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