impacts on national budgets of the necessary rehabilitation of infrastructure damaged by Tropical Cyclone Winston in 2016. This was one of the first green bonds to allocate a majority of its proceeds to build climate resilience. Adaptation-related projects funded by the proceeds included improvements to rural water supply, rainwater harvesting, rehabilitation and construction of schools, and emergency works.

    Adapted from the following source:

    Fiji Ministry of Economy. (2020). Fiji sovereign green bond: 2020 update. Reserve Bank of Fiji. https://www.rbf.gov.fj/wp-content/uploads/2021/06/Fiji_Sovereign_Green_Bond_2020_Impact_Report-1.pdf

  • Province of Ontario’s Green Bond Program

    The Province of Ontario, Canada, has issued a series of bonds that include climate adaptation and resilience as an eligible project category. Within this project category, Ontario can fund projects related to flood protection and stormwater management, extreme-weather-resistant infrastructure, and municipal infrastructure for clean and/or drinking water, wastewater treatment, sustainable urban drainage systems, and other forms of flooding mitigation. The Port Lands Flood Protection project is the first one centred on climate adaptation and resilience. The CAD 1.25 billion project is focused on flood protection and ecological habitat restoration in the City of Toronto.

    Adapted from the following sources:

    Ontario Financing Authority. (n.d.). Ontario green bond framework. https://www.ofina.on.ca/pdf/green_bond_framework.pdf

    Ontario Financing Authority. (2023, December). 2023 Ontario green bond newsletter. https://www.ofina.on.ca/pdf/2023_ontario_green_bond_newsletter_en.pdf

Green Loans

Case Studies

  • Borrowers use green loans to finance or refinance green projects. Green loans are similar to green bonds in that they raise capital for environmentally sustainable projects, but they differ in size and in how the funding is raised. Funds for bonds come from the investor market, while funds for green loans come from a bank or private operation; the amounts tend to be smaller than for a bond.

    For a project to be labelled as green,

    • the eligible green project categories should be set out in the use-of-proceeds section outlined in the loan framework;
    • the information/covenants relevant to the green projects should be identified in the facility agreement; and
    • the borrower should be under an obligation to represent the accuracy of any reporting.

    The issuance of green loans should follow the Green Loan Principles published by the Loan Markets Association in 2019 and updated in 2023. These principles recognize broad categories of eligibility, including climate change adaptation projects such as climate observation and early warning systems, climate-smart agriculture, and protection of coastal environments. Borrowers are expected to report on the use of proceeds, including a list of projects to which the loan proceeds have been allocated, the amounts allocated, and the expected and achieved impact.

     

    Current or potential adaptation-relevant sector applications:

    • crop and food production – including agroforestry; livestock production; fisheries (marine, freshwater, and aquaculture); irrigation;
    • ecological services and management – forest management (including afforestation and reforestation); wetlands; ecosystem and biodiversity protection, conservation, and enhancement;
    • water supply (infrastructure) – water storage; water harvesting; water management;
    • coastal and riverine protection and management – coastal defences or flood protection barriers; river flood protection measures;
    • disaster risk reduction – early warning and observation systems;
    • energy infrastructure – energy generation (including renewables);
    • transport infrastructure;
    • other built environment and infrastructure – urban development;
    • social infrastructure – education; health facilities; and
    • industry and manufacturing.

     

    Additional insights:

    • This is an emerging instrument, with the first green loan market beginning in 2016 in the United Kingdom, with Lloyd’s Bank earmarking loans for green real estate companies.

     

    Considerations for issuing a green loan:

    • The instrument is not widely used in developing countries, which accounted for USD 1.6 billion of the estimated USD 33 billion in outstanding green loans in 2021 (World Bank, 2021).
    • Borrower- and/or project-funded loans should meet credit and default risk thresholds.
    • Loans are not appropriate for all borrowers, especially borrowers that may not be able to take on additional debt.
    • Guarantees may be needed to increase lenders’ confidence in green loans issued in developing countries.

     

    Adapted from the following sources:

    Loan Market Association. (2023). Green loan principles. https://www.lma.eu.com/application/files/8916/9755/2443/Green_Loan_Principles_23_February_2023.pdf

    World Bank. (2021, October 4). What you need to know about green loans. https://www.worldbank.org/en/news/feature/2021/10/04/what-you-need-to-know-about-green-loans

  • Green Loans in Mauritius

    In 2019, the Agence Française de Développement and the European Union provided a credit line of EUR 75 million to two local banks in Mauritius to enable them to offer green loans with attractive conditions. The Mauritius Commercial Bank has a green loan program that offers clients preferential interest rates and an investment grant of 15% for green investments. The 2019 program expanded beyond earlier programs that focused on reducing greenhouse gas emissions to include grants to incorporate climate change adaptation and gender equality considerations, as well as technical assistance. This enabled the partner banks to provide green loans for projects that aim to reduce Mauritius’s vulnerability to climate change, including flood management, preservation of drinking water resources, rainwater harvesting, and prevention of coastal erosion.

    Adapted from the following sources:

    Agence Française de Développement Groupe. (2021). SUNREF Mauritius: Towards a greener future. https://www.businessmauritius.org/wp-content/uploads/2021/09/Brochure-SUNREF-Mauritius.pdf  

    Mauritius Commercial Bank. (n.d.). Green loan. https://www.mcb.mu/en/personal/loans/green-loans/

  • Hyson Development Company

    Hyson, a leading property investment, management, and development company in Hong Kong, partnered with ChinaChem to secure the largest green loan in Hong Kong in January 2022. The partners signed a 5-year HKD 12.95 million loan facility with six banks. The loan facility would be used to refinance the land premium and to finance the construction costs of a new green commercial project that would meet China’s green building standard. This green development included the use of renewable energy, energy efficiency, sustainable waste management, and water conservation. Hysan’s 2018 Green Finance Framework included climate change adaptation, described as “projects that will strengthen building resilience to climate change impacts such as extreme weather events and natural disasters, e.g. installation and upgrades of enhanced flood protection system, additional insulation, etc.” (Hysan, 2018, p. 6).

    Adapted from the following sources:

    Hysan. (2018). Hysan green finance framework. https://www.hysan.com.hk/app/uploads/2021/01/Hysan-Green-Finance-Framework.pdf

    Hysan. (2022). Hysan Development and Chinachem Group successfully raised
    Hong Kong’s largest green loan to fund Caroline Hill Road commercial project     [News release]. https://www.hysan.com.hk/app/uploads/2022/01/Hysan-Development-and-Chinachem-Group-Successfully-Raised-Hong-Kongs-Largest-Green-Loan-to-Fund-Caroline-Hill-Road-Commercial-Project.pdf

Green Revolving Fund

Case Studies

  • A green revolving fund has been defined as “an internal capital pool that is dedicated to funding sustainability projects that generate cost savings. A portion of those savings is then used to replenish the fund (i.e., the funds are revolved), allowing for reinvestment in future projects of similar value” (U.S. Department of Energy, n.d.). This establishes an ongoing funding vehicle that helps drive increased sustainability over time while generating cost savings and ensuring capital is available for important projects. Typically, the interest rates are at or below market rates. The funds are usually capitalized by public sources and managed in a manner that creates a repeated cycle of loans and repayments.

    Traditionally, green revolving funds in North America and Europe provided loans for sustainable energy and sustainable urban development projects. However, in the United States, several states have used state revolving funds to finance adaptation-related projects, including green stormwater and wastewater infrastructure and drinking water capacity projects.

    In addition, revolving funds have been used to support small projects in developing countries, including for adaptation. Repayment to the fund may not be through cost savings, but the fund enables community members to access funds at low interest rates with long repayment periods. Such funds are often established with seed funding from development partners.

     

    Current or potential adaptation-relevant sector applications:

    • ecological services and management – forest management (including afforestation and reforestation); wetlands; ecosystem and biodiversity protection, conservation, and enhancement;
    • water supply (infrastructure) – water management;
    • coastal and riverine protection and management – coastal defences or flood protection barriers; river flood protection measures;
    • disaster risk reduction – early warning and observation systems;
    • other built environment and infrastructure – urban development; and
    • social infrastructure – education; health facilities.

     

    Additional insights:

    • This is a mature instrument. Green revolving funds have been used since the 1990s by educational institutions in the United States to fund climate mitigation projects related to energy efficiency and renewable energy.

     

    Considerations for using Green Revolving Funds:

    • Sufficient capital is required to seed the fund.
    • Green revolving funds seek projects that will pay back/reseed the fund regularly, which may be an impediment to funding long-term projects.

     

    Adapted from the following sources:

    Council of Development Finance Agencies. (n.d.). Revolving loan funds and development finance. https://www.cdfa.net/cdfa/cdfaweb.nsf/pages/revolving-loan-funds.html

    Housing 2030. (n.d.) Revolving funds and auctioning – Austria, Czechia, France, Poland, Slovakia and Slovenia. https://www.housing2030.org/project/revolving-funds-and-auctioning/

    Urban Low Emission Development Strategies. (2021). Innovative financing for low emissions development: Revolving funds, intracting and community funding. What do they mean??https://urban-leds.org/wp-content/uploads/2021/11/Urban-LEDS-factsheet-_Innovative-Financing.pdf

    U.S. Department of Energy. (n.d.). Green revolving funds. https://betterbuildingssolutioncenter.energy.gov/toolkits/green-revolving-funds

  • State Revolving Funds – United States of America

    Federal–state partnerships support a number of water-related revolving funds in the United States. Grant funding from the federal government’s Environmental Protection Agency’s Drinking Water State Revolving Funds and its Clean Water State Revolving Funds can be used to reduce risks from disasters and natural hazards, including the effects of climate change. This can include the purchase and construction of resilience- and recovery-related infrastructure improvements, such as purchasing backup generators, constructing physical flood barriers, moving or modifying existing water facilities, and purchasing and conserving land to protect source-water areas. For example, with funding from the Clean Water State Revolving Fund, California and Oregon purchase and conserve land to protect source-water areas.

    In addition, the Federal Emergency Management Agency has established the Safeguarding Tomorrow Revolving Loan Fund program, which provides capitalization grants to states to enable low-interest loans to local governments to reduce their vulnerability to natural hazards and climate change and enhance community resilience. In October 2023, the Federal Emergency Management Agency granted a total of USD 50 million to seven American states and the District of Columbia to establish revolving loan programs that will support climate resilience and adaptation projects. Additional grants through the Safeguarding Tomorrow Revolving Loan Fund program are planned for 2024.

    Adapted from the following sources:

    Federal Emergency Management Agency. (2024). Safeguarding Tomorrow Revolving Loan Fund. https://www.fema.gov/grants/mitigation/storm-rlf#news

    Martinez, M. (2019). Using state revolving funds for land conservation. Conservation Finance Network. https://www.conservationfinancenetwork.org/sites/default/files/2019-02/CFN%20Toolkit%20-%20State%20Revolving%20Funds%20Rev.pdf

    United States Environmental Protection Agency. (2023). EPA state revolving funds and grants available to water and wastewater utilities. https://www.epa.gov/fedfunds/epa-state-revolving-funds-and-wifia-available-water-and-wastewater-utilities

  • The Maryland Shore Erosion Control Revolving Loan Fund

    The Maryland Shore Erosion Control Revolving Loan Fund provides zero-interest loans to households, businesses, and municipalities that own shoreline property and want to reduce shore erosion through natural solutions or living shoreline projects. These projects include bank grading, dune creation, and arch restoration. Technical assistance is also available in the form of site evaluations and issue assessments. The fund issues between 15 and 20 loans each year of up to USD 60,000, and loans can be repaid over 5, 15, or 20 years.

    Adapted from the following source:

    Crook, M. (2021). Fact sheet: How can revolving loan funds make our coast more resilient? Environmental and Energy Study Institute. https://www.eesi.org/papers/view/fact-sheet-how-can-revolving-loan-funds-make-our-coasts-more-resilient

  • Sustainable Island Resources Framework Fund – Antigua and Barbuda

    The adaptation window of the Sustainable Island Resources Framework Fund is a revolving loan program that disburses unsecured, low-interest loans (average size USD 14,550) to vulnerable homes and businesses to meet new adaptation guidelines and standards for built infrastructure. Loans are used to install rainwater harvesting systems, water efficiency retrofits, hurricane shutters, mosquito screens, and solar panels. The loan facility was capitalized with USD 3 million from the Adaptation Fund and USD 1.6 million from the Special Climate Change Fund, with the United Nations Environment Programme as the implementing entity.

    Adapted from the following sources:

    Adaptation Fund. (2021). An integrated approach to physical adaptation and community resilience in Antigua and Barbuda’s northwest McKinnon’s watershed. https://www.adaptation-fund.org/project/integrated-approach-physical-adaptation-community-resilience-antigua-barbudas-northwest-mckinnons-watershed/

    United Nations Environment Programme. (2023, October 18). How communal loans are helping Antigua and Barbuda brace for hurricanes. https://www.unep.org/news-and-stories/story/how-communal-loans-are-helping-antigua-and-barbuda-brace-hurricanes

Green Securitization

Case Studies

  • Securitization involves the pooling of financial assets into one group to form a new, sellable financial product. The financial assets that are pooled are usually loans or other debt, with regular cash flows being generated by the financial assets. These loans and debt must be fungible or interchangeable—that is, they have similar risk and return characteristics. The issuer pools loans into one group and usually transfers them into a newly created special-purpose vehicle, typically an asset-based security (ABS),  and then sells these repackaged assets to investors. The shares of these securities can be sold in secondary markets. This enables companies and lenders to sell off existing financial assets, which increases their liquidity.

    The instrument is defined as “green” when the underlying cash flows are derived from financial assets (i.e., loans) to fund low-carbon assets or when proceeds from the deal are earmarked to invest in low-carbon assets. Renewable energy, energy efficiency, and transport projects lend themselves to securitization due to their stable income profile and low operational risks. Incorporating physical climate risk considerations into the design of these projects could support climate adaptation efforts.

     

    Current or potential adaptation-relevant sector applications:

    • water supply (infrastructure) – water management;
    • energy infrastructure – energy generation (including renewables);
    • transport infrastructure; and
    • other built environment and infrastructure – urban development.

     

    Additional insights:

    • This is an emerging instrument for adaptation action in the water sector.
    • It is a mature instrument for other purposes, with the majority of green ABS issuance to 2021 taking place in the United States. There is increasing use in China, and a limited number of sustainable securitizations in Europe.

     

    Considerations for using securitizing assets:

    • This instrument requires multiple revenue-generating projects.
    • Securitization requires legal expertise and the definition of strict terms and conditions.
    • This tool is typically promoted with the active support of the government.

     

    Adapted from the following sources:

    Chen, J. (2023, September 29). Securitization. Investopedia. https://www.investopedia.com/terms/s/securitization.asp

    European Banking Authority. (2022). EBA report: Developing a framework for sustainable securitisation. https://www.eba.europa.eu/sites/default/documents/files/document_library/Publications/Reports/2022/1027593/EBA%20report%20on%20sustainable%20securitisation.pdf

    Harwood, A. (2021). Accelerating securitization in Africa to finance the SDGs: Future flow securitizations. Milken Institute. https://milkeninstitute.org/sites/default/files/reports-pdf/Accelerating%20Securitization%20in%20Africa.pdf

    Rado, G. (2018, August 17). Green securitisation: Unlocking finance for small-scale low carbon projects. Climate Bonds Initiative. https://www.climatebonds.net/resources/reports/green-securitisation-unlocking-finance-small-scale-low-carbon-projects#:~:text=A%20securitisation%20can%20be%20defined,invest%20in%20low%2Dcarbon%20assets

  • United States Property Assessed Clean Energy Asset-Backed Security

    The U.S. Property Assessed Clean Energy scheme finances energy efficiency and renewable energy improvements that residential and commercial property owners can repay over time through their property tax bills. Revenue from property taxes is redistributed to leading agencies. This scheme passes on the funding and credit risk to the asset-backed security investors through the securitization of the loans, freeing up financing for new loans.

    Adapted from the following source:

    Energy.gov. (n.d.). Property assessed clean energy programs. Office of State and Community Energy Programs. https://www.energy.gov/eere/slsc/property-assessed-clean-energy-programs

  • Beijing Enterprises Water Group

    The Beijing Enterprises Water Group in China operates 19 water treatment plants under takeover–operate–transfer or build–operate–transfer contracts in 16 municipalities. The proceeds of the green ABSs, backed by fees from water treatment services, are allocated to nine water infrastructure projects to support pollution prevention, resource recycling, and climate change adaptation categories under China’s green bond catalogue. The first Chinese green ABSs were issued in 2016, and the green ABS market has grown rapidly, comprising 11% of China’s green bond issuance in 2020.

     

    Adapted from the following sources:

    Climate Bond Initiative. (2018, March). Green securitisation: Unlocking finance for small-scale low carbon projects (Briefing paper). https://www.climatebonds.net/files/reports/green_securitisation_cbi_conference_final.pdf

    Climate Bond Initiative. (2020). China green securitization report: State of the market 2020. https://www.climatebonds.net/files/reports/cbi_cn_2020_sotm_04h_1.pdf

Payment for Ecosystem Services

Case Studies

  • Payments for ecosystem services (PES) are transfers that are mainly used for either regulating services, such as watershed protection, flood control, or shoreline defence, or cultural services, such as landscape beauty. Under a PES scheme, payments of cash or other resources are made by those who benefit from ecosystem services, such as downstream water consumers, cities, and hydropower companies, to ecosystem service providers, such as farmers' land trusts and stewards of protected areas. PES operationalize a "beneficiary pays principle" approach to ecosystem services and create an opportunity for providers to generate income and funding. Payments by beneficiaries to the provider are directly linked to the successful protection/provision of contractually stipulated ecosystem services (outcome-based payment) or the execution of certain activities that enable/improve the provision of ecosystem services (input-based payment approach). The latter approach is more appropriate if it is too difficult to assess a precise ecosystem service and how a landowner can provide this service or if there is a tendency for a long time lag for monitoring and verification.

    Payments serve to remunerate providers of certain activities and required resources. These payments also help compensate the providers for reduced or loss of income because certain economic activities or economic rights are not used in order to provide the ecosystem services. There is a range of payment models depending on who is defined as the (direct or indirect) beneficiary and who is chosen to finally pay.

    Many climate change-related PES schemes focus on mitigation. These schemes may offer an opportunity for also providing adaptation benefits, such as flood abatement resulting from afforestation. Addressing adaptation needs requires tailored PES schemes that address the local context, particularly for the stewards of the protected area, as well as flexible contracts with suppliers.

    Several developing countries have implemented PES initiatives, including Brazil, Costa Rica, Peru, the Philippines, Tanzania, Uganda, and Vietnam. These efforts provide a depth of experience internationally in their application.

     

    Current or potential adaptation-relevant sector applications:

    • crop and food production – including agroforestry; livestock production; fisheries (marine, freshwater, and aquaculture); irrigation;
    • ecological services and management – forest management (including afforestation and reforestation); wetlands; ecosystem and biodiversity protection, conservation, and enhancement; and
    • water supply (infrastructure) – water storage; water harvesting; water management.

     

    Additional insights:

    • This is a mature instrument. PES have been used as a conservation and resource management tool since the early 1990s and have been implemented on all continents. In 2018, there were over 550 active programs around the world.

     

    Considerations for using a PES initiative:

    • PES leverage strong public institutions and private property rights that allow beneficiaries to internalize the benefits and pay for them. Subsidy schemes can be employed to support owners with limited financial means.
    • Public authorities should have technical knowledge of the initiative creating the ecosystem services as well as the ability to monitor usage (if necessary) and legally enforce payment.
    • PES initiatives in developing countries have often been supported by public funds, including payments issued by governments and grant funds received from development partners and international conservation organizations. Some schemes have secured investments from private entities.

     

    Adapted from the following sources:

    Kuhfuss, L., Rivington, M., & Roberts, M. (2018). The ‘Payment for Ecosystems Services’ approach – Relevance to climate change. ClimateXchange. https://www.climatexchange.org.uk/media/3271/payment-for-ecosystem-services.pdf

    Salzman, J., Bennett, G., Carroll, N., Goldstein, A., & Jenkins, M. (2018). The global status and trends of Payments for Ecosystem Services. Nature Sustainability, 1, 136–144. https://www.nature.com/articles/s41893-018-0033-0

    Smith, S., Rowcroft, P., Everard, M., Couldrick, L., Reed, M., Rogers, H., Quick, T., Eves, C., & White, C. (2013). Payments for ecosystem services: A best practice guide. Department for Environment, Food & Rural Affairs. Defra. https://www.cbd.int/financial/pes/unitedkingdom-bestpractice.pdf

  • CompensACTION

    The CompensACTION initiative promotes PES innovation on a large scale to increase the incomes of small-scale farmers in developing countries, while encouraging environmental and climate change outcomes, including helping farmers build their resilience to climate change. The initiative, launched in 2022 by the Government of Germany, aims to use public finance to increase private investment to scale up PES programs to compensate smallholder farmers for their contributions to preserving ecosystem services. As of September 2023, PES pilot programs had been initiated through the International Fund for Agricultural Development in Brazil, Ethiopia, and Lesotho. The Lesotho program includes payment for water efficiency, as well as for biodiversity conservation and carbon sequestration.

    Adapted from the following source:

    CompensACTION. (n.d.). CompensACTION for food security and a healthy planet. https://compensaction.com

    Wollenberg, E., Tennigkeit, T., Dinesh, D., Baumert, S., Rohrig, F., Kirfel-Ruhle, L., & Zeppenfeldt, L. (2022). Compensating farmers for ecosystem services: Lessons and an agenda for innovation [Policy brief]. CompensACTION. https://www.globallandscapesforum.org/wp-content/uploads/2023/08/Compensating-farmers-for-ecosystem-services-policy-brief.pdf

  • Ecological Payment Systems – Switzerland

    Since the early 1990s, Switzerland has introduced reforms to move away from market price supports to direct payments, including those for the provision of ecological goods and services. As part of further reforms to its agricultural policy framework for 2014–2017, Switzerland transitioned from providing direct payments to farmers per hectare of production or per head of livestock to payments linked to efforts to achieve federal Environment Targets for Agriculture. Direct payments for the environmental benefits were provided for voluntary participation in activities under six categories: maintaining the cultural landscape, sustaining the food supply, promoting biological diversity, enhancing landscape quality, using production systems that are in harmony with nature and animal friendly, and the efficient use of resources. The policy included transition payments to reduce the disruption to farmers’ incomes. The transition was supported by a slight increase to Switzerland’s 2014–2017 budget allocation for agriculture.

    Adapted from the following source:

    Organisation for Economic Co-operation and Development. (2017). Reforming agricultural subsidies to support biodiversity in Switzerland: Country study (OECD Environment policy paper No. 8). https://www.oecd.org/environment/resources/Policy-Paper-Reforming-agricultural-subsidies-to-support-biodiversity-in-Switzerland.pdf

  • Remuneration Mechanisms for Ecosystem Services and the Quiroz-Chira Water Fund

    Peru’s Ministry of Environment developed the Remuneration Mechanisms for Ecosystem Services (MERESE) to mitigate the risks to the hydrological system threatening the ecosystem of Peru. The MERESE is a voluntary agreement promoting initiatives designed for the conservation, recovery, and sustainable use of ecosystem services. It consists of two parties: the payers benefit from the ecosystem services, and the contributors facilitate the conservation and recovery of the ecosystem by providing relevant services. The initiative is enshrined in law and included in Peru’s National Adaptation Plan and Nationally Determined Contribution.

    Nature and Culture International, an international non-governmental organization, initiated the Quiroz-Chira Water Fund under the MERESE program. The fund was created to conserve the Chira-Quiroz basin in Peru, as it is a critical source of water contributing to agriculture, aquaculture, domestic consumption, and industrial use. The fund targeted raising and managing funds for the conservation and recovery of the forests in the area where the contributors were located. It was financed by a voluntary group consisting of five payers (two municipalities, two water boards, and Nature and Culture International) and five contributors consisting of various peasant communities. The water boards voluntarily contributed 1% of the water tariff they collected from users. The two municipalities committed to annual contributions of USD 17,000 and USD 15,000, respectively, and also provided technical and logistical assistance in the operation of the water fund. Nature and Culture International was the key player, as it provided technical, administrative, and logistical assistance to the water fund.

    Between 2014 and 2020, water fund flows went toward community development (53%), conservation and recovery of ecosystems (37%), and management of the water fund (10%). This innovative financing mechanism succeeded in harnessing political and citizen support to blend new and traditional funds for conservation activities.

    Adapted from the following source:

    Fonseca, A., & Lahud, J. (2022). Implementación de MERESE mediante el Fondo de agua Quiroz-Chira: Instrumental financieros innovadores para la adaptación [Implementation of MERESE through the Quiroz-Chira Water Funds: Innovative financial instruments for adaptation]. Libélula. https://libelula.com.pe/download/14106/

Pooled Investment Funds

Case Studies

  • Pooled investment funds are financial vehicles that combine capital from different entities and then deploy that capital to projects/initiatives. These entities can be public, private, and/or not-for-profit. The entities can offer the investment fund different forms of capital, including grants, equity, or loans.

    Often, when public finance is combined with private finance, the resulting pool of resources is referred to as a blended finance investment fund. Usually, these types of funds have specific development or sectoral objectives and will only invest in projects that align with those objectives.

    Given the inclusion of public capital in blended finance investment funds, the returns that the investment fund seeks when making an investment can be lower. This allows those structuring the project or initiative financing to use this blended finance to lower the risk/return trade-off for other co-investors in the project or initiative. In many cases, this de-risking is intended to attract private sector capital to a project or initiative that otherwise would not have received commercial capital.

    Pooled investment funds for adaptation are in and of themselves unlikely to emerge given the difficulties in generating consistent revenue streams from these types of projects. However, climate investment funds can pair adaptation projects with revenue-generating mitigation projects to alleviate this constraint. Moreover, the greater the proportion of public finance included in an investment, the greater the influence that this finance could have on ensuring that projects are developed/implemented in a manner that accounts for projected physical climate hazards and risks.

     

    Current or potential adaptation-relevant sector applications:

    • crop and food production – including agroforestry; livestock production; fisheries (marine, freshwater, and aquaculture); irrigation;
    • ecological services and management – forest management (including afforestation and reforestation); wetlands; ecosystem and biodiversity protection, conservation, and enhancement;
    • water supply (infrastructure) – water storage; water harvesting; water management;
    • coastal and riverine protection and management – coastal defences or flood protection barriers; river flood protection measures;
    • disaster risk reduction – early warning and observation systems;
    • energy infrastructure – energy generation (including renewables);
    • transport infrastructure;
    • other built environment and infrastructure – urban development;
    • social infrastructure – education; health facilities; and
    • industry and manufacturing.

     

    Additional insights:

    • This is a mature instrument, although funds focused on climate adaptation have only emerged in the 2020s.

     

    Considerations for using pooled investments:

    • The project/initiative should generate an acceptable return on investment for investors.
    • Different projects/initiatives will require different mixes of finance (grants, equity, loans) based on the projected risk/return trade-off.
    • Building a portfolio of adaptation projects requires adequate data to inform investment opportunities.

     

    Adapted from the following sources:

    Convergence. (2023). State of blended finance 2023: Climate edition. https://www.convergence.finance/resource/state-of-blended-finance-2023/view

    Gozzi, J. C., & Schmukler, S. (2015, October 23). Public credit guarantees and access to finance. European Economy. https://european-economy.eu/leading-articles/public-credit-guarantees-and-access-to-finance/

    Organisation for Economic Co-operation and Development. (n.d.). Blended finance. https://www.oecd.org/dac/financing-sustainable-development/blended-finance-principles/

  • Africa Rural Climate Adaptation Finance Mechanism (ARCAFIM) for the East Africa region

    ARCAFIM is a blended finance mechanism launched in 2023 that aims to increase support and finance for adaptation for small-scale farmers and rural enterprises in East Africa. The mechanism includes two pillars. The first is a risk-sharing mechanism that involves a blend of international funds (USD 110 million provided by the Green Climate Fund [GCF], Nordic Development Fund, and Finland) programmed through the International Fund for Agricultural Development (IFAD) and a contribution of USD 90 million from Equity Bank, a local commercial bank. The funding structure includes a credit risk-sharing model in which IFAD’s partners cover 20% of the first loss, IFAD’s partners and Equity Bank share 60% of the second, and Equity Bank is responsible for the remaining 20% senior tranche. Equity Bank will use the loan proceeds for on-lending under the ARCAFIM programme, with local affiliate banks providing climate change adaptation loans to small-scale farmers and rural enterprises. The mechanism includes a grant component supported by the GCF and Denmark that aims to overcome barriers to accessing financing to address climate change adaptation, including building the skills of financial institutions and increasing the financial literacy of farmers and enterprises.

    Adapted from the following sources:

    International Fund for Agricultural Development. (2023). Funding proposal: FP220: Africa Rural Climate Adaptation Financial Mechanism (ARCAFIM) for East Africa region. https://www.greenclimate.fund/sites/default/files/document/funding-proposal-fp220.pdf

    International Fund for Agricultural Development. (2023, December 2). IFAD launches innovative financing mechanism to support small-scale food producers to adapt to climate change in Eastern Africa. https://www.ifad.org/en/web/latest/-/ifad-launches-innovative-financing-mechanism-to-support-small-scale-food-producers-to-adapt-to-climate-change-in-eastern-africa

  • GAIA

    GAIA is a proposed USD 1.5 billion climate-focused blended finance platform that was launched in 2023. The creation of the platform was led by MUFG, a global financial group, and FinDev Canada, Canada’s bilateral development finance institution. The GCF has committed USD 150 million in equity to the platform. The platform will blend commercial capital with concessional and patient capital to provide long-term loans to support the transition to climate-resilient and low-carbon pathways in developing countries. Seventy percent of the portfolio’s expenditure will be dedicated to climate change adaptation projects, and at least 25% of the portfolio’s expenditure will be allocated to least developed countries and small island developing states. A technical assistance facility will be developed as part of the platform.

    Adapted from the following sources:

    FinDev Canada. (2023, November 2). GAIA – a climate-focused blended finance platform – received US$150 million approval from the Green Climate Fund. https://www.findevcanada.ca/en/news/gaia-climate-focused-blended-finance-platform-receives-us150-million-approval-green-climate

    Green Climate Fund. (2023). Consideration of funding proposal – Addendum XIV. Funding proposal package for FP223. https://www.greenclimate.fund/sites/default/files/document/gcf-b37-02-add14-funding-proposal-package-fp223.pdf

    Project GAIA. (2023). Environment and Social Management System (ESMS). https://www.bk.mufg.jp/global/productsandservices/corpandinvest/gcf/pg/pdf/system_english.pdf

  • Land Resilience Fund

    Launched in 2021 by WWF and South Pole, the Landscape Resilience Fund blends USD 1.3 million from the Global Environment Facility with USD 25 million from Chanel (a private company). WWF and South Pole plan to mobilize a total of USD 100 million in this fund by 2025, combining public, philanthropic, and private funding to finance sustainable adaptation solutions. The fund focuses on assistance to small and medium-sized enterprises that work with smallholders in vulnerable landscapes on climate adaptation projects. It helps smallholders access better farming materials, finance, training, and programs so they can develop more sustainable agricultural and forestry supply chains. When loans are repaid, they are re-invested in other small and medium-sized enterprises to create a self-sustaining tool for adaptation. Rather than financial returns, funders see environmental and social benefits that result from the projects.

    Adapted from the following sources:

    Landscape Resilience Fund. (n.d.). Shaping the future of climate adaptation finance. https://landscaperesiliencefund.org

    South Pole. (2021, June 10). New climate resilience fund brings private and public climate finance to vulnerable landscapes and farmers. https://www.southpole.com/news/new-climate-resilience-fund-brings-private-and-public-climate-finance-to-vulnerable-landscapes-and-farmers

  • Lightsmith Climate Resilience

    The Lightsmith Group announced the final closing of Lightsmith Climate Resilience Partners (the fund) in January 2022, with USD 186 million in commitments to growth-stage technology companies whose technologies address the physical impacts of climate change. The fund has initially been focusing on water efficiency and smart water management, resilient food systems, agricultural analytics, geospatial intelligence, supply chain analytics, and catastrophe risk modelling and risk transfer.

    The Lightsmith Fund is the first private equity fund that focuses on climate resilience, introducing a system to measure the impacts of investments on climate adaptation efforts. It brought together public and private investors, including the GCF, the European Investment Bank, the Asian Infrastructure Investment Bank, the KfW on behalf of the Government of Germany, the Rockefeller Foundation, and the PNC Insurance Group. Its blended structure is based on the Climate Resilience and Adaptation Finance & Technology Transfer Facility investment strategy and was developed with the support of the Global Innovation Fund, Nordic Development Fund, Global Environment Facility, Conservation International, and the International Climate Finance Accelerator.

    Adapted from the following sources:

    The Climate Finance Lab. (2022). Climate Resilience and Adaptation Finance & Technology Transfer Facility (CRAFT). https://www.climatefinancelab.org/ideas/climate-resilience-and-adaptation-finance-technology-transfer-facility-craft-2/

    Lightsmith Group. (2022, January 31). Lightsmith group closes inaugural $186 million growth equity climate fund, the first to focus on climate resilience and adaptation [Press release]. https://lightsmithgp.com/news-posts/lightsmith-group-closes-inaugural-186-million-growth-equity-climate-fund-the-first-to-focus-on-climate-resilience-and-adaptation/

Public–Private Partnership

Case Studies

  • The Public–Private Partnership Legal Resource Centre’s reference guide defines a public–private partnership (PPP) as “a long-term contract between a private party and a government entity, for providing a public asset or service, in which the private party bears significant risk and management responsibility, and remuneration is linked to performance” (PPP Knowledge Lab, 2017, p. 1).

    PPPs are created following a rationale that they deliver public assets or services more cheaply and effectively than projects purely funded and steered by the public sector and that they optimally divide counterparty risks between public and private partners. In other words, risks that are best borne by the public sector should remain with the public sector and the same principle should apply to risks and the private sector.

    There is no standard formula on how risks should be allocated; this depends on the characteristics of the projects and their revenues, the expertise of the private counterparty, and the institutional strengths of the public sector.

    The World Bank and the Global Center on Adaptation have noted that PPPs can be a key tool for integrating adaptation and resilience into infrastructure projects. The greater the proportion of public finance included in an investment, the greater the influence that this finance could have on ensuring that projects are developed/implemented in a manner that accounts for projected physical climate hazards and risks. The Global Center on Adaptation offers a course on climate-resilient infrastructure in PPPs, the World Bank provides resources on climate-smart PPPs, and the Public–Private Infrastructure Advisory Facility has developed climate toolkits for infrastructure PPPs.

     

    Current or potential adaptation-relevant sector applications:

    • crop and food production – including agroforestry; livestock production; fisheries (marine, freshwater, and aquaculture); irrigation;
    • ecological services and management – forest management (including afforestation and reforestation); wetlands; ecosystem and biodiversity protection, conservation, and enhancement;
    • water supply (infrastructure) – water management;
    • energy infrastructure – energy generation (including renewables);
    • transport infrastructure;
    • other built environment and infrastructure – urban development; and
    • social infrastructure – education; health facilities.

     

    Additional insights:

    • This is a mature instrument, with PPPs becoming widely recognized in the 1990s. They have been implemented in many countries, mainly for infrastructure projects.

     

    Considerations for entering into PPPs:

    • PPPs require long-term contracts, legal expertise, and the definition of strict terms and conditions. This complexity means that technical assistance may be needed by parties interested in creating a PPP.
    • Fulfillment of PPP conditions requires monitoring and evaluation capabilities.
    • Public entities may be uncomfortable with private ownership of traditionally owned public goods.

     

    Adapted from the following sources:

    Global Center on Adaptation. (2023). Knowledge module on PPPs for climate-resilient infrastructure. https://gca.org/knowledge-module/

    Public-Private Infrastructure Advisory Facility. (2023, July 20). New: Climate toolkits for infrastructure PPPs. https://www.ppiaf.org/feature/new-climate-toolkits-infrastructure-ppps

    Public-Private Partnership Legal Resource Centre. (2017). What is in the PPP reference guide? Public-private partnerships reference guide (Version 3). https://ppp.worldbank.org/public-private-partnership/PPP_Online_Reference_Guide

    World Bank. (2022). Climate-smart PPPs. https://ppp.worldbank.org/public-private-partnership/energy-and-power/climate-smart-ppps-1

    World Bank (2023). Public-Private Partnership Legal Resource Centre. https://ppp.worldbank.org/public-private-partnership/

  • African Parks and the Wyss Foundation

    African Parks is a non-profit conservation organization that manages protected areas for respective governments, who own the land and develop policies to protect it. The partnership uses three tools in its model for protected area management: long-term agreements, funding strategies, and management through separate legal entities registered in each host country and a board representing key stakeholders. Some activities address the climate vulnerability of communities, including the provision of maize to families in times of drought and livelihood diversification initiatives.

    The success of African Parks has drawn funders to support their work through PPPs. In 2021, the Wyss Foundation committed USD 108 million to African Parks. The initial 5-year commitment aims to support up to half of the annual budgets of nine existing parks under African Park’s management in Angola, Benin, Malawi, Mozambique, Rwanda, and Zimbabwe. The grant provides critical long-term support to the operating budget of African Parks by providing sustainable, multi-year financing.

    Adapted from the following source:

    African Parks. (n.d.). The African Parks model. https://www.africanparks.org/about-us/our-story/the-african-parks-model

    African Parks. (2021, June 8). The Wyss Foundation commits $108M to secure protected areas in Africa. https://www.africanparks.org/wyss-foundation-commits-108m-secure-protected-areas-africa

    Global Wildlife Program. (n.d.). Collaborative management partnerships: Case studies. World Bank Group. https://thedocs.worldbank.org/en/doc/80cfa22836e81e8de5c1d1b0d249fd5f-0320052021/original/CMP-Toolkit-Country-Case-Studies.pdf

  • Jamaica’s Public–Private Partnership Framework

    The Development Bank of Jamaica, with the support of the Inter-American Development Bank, strengthened the country’s PPP framework—including updating the PPP policy, preparing a toolkit for climate-resilient PPPs, and climate-related operational guidelines—to include climate resilience considerations at each stage of the PPP process. Jamaica, with support from the International Monetary Fund, committed resources to establish a project preparation facility to identify and develop a pipeline of climate-resilient PPPs across sectors.

    Adapted from the following sources:

    Development Bank of Jamaica Limited. (2023). P4 Knowledge Center. https://dbankjm.com/elementor-8793/

    International Monetary Fund. (2023, October 11). The Government of Jamaica is working with international financial institutions and donors to strengthen cooperation, crowd-in private investment and build climate resilience following the Resilience and Sustainability Facility arrangement with the International Monetary Fund [Press release]. https://www.imf.org/en/News/Articles/2023/10/11/pr23346-jamaica-working-international-financial-institutions-following-rsf-arr-imf

  • Santiago Water Fund

    The Santiago Water Fund, a PPP in Chile, aims to protect the Maipo watershed, which provides 80% of the capital city’s fresh water supply as well as supporting agriculture and industry. This supply is at risk due to changes in precipitation patterns caused by climate change. Set up in 2019, the fund has invested in a wetlands monitoring network, reforestation, and source-water protection, including the protection of native vegetation, forests, and wetlands. The fund relies on the cooperation of the regional government, the association of rural municipalities, a local water utility, Nestlé Corporation, Anglo-American Corporation, and The Nature Conservancy (an international non-governmental organization) on behalf of the Latin America Water Funds Partnership. The partnership, which is funded by the government of Germany and includes the Inter-American Development Bank, FEMSA Foundation, and the Global Environment Facility, provides support for capacity building, monitoring, research, and dissemination of knowledge.

    Adapted from the following sources:

    Alianza Latinoamericana de Fodos de Agua. (n.d.). Chile Water Fund: Santiago-Maipo. https://www.fondosdeagua.org/es/los-fondos-de-agua/mapa-de-los-fondos-de-agua/chile/fondo-de-agua-santiago-maipo/?tab_q=tab_container_copy_c-tab_element_704  

    The Nature Conservancy. (n.d.). Santiago Water Fund: Protecting water at the source to ensure a healthy Mediterranean Chile and planet. https://www.nature.org/en-us/about-us/where-we-work/latin-america/chile/stories-in-chile/santiago-water-fund/

Restoration Insurance Service Companies

Case Studies

  • A Restoration Insurance Service Company (RISCO) is a social enterprise that partners with local communities in conservation and restoration activities that provide flood reduction benefits. Insurance companies pay an annual fee for these services to reduce their risk exposure. While reducing climate-related risks due to flooding, RISCO-led projects can also generate and sell carbon credits to organizations interested in offsetting their greenhouse gas emissions to meet climate targets.

    The first iteration of a RISCO, under development through a pilot initiative in Southeast Asia in 2022, targets coastal risk reduction through mangrove conservation and restoration in areas with high-value coastal assets. This initiative is intended to sequester carbon and reduce flooding and property damage risks. The aim is to generate revenue streams through insurance-related payments for flood-risk reduction benefits and by selling blue carbon credits.

     

    Current or potential adaptation-relevant sector applications:

    • coastal and riverine protection and management – coastal defences or flood protection barriers; river flood protection measures; and
    • disaster risk reduction – early warning and observation systems.

     

    Additional insights:

    • pilot instrument, under development.

     

    Considerations for creating a RISCO:

    • RISCOs need a plan for deep engagement with local communities to develop conservation and restoration activities.
    • Insurance payments require site-specific calculations of the flood reduction benefits.
    • There must be insurance companies that are interested in insuring high-risk areas.
    • There must be a market for the generated carbon credits, which may include ascertaining the quality of the credits.

     

    Adapted from the following sources:

    Global Innovation Lab for Climate Finance. (2021). Restoration Insurance Service Company (RISCO). https://www.climatefinancelab.org/ideas/restoration-insurance-service-company-risco/

    Mazza, F. (2019, September 27). Restoration Insurance Service Company (RISCO). Climate Policy Initiative. https://www.climatepolicyinitiative.org/publication/restoration-insurance-service-company-risco/

  • No examples yet, as this program is still in the pilot phase. 

Social Bonds

Case Studies

  • Social bonds are similar to green bonds but raise funds exclusively to support new and existing projects with clear social outcomes. These social outcomes include programs for unemployed people and those living below the poverty line, as well as marginalized communities, including migrants and displaced persons, women and/or sexual and gender minorities, and people with disabilities. Social Bond Principles were published in 2017 and updated in 2023. These voluntary guidelines set out best practices for the issuance of social bonds, including information to be disclosed and how issuers are to report to stakeholders.

    Sovereign social bonds have been issued by Ecuador (supporting decent and affordable housing) with a guarantee from the Inter-American Development Bank, and by Guatemala where proceeds are financing COVID-19 response efforts, health infrastructure improvements, and initiatives in food security.

    While not readily apparent in these issuances, the 2023 Harmonised Framework for Impact Reporting for Social Bonds notes that projects supported by the proceeds of social bonds can strengthen the capacity of agri-food systems to address climate change and help vulnerable people cope with the impacts of climate change. In addition, projects that address basic infrastructure (drinking water) and food security and sustainable food systems (agricultural practices, reduction of food waste) could be designed to generate adaptation co-benefits; and climate adaptation considerations could be integrated into the design of relevant initiatives, such as by ensuring the climate resilience of new housing. Slight revisions to project designs for social projects and the addition of adaptation impact metrics could improve adaptation outcomes.

     

    Current or potential adaptation-relevant sector applications:

    • crop and food production – including agroforestry; livestock production; fisheries (marine, freshwater, and aquaculture); irrigation;
    • water supply (infrastructure) – water storage; water harvesting; water management;
    • disaster risk reduction – early warning and observation systems;
    • other built environment and infrastructure – urban development; and
    • social infrastructure – education; health facilities.

     

    Additional insights:

    • This is an emerging instrument, with the first social bond being issued in the United Kingdom in 2010.
    • The majority of social bonds have been issued by the public sector.
    • The Government of Ecuador was the first country to issue a sovereign social bond, in 2020.

     

    Considerations for issuing social bonds:

    • Bond issuances have been launched by governments, public banks, national development banks, multilateral development banks, corporations, and non-profit organizations.
    • Bond proceeds need a robust pipeline of social projects to fund.
    • Bonds need to identify specific target populations for social projects.
    • Bonds are not appropriate for all borrowers/issuers, especially in countries that may not be able to take on additional debt.
    • Social outcomes can be difficult to measure and track, and as of 2023, no social taxonomy existed.
    • Guarantees may be needed to increase investors’ confidence in bonds issued in developing countries, such as the guarantee provided by the Inter-American Development Bank for the Guatemala issuance.

     

    Adapted from the following sources:

    Chen, J. (2022, April 12). Social impact bond (SIB): Definition, how it works, and example. Investopedia. https://www.investopedia.com/terms/s/social-impact-bond.asp

    International Capital Market Association. (2023, June). Harmonised framework for impact reporting for social bonds. https://www.icmagroup.org/assets/documents/Sustainable-finance/2023-updates/Harmonised-framework-for-impact-reporting-for-social-bonds-June-2023-220623.pdf

    International Capital Market Association. (2023, June). Social bond principles: Voluntary process guidelines for issuing social bonds. https://www.icmagroup.org/assets/documents/Sustainable-finance/2023-updates/Social-Bond-Principles-SBP-June-2023-220623.pdf

     

  • African Development Bank Social Bonds

    The African Development Bank has issued USD 7.3 billion in 10 social bonds since 2017, including bonds denominated in euros, Australian dollars, Norwegian kroner, and Swedish kroner. The African Development Bank’s social bonds are use-of-proceeds bonds, and financing has been allocated to projects in Africa that have adaptation benefits, including improved access to water, improved food security through support to fisher communities, and improved agricultural inputs and small-scale irrigation for rural farmers.

    Adapted from the following source:

    African Development Bank. (2017, September). Social bond framework. https://www.afdb.org/fileadmin/uploads/afdb/Documents/Generic-Documents/AfDB_Social_Bond_Framework.pdf

    African Development Bank. (2022). Green & social bond newsletter, 8. https://www.afdb.org/en/documents/green-and-social-bond-newsletter-issue-ndeg8-november-2022

  • Miami Forever Bond

    In 2017, the City of Miami authorized the USD 400 million Miami Forever Bond to address sea-level rise and the housing crisis. The debt is to be repaid through a 3% property tax. Growing social inequities and a lack of affordable housing in Miami have exacerbated the risks of climate change for low-income and other marginalized communities. The bond gained support through a foundation investing USD 350,000 to educate Miami voters about sea level rise. A participatory process was used to develop a set of equity criteria for bond-funded projects.

    Adapted from the following source:

    City of Miami. (2023). Miami forever bond. https://www.miami.gov/My-Government/Departments/Office-of-Capital-Improvements/Miami-Forever-Bond

Stormwater Credit Trading Program

Case Studies

  • Stormwater credit trading programs are an economic instrument used by municipal governments to encourage individual firms to implement measures to manage stormwater runoff on their properties. Property owners in urban areas are encouraged to build green infrastructure or green their existing infrastructure to create or generate credits. Green infrastructure projects include the installation of green roofs, rainwater harvesting systems such as rain barrels, and permeable pavement that allows rainwater to seep back into the ground.

    There are various options for developing these credit trading programs. One option is to base the generation of credits on meeting a runoff retention standard, where a property owner can buy credits when they cannot meet the standard. Another approach is to generate allowances that are based on the maximum amount of runoff to be delivered to the sewer system allowed by each property, as calculated by the municipal utility or regulator. A property with runoff below its allowance generates credits that can be sold to property owners who exceed the desired runoff level. The opportunity to generate revenue encourages property owners to invest in green infrastructure that could qualify to generate credits.

     

    Current or potential adaptation-relevant sector applications:

    • coastal and riverine protection and management – coastal defences or flood protection barriers; river flood protection measures; and
    • other built environment and infrastructure – urban development.

     

    Additional insights:

    • This is a mature instrument. Credits to reduce stormwater fees and allowance-based credit trading systems have existed in the United States since the 1990s.

     

    Considerations for developing stormwater markets:

    • Strong public institutions and private property rights that allow owners to bear the costs of implementing stormwater management are needed. Subsidy schemes can be employed to support owners with limited financial means.
    • Public authorities should have technical knowledge of water management, economic instruments to establish allowances and trading systems, and data collection and analysis, in addition to monitoring and legal enforcement.
    • Quantitative instruments should be employed to assess runoff levels to prioritize where economic investments should be made first. For instance, as it may be more expensive to introduce or enhance green infrastructure in urban areas with less permeable ground cover, investment in these locations may be given lower priority.

     

    Adapted from the following sources:

    Bassi, A., Cuéllar, A., Pallaske, G., & Wuennenberg, L. (2017). Stormwater markets: Concepts and applications. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/stormwater-markets-concepts-applications.pdf

    Department of Energy and Environment. (n.d.). Stormwater Retention Credit Trading Program. Government of the District of Columbia. https://doee.dc.gov/src

  • Washington, D.C. – Stormwater Retention Credit Trading Program

    Development projects are required by the District of Columbia to retain 100% of the stormwater on their sites to avoid hazardous flooding. If all of the stormwater cannot be retained as required, developers can either pay a fee in lieu of the cost of implementing stormwater retention measures or they can buy stormwater credits as needed to keep their projects under the set limit. These credits are generated by other developers that construct stormwater management control structures (e.g., green roofs, rain gardens, permeable pavement, tree planting) in the district. Credits can be generated through actions taken on one property or aggregated from multiple properties.

    Washington, D.C.’s credit market completed 44 trades in both the 2020 and 2021 fiscal years, with the value of credits traded in the two years totalling over USD 1,600,000. The program has encouraged the growth of green infrastructure investment, creating more green space and stormwater retention capacity. The Washington, D.C., stormwater credit trading program was recognized in 2014 as an innovative climate program that increased climate resilience through green infrastructure that prevented flooding and reduced the urban heat island effect.

    Other municipalities in the United States, including ones in Michigan and Illinois, were developing credit markets for stormwater retention in 2023, building on the learning of the Washington, D.C., program.

    Adapted from

    Department of Energy & Environment. (n.d.). Stormwater Retention Credit Trading Program. Government of the District of Columbia. https://doee.dc.gov/src

    Department of Energy & Environment. (2014, September 25). District recognized at International Climate Leadership Awards. Government of the District of Columbia. https://doee.dc.gov/node/903872

    Jackson, R. (2023). Stormwater Retention Credit Program: Fiscal year 2020–2021 summary report. Department of Energy and Environment, Government of the District of Columbia. https://doee.dc.gov/sites/default/files/dc/sites/ddoe/service_content/attachments/FY2020-FY2021%20SRC%20program%20Report.pdf

    Rainplan. (2023, June 22). An intro to stormwater credit trading programs. https://www.linkedin.com/pulse/intro-stormwater-credit-trading-programs-rainplan/

Sustainability Bonds

Case Studies

  • Sustainability bonds are a type of green bond where the proceeds from the issuance are applied to financing or refinancing both green and social projects. For example, a social project may have environmental co-benefits and thus can be classified as a sustainability bond at the determination of the issuer. They should follow the Sustainability Bond Guidelines, which are aligned with the Green Bond Principles and Social Bond Principles. These use-of-proceeds bonds can be issued by companies, governments, and municipalities for assets and projects.

    Sustainability bonds are becoming increasingly popular among issuers/borrowers, as they allow for greater flexibility regarding which project categories to include.

     

    Current or potential adaptation-relevant sector applications:

    • crop and food production – including agroforestry; livestock production; fisheries (marine, freshwater, and aquaculture); irrigation;
    • ecological services and management – forest management (including afforestation and reforestation); wetlands; ecosystem and biodiversity protection, conservation, and enhancement;
    • water supply (infrastructure) – water storage; water harvesting; water management;
    • coastal and riverine protection and management – coastal defences or flood protection barriers; river flood protection measures;
    • disaster risk reduction – early warning and observation systems;
    • energy infrastructure – energy generation (including renewables);
    • transport infrastructure;
    • other built environment and infrastructure – urban development;
    • social infrastructure – education; health facilities; and
    • industry and manufacturing.

     

    Additional insights:

    • This is an emerging instrument: the first sustainability bond was issued in 2014 by Unilever.
    • In 2021, corporations and development banks were the main issuers of sustainability bonds (44% and 36% of total 2021 issuances, respectively) (OECD, 2023).

     

    Considerations for issuing sustainability bonds:

    • Bond proceeds need a robust pipeline of green and/or social projects to fund.
    • Bonds need to identify specific target populations for social projects.
    • Bonds are not appropriate for all borrowers/issuers, especially in countries that may not be able to take on additional debt.
    • Guarantees may be needed to increase investors’ confidence in bonds issued in developing countries.

     

    Adapted from the following sources:

    International Capital Market Association. (2021, June). Sustainability bond guidelines. https://www.icmagroup.org/assets/documents/Sustainable-finance/2021-updates/Sustainability-Bond-Guidelines-June-2021-140621.pdf

    Organisation for Economic Co-operation and Development. (2023). Report on green, social, and sustainability bonds issued by multilateral development banks (DAF/CMF/AS(2023)3/REV2). https://one.oecd.org/document/DAF/CMF/AS(2023)3/REV2/en/pdf#:~:text=The%20sustainable%20bonds%20market%20grew,trillion%20of%20issuance%20to%20date.

     

  • ARAUCO, Chile

    ARAUCO, a forestry company in Chile, issued the first corporate sustainable bond in the country in 2023. The proceeds of the issuance will finance or refinance green and social projects, including adaptation-related sustainable water management. The bond was for a total of 7 million UF (Chile’s inflation-indexed currency, about USD 240 million in April 2023 and was issued at a rate of 3.35% and 3.18% for lines maturing in 2032 and 2044, respectively. The company committed to annual reporting on the use of the proceeds of the bond.

    Adapted from the following sources:

    ARAUCO. (2019). Sustainability bond framework. https://www.arauco.cl/argentina/wp-content/uploads/2019/10/Arauco-Sustainability-Bond-Framework.pdf

    Empresas Copec. (2023, April 28). ARAUCO issues its first sustainable bond in Chile for UF 7 million. https://www.empresascopec.cl/en/noticia/arauco-issues-its-first-sustainable-bond-in-chile-for-uf-7-million/

  • Chile’s Sustainable Bond

    Chile’s Green Bond Framework was updated in 2020 to include the issuing of sustainable bonds. Chile issued the first sovereign green bond in the Americas in 2019, and since then, it has issued green, social, sustainability, and sustainability-linked bonds. Chile issued its first sovereign sustainable bond (USD 1.5 billion, 32-year tenor) in 2021 and has issued at least four more sovereign sustainable bonds since then. The Sustainable Bond Framework established categories for eligible projects, including adaptation-focused projects in the land use and marine ecosystems sectors, and the water management sector, including water conservation, flood control, and efficient irrigation systems.

    Adapted from the following sources:

    Boitreaud, S., Emery, T., Gonzales, L., Gurhy, B., Larrain, F., & Paladines, C. (2021). Paving the path: Lessons from Chile’s experiences as a sovereign issuer for sustainable finance action. World Bank Group. https://openknowledge.worldbank.org/server/api/core/bitstreams/f0ed6870-ba37-5352-b70d-7dfa0109280b/content

    Ministry of Finance. (2020). Chile’s sustainable bond framework. Government of Chile. https://www.hacienda.cl/english/work-areas/international-finance/public-debt-office/sustainable-bonds/chile-s-sustainable-bond-framework

    Ministry of Finance. (2023). Sustainable bonds. Government of Chile. https://www.hacienda.cl/english/work-areas/international-finance/public-debt-office/sustainable-bonds/green-bonds

  • Islamic Development Bank

    The multilateral development financing institution released its bond framework for the issuance of green and sustainability Sukuks in 2019. Sukuks are Islamic financial certificates that overcome the prohibition under Sharia law of receiving interest on loans (as with conventional bonds). Instead, investors gain partial ownership of an issuer’s underlying assets and receive a share of the profits generated until the Sukuk matures. The bank has raised over USD 5 billion with green and sustainability public issuances of its Sukuk. Examples of projects with adaptation benefits eligible to be funded under the sustainability bond’s finance framework include

    • green assets (e.g., agroforestry, reforestation, landscape restoration, soil remediation, and flood protection); and
    • social assets (e.g., youth job creation, improved rural housing, clean drinking water, and projects targeting women and refugees).

    Adapted from the following sources:

    Corporate Finance Institute. (n.d.). Sukuk. https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/sukuk/

    Islamic Development Bank. (2019, November). Sustainable finance framework. https://www.isdb.org/sites/default/files/media/documents/2019-11/IsDB%20Sustainable%20Finance%20Framework%20%28Nov%202019%29.pdf

    Islamic Development Bank. (2023, March 7). The Islamic Development Bank issues US$ 2 billion Sukuk. https://www.isdb.org/news/the-islamic-development-bank-issues-us-2-billion-sukuk

  • Republic of the Philippines Sustainability Bond

    The Republic of the Philippines has issued four sustainability bonds totalling approximately USD 3.55 billion since the Department of Finance published the country’s Sustainable Finance Framework in 2022, which includes climate change adaptation as a pillar in its sustainability bond framework. Of the proceeds of the four bond issuances, 41.24% has been allocated to climate change adaptation projects, including management of coastal and marine areas, flood management, and sustainable management of natural resources.

    Adapted from the following source:

    Republic of the Philippines. (2023). Sustainability bond: Allocation and impact report. Department of Finance. https://www.dof.gov.ph/download/sustainability-bond-allocation-and-impact-report/?wpdmdl=36591&refresh=654c159e3f3501699485086

Sustainability-Linked Bonds

Case Studies

  • Sustainability-linked bonds (SLBs) are linked to the issuer’s achievement of climate or broader sustainability goals, such as through a covenant linking the coupon of the bond. In these bonds, the progress, or lack thereof, toward achieving the predefined key performance indicators (KPIs) can impact the pricing structure of the instrument's coupon. Unlike other sustainable bonds (i.e., green, social, blue, and sustainability bonds), SLBs do not have use-of-proceeds criteria, such as financing particular projects, and can be used for the general purposes of firm or government operations that have explicit sustainability targets. Instead of the criteria, each KPI is linked to a certain trigger event that has the potential to modify the pricing structure of the bond if the KPI is not achieved by a predetermined date. The coupon rate may increase, for example, if the issuer does not meet a predetermined agreed target.

    SLBs have typically been used by corporations to further their overall sustainability strategies or to deliver on specific KPIs; users include issuers in banking, retail, consumer products, and business and consumer services. Thus, these bonds can encourage companies (or sovereign countries) to make sustainability commitments, particularly through aligning to the United Nations Sustainable Development Goals or the Paris Agreement.

    Most of the SLBs’ climate-related targets to date have focused on mitigation; however, firms or governments could use financing issued through these bonds to undertake adaptation projects, such as improving flood protection. The addition of impact metrics that capture climate resilience improvements could allow firms or governments to utilize SLBs and increase financing for adaptation outcomes.

     

    Current or potential adaptation-relevant sector application:

    • ecological services and management – forest management (including afforestation and reforestation); wetlands; ecosystem and biodiversity protection, conservation, and enhancement;
    • water supply (infrastructure) – water management;
    • energy infrastructure – energy generation (including renewables);
    • transport infrastructure;
    • other built environment and infrastructure – urban development; and
    • industry and manufacturing.

     

    Additional insights:

    • This is an emerging instrument that is growing fast in the corporate debt market. The first corporate SLBwas launched by ENEL (an Italian power utility company) in 2019.
    • SLBs make up a small portion of the sustainable debt market, representing only 4% of the issuances as of July 2023.
    • SLBs have mainly been issued by non-financial corporations based in Europe.
    • The world’s first sovereign SLBs were issued by Chile and Uruguay in 2022. Chile’s KPIs were linked to climate mitigation targets, and Uruguay included KPIs linked to their nationally determined contribution goals for greenhouse gas emissions and maintenance of native forest areas.
    • The OECD (2023) reports that SLBs have potential for developing countries because they typically have lower costs and require less operational set-up than bonds that require use-of-proceeds tracking.

     

    Considerations for issuing SLBs:

    • SLBs could be used on any social or environmental KPI. Examples include a reduction in the number of people affected by saltwater intrusion, the area of mangrove forest retained, or the number of cooling centres established. Most corporations have adopted climate-related KPIs linked to greenhouse gas emissions because of the ability that gives them to set measurable and quantifiable targets.
    • Bonds need a plan to meet the KPIs.
    • Bonds are not appropriate for all borrowers/issuers, especially in countries that may not be able to take on additional debt.
    • Guarantees may be needed to increase investors’ confidence in bonds issued in developing countries.

     

    Adapted from the following sources:

    Godemer, M. (2023, July 19). Sustainability-linked bonds have long road to drive impact. BloombergNEF. https://about.bnef.com/blog/sustainability-linked-bonds-have-long-road-to-drive-impact/

    International Capital Market Association. (2020, June). Sustainability-linked bond principles (SLBP). https://www.icmagroup.org/sustainable-finance/the-principles-guidelines-and-handbooks/sustainability-linked-bond-principles-slbp/

    Organisation for Economic Co-operation and Development. (2023). Green, social, sustainability and sustainability-linked bonds in developing countries: The case for increased donor co-ordination. OECD Publishing. https://www.oecd.org/dac/green-social-sustainability-bonds-developing-countries-donor-co-ordination.pdf

    S&P Global. (2022). Global sustainable bond issuance to surpass $1.5 trillion in 2022. https://www.spglobal.com/ratings/en/research/articles/220207-global-sustainable-bond-issuance-to-surpass-1-5-trillion-in-2022-12262243

  • CMPC

    CMPC is a multinational corporation producing and marketing wood, pulp, packaging products, household and non-household sanitary protection products, and tissue paper—and the first Chilean company to issue an SLB bond in the international market. The USD 500 million bond was issued in 2021 and has a 10-year term. CMPC pays interest on this bond based on two KPIs: (i) a reduction of 23.5% of carbon dioxide emissions by 2025 and (ii) a reduction of 25% of industrial water use by 2025.

    Adapted from the following sources:

    CMPC. (2021, April 1). CMPC is the first Chilean company to issue a sustainability-linked bond (SLB) in international markets. https://www.cmpc.com/en/cmpc-is-the-first-chilean-company-to-issue-a-sustainability-linked-bond-slb-in-international-markets/

    CMPC. (2021). Sustainability-linked bond framework. https://s23.q4cdn.com/927837516/files/doc_downloads/outstanding_bonds/CMPC_Framework-SLB-2021.pdf

  • Klabin

    Klabin, a Brazilian forestry and paper company, issued an SLB for USD 500 million in 2021. The bond is aligned with the Sustainability-Linked Bond Principles. The three KPIs to be achieved by 2025 commit the company to reducing water consumption by 16.7% against a 2018 baseline, increasing total waste reuse and recycling by 3.2% against a 2017 baseline, and reintroducing at least two native animal species at risk of extinction or threatened on the company’s land. The SLB framework sets out the coupon adjustment (coupon step-up or increase in the rate to be paid) if performance does not achieve the stated KPI targets. For example, the coupon will increase by 0.125% if the target to reduce water consumption is not achieved. The company reports annually on the performance of the KPIs and progress toward targets, including a verification report.

    Adapted from the following source:

    Klabin ESG Panel. (2022). Sustainable finance: Sustainability-linked bond. https://esg.klabin.com.br/financas-sustentaveis#biodiversidade

Sustainability-Linked Loans

Case Studies

  • A sustainability-linked loan (SLL) is a loan instrument that includes guarantees and letters of credit. It is not conditional on the proceeds being used for a particular purpose, but, similar to the sustainability-linked bonds (SLBs), the terms of the loan incentivize the borrower to improve its performance against agreed predetermined environmental, social, and governance (ESG) criteria. The loan can be used for general corporate purposes, but the borrower agrees to have performance assessed across a selection of KPIs and to provide lenders with external verification of performance. The loans, also referred to as sustainability improvement loans or ESG loans, can be linked to a corporation’s overall ESG rating. In these arrangements, interest rates on an SLL can be lowered if a company achieves a higher ESG rating or raised if one or more of its ESG goals are not met.

    Most corporations have adopted climate change-related KPIs linked to greenhouse gas emissions because of the ability it gives them to set measurable and quantifiable targets. However, some KPIs have been related to adaptation, including water savings, improvements in conservation and biodiversity, and sustainable farming. The SLL market is expected to play a growing role in adaptation finance, with early targets around water consumption and water use efficiency.

     

    Current or potential adaptation-relevant sector applications:

    • crop and food production – including agroforestry; livestock production; fisheries (marine, freshwater, and aquaculture); irrigation;
    • ecological services and management – forest management (including afforestation and reforestation); wetlands; ecosystem and biodiversity protection, conservation, and enhancement;
    • water supply (infrastructure) – water storage; water harvesting; water management;
    • coastal and riverine protection and management – coastal defences or flood protection barriers; river flood protection measures;
    • disaster risk reduction – early warning and observation systems;
    • energy infrastructure – energy generation (including renewables);
    • transport infrastructure;
    • other built environment and infrastructure – urban development;
    • social infrastructure – education; health facilities; and
    • industry and manufacturing.

     

    Additional insights:

    • This is an emerging instrument, with the first loan of EUR 1 billion to Philips (a health technology company) in 2017 structured by ING Bank and supported by 15 other banks.
    • The SLL market is a growing sector, with nearly USD 1.5 trillion of SLLs outstanding as of December 2022. SLLs are becoming common in the corporate lending market (Finch & Dowse, 2023).
    • SLLs have considerable momentum in Europe. Over 80% of the SLL volumes were in European markets in 2019.

     

    Considerations for issuing an SLL:

    • Borrower/project-funded SLLs should meet credit and default risk thresholds.
    • Loans are not appropriate for all borrowers, especially those that may not be able to take on additional debt.
    • Guarantees may be needed for SLLs issued in developing countries to increase lenders’ confidence.

     

    Adapted from the following sources:

    Asia Pacific Loan Market Association & Loan Market Association. (2023). Sustainability-linked loan principles: Supporting environmentally and socially sustainable economic activity. https://www.lsta.org/content/sustainability-linked-loan-principles-sllp/

    Environmental Finance. (2023, September 11). Adaptation, biodiversity and the SLL market. https://www.environmental-finance.com/content/market-insight/adaptation-biodiversity-and-the-sll-market.html

    Finch, S. A., & Dowse, K. (2023, June 28). Sustainability-linked loans: Growth of the sustainable finance market and updated guidance for lenders and borrowers. https://www.blakes.com/insights/bulletins/2023/sustainability-linked-loans-growth-of-the-sustaina

  • JDE Peet’s

    Headquartered in the Netherlands, JDE Peet’s is the world’s largest coffee and tea group. In 2021, it refinanced its existing indebtedness by setting up new financing facilities for EUR 6.5 billion of debt provided by 25 global financial institutions. Investment-grade facilities of EUR 2.5 billion were linked to science-based sustainability targets that incentivize the company to purchase certified or verified coffee and responsibly sourced palm oil; support smallholder farmers through technical and other assistance; use recyclable, compostable, and reusable packaging; and reduce greenhouse gas emissions.

    Adapted from the following source:

    JDE Peet’s. (2021, March 31). JDE Peet’s links new debt facilities to sustainability ambitions [Press release]. https://ml-eu.globenewswire.com/Resource/Download/9f9d33ec-589b-4e9b-a210-963c137cbb4f

  • Iberdrola

    Iberdrola, a Spanish energy company, set up the world’s first syndicated line of credit (an SLL) that was structured to include targets that address climate change adaptation in 2022. The EUR 2.5 billion credit facility was referred to as a “water footprint” loan and included two water-related KPIs. The first KPI target was a 50% reduction by 2030 of water consumption in the generation of energy, measured as the amount of water drawn within the organization’s boundaries and not discharged back into the environment. The second target was the water score set by CDP, a not-for-profit organization that provides a snapshot of a company’s performance on actions to address water security, including disclosure, awareness, management of water risks, and application of best practices. (CDP was established as the Carbon Disclosure Project in 2019, and has since shortened its name to reflect a broader scope of environmental disclosure that includes water security, biodiversity, and deforestation.)

    Adapted from the following sources:

    Banco Bilbao Vizcaya Argentaria. (2022, July 14). BBVA creates the ‘water footprint’ loan and launches it worldwide together with Iberdrola. https://www.bbva.com/en/sustainability/bbva-creates-the-water-footprint-loan-and-launches-it-worldwide-together-with-iberdrola/

    CDP. (n.d.). Home Page. https://www.cdp.net/en/

Tax Increment Financing

Case Studies

  • Tax increment financing (TIF) is a form of land value capture financing based on the expected appreciation of land value. It assumes that once redevelopment projects are completed, land values will increase and, as a result, the taxation authority will receive higher tax revenue. The initial redevelopment is financed via upfront government resources or a bond, and it is typically the municipal government that borrows against future tax revenues.

    TIF schemes are typically used as an incentive mechanism to encourage redevelopment or revitalization with a focus on public infrastructure and public structures such as roads, water, and sewer lines. These schemes could be used to finance natural infrastructure and climate change adaptation projects using the anticipation of future tax revenue resulting from new development. As a hypothetical example, the development of a new public green space as part of an urban cooling initiative may cause property values to rise and lead to an increase in property tax receipts. While the prior (or base) amount of the property tax revenue continues to fund the maintenance of the public green space, the increase in tax revenue is used to pay bonds and/or reimburse initial investors.

     

    Current or potential adaptation-relevant sector applications:

    • water supply (infrastructure) – water management;
    • coastal and riverine protection and management – coastal defences or flood protection barriers; river flood protection measures;
    • other built environment and infrastructure – urban development;
    • transport infrastructure; and
    • social infrastructure – education; health facilities.

     

    Additional insights:

    • This is a mature instrument. It has been used for over 50 years by municipal governments in the United States, with some application in Australia, Canada, Hong Kong, New Zealand, and the United Kingdom. Similar instruments have been considered in Europe.

     

    Considerations for using TIF: 

    • Governments must have the capacity to tax and conduct the analysis and modelling required to set base and new tax rates.
    • Governments should be able to issue the bonds or obtain other financing required to fund the investment before increased tax revenue flows.
    • This scheme has high transaction costs, so it is only suitable for larger projects and for municipal governments that can take on debt.
    • It requires robust real estate and economic conditions.
    • It requires solid urban development projects, with long-term feasibility.

     

    Adapted from the following sources:

    Council of Development Finance Agencies. (n.d.). Tax increment finance resource center.  https://www.cdfa.net/cdfa/cdfaweb.nsf/resourcecenters/tif.html

    Schneider, B. (2019, October 24). Citylab University: Tax increment financing. Bloomberg. https://www.bloomberg.com/news/articles/2019-10-24/the-lowdown-on-tif-the-developer-s-friend

  • Chicago's Tax Increment Financing

    From 1984 to 2014, the City of Chicago, Illinois, United States, used TIF to fund public infrastructure and development projects: more than 150 TIF districts leveraged over USD 6 billion in private capital investment. In one project, Chicago's Central Loop TIF District funded the city's Green Roof Improvement Fund, which supported the installation of green roofs to manage stormwater on commercial buildings in the district through a 50% grant match, up to a maximum grant amount of USD 100,000 per project. The city also used TIF funds to implement actions identified in Chicago’s 2008 adaptation strategy, such as green infrastructure programs that address extreme heat risks and improve the capacity of stormwater management systems to handle extreme precipitation events.

    Adapted from the following sources:

    Georgetown Climate Centre. (n.d.). Tax credits, tax increment financing and land value capture. https://www.georgetownclimate.org/adaptation/toolkits/equitable-adaptation-toolkit/tax-credits-tax-increment-financing-land-value-capture.html

    United States Environmental Protection Agency. (2023). Chicago, IL uses green infrastructure to reduce extreme heat. Climate Change Adaptation Resource Center. https://www.epa.gov/arc-x/chicago-il-uses-green-infrastructure-reduce-extreme-heat

  • Medellin and Barranquilla, Colombia

    The World Bank supported a case study in Medellin, Colombia, to explore the barriers to TIF, develop a regulatory framework for TIF, and set out a roadmap for cities wanting to implement TIF. The city created a TIF district in a 26-hectare area that was divided into 45 strategic urban development units. A TIF was defined for a 16-year term to raise financing for investment in residential water services and social compensation for land acquisition. Pilot projects were undertaken in Medellin and Barranquilla, with the latter including an assessment of climate hazards in riverine and coastal areas with the aim of identifying options to improve the climate resilience capacity of the TIF investment area.

    Adapted from the following sources:

    Public–Private Infrastructure Advisory Facility. (n.d.). Colombia: Financing urban development in Colombia, implementing innovating LVC instruments – TIF Phase II. https://www.ppiaf.org/activity/colombia-financing-urban-development-colombia-implementing-innovating-lvc-instruments-tif

    The World Bank. (2020). Innovative instruments to finance urban development in Colombian cities (Report No. AUS0001740). https://documents1.worldbank.org/curated/en/921731593563388387/pdf/Innovative-Instruments-to-Finance-Urban-Development-in-Colombian-Cities.pdf

Works for Taxes Scheme

Case Studies

  • The Government of Peru devised a public investment mechanism in 2008 that allowed private firms to prepay a portion of their income taxes in the form of public works. The Works for Taxes scheme encourages joint work between the public and private sectors to reduce Peru’s infrastructure gap. Through this mechanism, private companies assume the upfront costs and management of new infrastructure programs while the government accepts the infrastructure projects in lieu of future tax payments.

    The mechanism could be applied to public investment in urban development, agriculture, irrigation, water and sanitation, tourism, public safety, transport, education, health, fishing, social development, culture, environment, and rural electrification. Because many of these sectors have clear links to climate change adaptation, there are many opportunities for adaptation considerations to be integrated into the instrument, such as by ensuring the climate resilience of new infrastructure. Slight revisions to project designs and the addition of adaptation impact metrics could improve adaptation outcomes.

    Colombia replicated the program in 2017 to encourage social and economic development in the most affected zones of the previous armed conflict. Companies with an annual income of over COP 1 billion (about USD 250,000) can pay 50% of their tax obligations through the funding of social and development projects. Adaptation to climate change and climate risk management is one of the priority areas for project development in Colombia’s program.

     

    Current or potential adaptation-relevant sector applications:

    • crop and food production – including agroforestry;
    • ecological services and management – forest management (including afforestation and reforestation);
    • water supply (infrastructure) – water management;
    • disaster risk reduction – early warning and observation systems;
    • energy infrastructure – energy generation (including renewables);
    • transport infrastructure;
    • other built environment and infrastructure – urban development; and
    • social infrastructure – education; health facilities.

     

    Additional insights:

    • This is an emerging instrument, developed in Peru in 2008 and replicated in Colombia in 2017.

     

    Considerations for using a Works for Taxes scheme:

    • This tool can be implemented by national and subnational governments.
    • It has attracted the participation of larger corporations that have established social responsibility programs, are able to pay the transaction and management costs, and have the high degree of liquidity that is needed to fund major public works programs.
    • It requires systems to prioritize and monitor public investment projects.

     

    Adapted from the following sources:

    Del Carpio Ponce, P. E. (2018). Peru’s works for taxes scheme: An innovative solution to accelerate private provision of infrastructure investment. EMCompass, Note 55. International Finance Corporation. https://openknowledge.worldbank.org/server/api/core/bitstreams/55282690-f795-50e2-87a2-0204d430d88b/content

    Oxi Consultoria. (2023). What are tax works? https://www.obrasximpuestos.com/obras-por-impuestos/

  • Peru’s Obras por Impuestos (Works for Taxes)

    Peru’s Works for Taxes scheme was launched in 2008. As of November 2021, 442 Works for Taxes projects worth approximately USD 1.6 billion had been carried out with the participation of private enterprises, national ministries, regional governments, local governments, and public universities. Several companies that have used the mechanism are from the mining sector. Projects have been or are being implemented in the agriculture, education, environment, health, sanitation, security, transport, and urban development sectors.

    In 2017, the government passed legislation to enable Works for Taxes to implement projects set out in the country’s disaster fund. This change was made in response to the damage caused by heavy rains and landslides earlier that year, resulting in a need to rebuild damaged infrastructure and create public works that are resilient to extreme weather and can prevent future infrastructural damage and casualties. In 2023, the regulatory framework was updated and now specifically approves projects to address national emergencies and to maintain infrastructure.

    Adapted from the following sources:

    Baker Mackenzie. (2023, May 9). Peru: Significant benefits for investors in the works-for-taxes (OXI) regime approved. https://insightplus.bakermckenzie.com/bm/projects/peru-significant-benefits-for-investors-in-the-works-for-taxes-oxi-regime-approved

    ProInversión (Private Investment Promotion Agency). (2021). What is it? Works for taxes. https://info.proinversion.gob.pe/define-oxi/

This inventory of innovative financial instruments for climate change adaptation was prepared between 2021 and 2022 and updated in 2024. The inventory aims to improve knowledge of how innovative financial instruments can play a positive role in scaling up investment in adaptation in developing countries.

The inventory was initially developed as a component of the Mobilizing Development Finance for Strategic and Scaled-up Investment in Climate Adaptation project that was implemented by the International Institute for Sustainable Development (IISD) in collaboration with the African Centre for Technology Studies (ACTS) in Kenya, Libélula in Peru, and the Prakriti Resources Centre (PRC) in Nepal. Funding for the project was provided by Canada’s International Development Research Centre (IDRC). Funding for the 2024 update was provided by the German Federal Ministry for Economic Cooperation and Development (BMZ) through the National Adaptation Plan (NAP) Global Network, whose Secretariat is hosted by IISD. 

The content of the inventory was developed by Matt Gouett, Deborah Murphy, Laurin Wuennenberg, Safa Rahim, and Jo-Ellen Parry. Input on its content was provided by representatives of ACTS, Libélula, and PRC, as well as members of the project’s advisory committee, comprised of representatives of four multilateral development banks, IDRC, and the governments of Kenya, Nepal, and Peru. Web design was initially provided by Harsh Vaniawala, of IISD, with the design of the updates provided by Modo Design Group.

Questions, suggested changes, or proposed additions to the inventory can be sent to info@napglobalnetwork.org.