The African Development Bank, in partnership with professional services provider Ernst & Young and Perspectives Climate Group, has published a study on the demand for Certified Adaptation Benefits as a means of financing private sector adaptation projects in Africa.
Certified Adaptation Benefits are generated by the Adaptation Benefits Mechanism (ABM), an innovative financial instrument that enables donors, consumers, and others who can afford it, to contribute to the costs of genuine adaptation projects in African countries.
The report presents findings from 68 online responses and 15 in-person interviews. Participants considered the ABM highly relevant for agriculture and forestry, water management, energy access, biodiversity, and climate information systems across project sizes. They expressed specific interests in projects ranging from $1 million to $50 million.
Kevin Kariuki, Vice President for Power, Energy, Climate & Green Growth at the African Development Bank Group, stated: "In order for the Adaptation Benefits Mechanism to succeed and be viable, it is vital to have a comprehensive understanding of the demand for such a tool. The Mechanism contributes to the adaptation goal of the Paris Agreement, and fulfils corporate social responsibility or philanthropic mandates."
The African Development Bank launched the Pilot Phase of the Adaptation Benefits Mechanism in 2019 to deliver a working structure to the Parties of the UN Framework Convention on Climate Change in time for the 2023 global stock-take. By paying project developers to deliver Certified Adaptation Benefits, the donors will contribute to developing countries' needs while helping to lower the costs of technologies and stimulate further investment in adaptation.
Ernst & Young hosted a side-event at the Pavilion of the Rainforest Nations at COP26 in Glasgow on 5 November where speakers explained the Adaptation Benefits Mechanism and presented the results of the market study, including a summary of the responses to an online questionnaire, and key findings.
Patrice Lefeu, Associate Partner, Global Climate & Sustainability at EY, stated: "The Adaptation Benefits Mechanism developed by the African Development Bank will be a game-changer to mobilize public and private capital for adaptation as we will be able to demonstrate measurable added value, results, impacts and co-benefits generated by such a new approach. This added value should be monetized to increase adaptation funding as the Adaptation Benefits Mechanism will de-risk adaptation projects and improve bankability. EY is ready to implement such a methodology to develop new adaptation financing models."
Sergi Cuadrat from Allcot, an adaptation project developer working in Africa, noted, "As a project developer, the Adaptation Benefits Mechanism will help develop solutions needed by the global south to become more resilient. The monitoring and verification of outcomes and impacts, well-aligned with the Sustainable Development Goals, will help mobilize the financial sector."
Gareth Phillips, Manager of the Climate and Environment Finance Division at the African Development Bank, explained: "The Adaptation Benefits Mechanism is specifically designed to help channel private sector investment into adaptation. We need developed countries, consumers, and those who can afford to contribute to the costs of adaptation and resilience and make the investments financially viable, not just economically viable. We pay for mitigation in many ways, but we are not paying for adaptation, and the African continent needs support for adaptation."
Most participants said an explicit definition of measurement indicators and their ex-post verification would boost the credibility of Adaptation Benefits. They said outcome and impact indicators were the most relevant to measure Adaptation Benefits and called for more vigorous well-targeted communication efforts that articulate ABM's specific processes and impact to strengthen adaptation actors' buy-in.
The report is available here
