International climate finance / Adaptation / Transparency

New adaptation index shows: access to climate finance lacks equity

Ethiooia is one of the most vulnerable countries that receive far too little adaptation finance. Photo: C. Krackhard, Brot für die Welt

Adressing an aspect not previously covered, Brot für die Welthas assessed the access to adaption finance under the viewpoint of climate justice.  Its new adaptation index looks at 129 countries to determine whether their share of international climate adaptation finance is reflecting their country-specific climate risk.

The volume of adaptation finance provided internationally is nowhere near enough for even the most urgently needed measures to protect the countries of the Global South from the effects of the climate crisis. An annual report by the United Nations Environment Program (UNEP) provides information on the protection gap in climate adaptation.

Whether the adaptation finance provided to date is distributed equitably among the recipient countries in relation to their respective risk had never been examined, however. The new Brot für die Welt adaptation index closes this gap: For the years 2014-2020, it determined whether the shares of international adaptation finance for 129 countries are proportionate to their country-specific climate risk. This creates transparency about how successfully the climate policy goal of providing financial support to the most vulnerable countries in particular is being implemented.

The adaptation index was developed by Climate & Development Advice and audited by the Munich Climate Insurance Initiative. The index takes two factors into account: country-specific climate risk, based on adjusted data from the EU Inform Risk Index, and financial inflows, based on data from the OECD-DAC database on adaptation finance.

Adaptation index reveals unequal access

The results are clear: There is a serious lack of justice with regard to distribution in international adaptation finance. The 14 countries with the highest climate risk are also the 14 most underfunded countries. Afghanistan tops this negative ranking, followed by South Sudan, Niger, Sudan, Yemen, Uganda, Somalia, Mali, Iraq, Ethiopia, Syria, Mauritania and Mozambique. There is also no significant change if absolute financing inflows are chosen as the basis for calculation (Figure 2) instead of the per-capita view of the financing received (Figure 1): Ethiopia and Mozambique are the only two countries to improve their ranking to some extent. The lack of risk-adjusted financing, which applies to the most vulnerable countries in particular, can be generalized to a lesser extent for all countries. Less than one in four of the 129 countries examined received a share of financing that was appropriate to their risk in the period from 2014 to 2020. This means that most countries, but especially the most vulnerable among them, face a lasting resilience gap that makes achieving the Sustainable Development Goals (SDGs) a distant prospect.

Figure 1: World map of adaptation funding distribution (Climate Adaptation Finance Index) per capita

The map is based on the committed adaptation funding for the countries per capita in the period 2014 to 2020. Areas of Egypt’s south-eastern border are disputed, as is also the case for the border of Sudan and South Sudan. Source: Brot für die Welt 2023

Figure 2: World map of adaptation funding distribution (Climate Adaptation Finance Index) in absolute numbers

The map is based on the committed adaptation funding for the countries in absolute numbers in the period 2014 to 2020. Areas of Egypt’s south-eastern border are disputed, as is also the case for the border of Sudan and South Sudan. Source: Brot für die Welt 2023.

In the study accompanying the index, further correlations are considered in order to obtain a differentiated picture of the factors that make access to adaptation finance easier or more difficult. The study analyzes whether a country belongs to the following categories: (1) least-developed countries, (2) low-income countries, (3) African countries and (4) fragile and conflict-affected states.

Overall, a complex yet relatively clear picture emerges when comparing the different levels of analysis: International climate adaptation finance is unevenly distributed. Very few countries receive a fair share based on their specific climate risk. If multiple or all of the above factors apply, a country seems destined to be among those with the worst access to adaptation finance relative to their climate risk. This massively raises the hurdles for these countries to become climate-resilient. When countries are not only exposed to high climate risks, but also suffer from an accumulation of other risk factors, this leads to a multiple risk situation that is often even more difficult to manage than a single risk exposure. In these cases, solutions should be sought particularly intensively, and a correspondingly wide range of support would be required.

The index is an important, but not a sufficient assessment criterion for adaptation finance as it only measures the distribution of available funds in relation to country-specific climate risks without making any statements about the absolute amounts needed to make a country climate-resilient.

Ways to improve the fair distribution of adaptation finance

Fairness in climate policy would dictate that countries be supported according to their specific climate risks. Both German development cooperation and international climate diplomacy use human rights as a benchmark. It should therefore not only be a climate policy, but also a human rights dictum to give the highest priority to supporting the most vulnerable. Policymakers are called upon to improve the fair distribution of access to adaptation finance, and in particular, to end the serious underfunding of countries with the highest risks.

As a first step, we recommend an analysis of why there is so little equity in access to international adaptation finance and what measures can be taken to improve this quickly. The German government should take the initiative here. Brot für die Welt’s adaptation index provides a tool for analyzing German adaptation finance as well. This would contribute to greater transparency and at the same time create trust among the countries most impacted by climate change.

Building on this, access to adaptation finance should be improved in line with the needs of the different country groups.

  1. The top priority should be to quickly and effectively increase access to adaptation finance for the countries with the highest climate risk, both in German and international adaptation finance. This will require concrete goals and implementation plans. In the case of Germany, high-risk countries could be prioritized in negotiation of future climate partnerships.
  2. A plan should be developed with the involvement of the African Union and relevant stakeholder groups to rapidly improve access to finance for severely underfunded African countries, many of which are suffering from multiple crises involving poverty, a lack of food security, violent conflicts and debt. The German government could also make this goal part of its Africa initiatives.
  3. Building on what has been achieved and ensuring a fair share of climate adaptation financing for all island states is a very desirable and realistic goal that should be pursued as a priority. According to the Intergovernmental Panel on Climate Change (IPCC), this group of countries faces particularly severe challenges. It is already reaching its limits in terms of climate adaptation and requires special support.
  4. The financing problems of fragile and conflict-affected states – which have hardly any access to adaptation finance, but are at the same time hotspots of climate change – are also very specific and particularly serious. The consequences are humanitarian disasters and human mobility such as migration and displacement. For humanitarian, human rights and migration policy reasons alone, it would thus be urgently necessary to find specific solutions for these countries. This must also apply if there are difficulties in complying with financial and legal standards, making the administrative handling of financial cooperation much more difficult. Such solutions can be better achieved if international and non-governmental organizations (NGOs) that are active in these countries and have a great deal of experience in supporting suffering population groups in fragile contexts are intensively involved and, if necessary, also take on fiduciary and implementation tasks.
  5. Low and lower-middle income countries also need to be prioritized for access to adaptation finance because their share is currently far below average in relation to their climate risks. To this end, concrete goals should be set in Germany and internationally in dialogue with these countries and an implementation plan should be drawn up, combined with accompanying measures in order to improve the framework conditions for access to financing in the countries themselves.

The results should also be used for current climate policy discussions and initiatives:

  1. The findings from Brot für die Welt’s adaptation index can be incorporated into the discussion on priority target groups for the emerging finance mosaic for coping with climate-related loss and damage, particularly with regard to the planned Loss & Damage Fund. This can help to take aspects of distributive justice into account from the outset.
  2. Even if the overall picture does not currently reveal any clear trends, many countries are affected by a dual debt and climate crisis, as Brot für die Welt and others have pointed out. This particularly affects middle-income countries that have little access to debt relief programs and cheap loans. Instead, they suffer from additional interest premiums due to their climate risk and can hardly invest in climate adaptation as a result. This special situation requires specific solutions: The proposals put forward by the Bridgetown Initiative and the Vulnerable Twenty (V20) countries in the Accra-Marrakech Agenda, such as the inclusion of climate clauses in loan agreements, provide a basis for this.

With the Brot für die Welt adaptation index, we are providing an impetus for the necessary debate on the direction and priorities of adaptation finance. We are also advancing the discussion about the future use of resources to deal with loss and damage.

Sabine Minninger, Brot für die Welt, and Thomas Hirsch, Climate & Development Advice

The complete study is available here.