3. Mechanisms for strengthening climate resilience

3.1.1. Checklist for action

3.1.2. Rationale

Governance is a comprehensive concept of the full range of means for deciding, managing, implementing and monitoring policies and measures with accountability and transparency (IPCC, 2019[1]). An effective governance arrangement also provides an important basis for a government to co-ordinate actions on climate resilience by different ministries and agencies, sub-national governments, non-state actors and development co-operation providers.

Measures to strengthen climate resilience, whether initiated by domestic or external actors, need to consider wealth and power structures, and must not exacerbate economic and social inequality (UNFCCC, 2015[2]; Dazé, 2019[3]; LIFE-AR, 2019[4]; OECD, 2020[5]). A governance arrangement for action on climate resilience must therefore be inclusive to ensure its approaches are informed by the needs of the most vulnerable people. Women and people in marginalised and Indigenous groups often face barriers to participating in decision making, from the household level to national policy-making processes (Dazé and Church, 2019[6]). Developing inclusive governance should thus pay attention to equitable engagement of vulnerable stakeholders in decision making for climate resilience. This includes, for instance, improving their access to information and considering the domestic responsibilities of women (Chingarande et al., 2020[7]).

Inclusive governance arrangements also facilitate the generation of context-specific information about climate risks and possible solutions to address them (IPCC, 2014[8]). Governance arrangements that foster coherence between climate policies and other policy agendas can also help governments pursue broader sustainable development goals. Such policy coherence may contribute to improving efficiency in the use of financial and human resources, and minimising misalignment between different policy objectives (e.g. climate mitigation, health and well-being, agriculture sector development, disaster risk reduction, water resource management and conservation of biodiversity) (Worker and Northrup, 2018[9]; UCS, 2016[10]; OECD, 2020[11]).

Governance in the context of climate resilience is an established area of research. This section draws on the definitions put forward by the Intergovernmental Panel on Climate Change (IPCC) of multi-level governance, participatory governance, and adaptive and flexible governance (see Box 3.1). The Guidance also recognises political economy aspects, such as the underlying incentives or interests of different stakeholders. These aspects greatly influence the way in which levels of governance relate, public participation is organised, and adaptive and flexible governance processes are designed and operated (OECD, 2020[5]). All these aspects must be explicitly integrated into different steps of a country’s policy cycle. This ranges from formulation, planning, resource allocation and implementation to monitoring, evaluation and learning (MEL) (OECD, 2009[12]; IPCC, 2019[1]) (see also Figure 3.1 in section 3.1.7).

This section provides governments and development co-operation with guidance on developing governance arrangements that facilitate decision making, co-ordination, local-level actions, participatory processes and policy coherence in support of climate resilience. The section also discusses approaches to integrating climate resilience consideration throughout policy cycles as an integral part of governance. Based on good practices and lessons learnt, this section proposes several approaches around the following action areas:

• Build inclusive governance arrangements for climate resilience.

• Empower local action by facilitating collaboration across levels of governance.

• Develop governance mechanisms for adaptive decision making.

• Enhance governance for greater coherence across different development agendas.

• Integrate climate risks and opportunities throughout a policy cycle

3.1.3. Build inclusive governance arrangements for climate resilience

Inclusive governance for climate resilience strives for equity in both processes and outcomes of climate resilience measures. It embraces the right of stakeholders to participate in making decisions that affect them. Building inclusive governance therefore calls for explicit efforts to engage with public/private and formal/informal stakeholders, each with their own needs, priorities, political interests and decision-making processes (OECD, 2020[5]; IPCC, 2014[8]; Casado Asensio, Kato and Shin, forthcoming[13]; Woor, 2017[14]) (see also Box 3.2). Inclusive governance should strive to create spaces where stakeholders can interact to identify unintended consequences of certain climate resilience measures (e.g. forestation that reduces pasture areas in highlands, or controlled periodic flooding that limits agricultural crop options). This sub-section highlights a few types of stakeholders whose participation is particularly important but challenging: women, the elderly and people with disabilities, and Indigenous and marginalised groups. It also highlights various roles of civil society organisations (CSOs) and the private sector in inclusive approaches to strengthening climate resilience.

Some groups of people are particularly vulnerable to climate risks due to factors such as their gender, age and disability (Handicap International, 2017[19]). Gender-, disability- and age-responsive climate action is therefore a key consideration for inclusive governance that seeks to strengthen climate resilience (Handicap International, 2017[19]; Dazé, 2019[3]; HelpAge International, 2019[20]). For instance, gender analysis can help governments and development co-operation providers identify differences among women, men, girls and boys in terms of their roles and responsibilities, as well as access to and control over resources for strengthening climate resilience [see Box 3.3 for an example from Côte d’Ivoire, and also (Dekens and Dazé, 2019[21]; Government of Canada, 2017[22])]. An increasing number of international commitments and initiatives have established targets and contributed to tools to integrate gender considerations into climate-related policies, programmes and institutions (Dekens and Dazé, 2019[21]). A similar focus on the role of age or disability in vulnerability to climate hazards is also important [see (Handicap International, 2017[19]; HelpAge International, 2019[20])].

Including Indigenous groups in policy-making processes on climate resilience is also crucial (ILO, 2017[23]). In many cases, Indigenous groups depend for their livelihoods on natural resources that are at significant climate risk. Thus, decision making on climate resilience must consider needs and priorities of Indigenous groups as users of natural resources within the community. Such groups also tend to live in geographical areas that are highly exposed to climate-related hazards, including the polar regions, tropical forests, high mountains, coastal areas, and arid and semi-arid lands (ILO, 2017[23]; Baird, 2008[24]). Inclusive governance therefore should enhance the recognition of these challenges facing Indigenous groups, their rights and institutions. Furthermore, it should facilitate their participation in policy-making processes that can directly affect their climate resilience (Minority Rights Group International, 2019[25]; ILO, 2017[23]).

The roles of non-state actors, such as CSOs and the private sector, are crucial for inclusive governance of climate resilience measures. For instance, given their ability to reach people on the frontlines of poverty, inequality and climate risks, CSOs often bring the vulnerabilities of marginalised populations into public debates and policy processes (OECD, 2020[27]). Similarly, CSOs can play a critical role in monitoring climate risks and vulnerabilities in the long term – after public administrations change or development projects end. CSOs often provide many services (e.g. humanitarian aids after disasters) that some governments do not have the capacity, resources or will to provide. The participation of CSOs in monitoring and evaluation also promotes accountability by providing enhanced scrutiny and transparency (Canales, 2011[28]). Further, CSOs can help local populations obtain climate data and information by facilitating their access to, for instance, research institutions and national meteorological and hydrological service providers (Canales, 2011[28]).

Despite those important roles, gaps remain in effectiveness and accountability of CSOs’ development activities. The gaps have also led to concerns among development co-operation providers about CSOs’ legitimacy, their results and the challenges of co-ordination among them and with government agencies (OECD, 2020[27]). Box 3.4 provides some examples of approaches to enhanced engagement between governments and CSOs in Latin America and the Caribbean, and the Philippines.

The roles of the private sector in building climate resilience are also increasingly recognised. The nature of the roles varies significantly among actors ranging from large corporations and small businesses to interest groups such as industry associations, chambers of commerce and co-operatives (see Table 3.2). Examples of their roles include: implementation of activities in support of climate resilience; production of information, goods and services for climate risk management; direct or indirect financing and provision of risk transfer solutions (e.g. insurance) (Schaer and Kuruppu, 2018[31]; UNDP, 2018[32]; Crawford, Church and Ledwell, 2020[33]; Casado Asensio, Kato and Shin, forthcoming[13]). In countries1 that have participated in the Private Markets for Climate Resilience programme, for instance, the private sector has contributed to weather forecasting, agro-climatic simulations, flood control, soil management, resistant construction materials and infrastructure design, among others (IDB and NDF, 2020[34]).

Strong relationships with key private-sector actors can also help government bodies integrate the voices and views of the private sector into policy making on climate resilience. While appropriate environmental and social safeguards must be applied to private-sector activities, they could better reflect the interest of the private sector. This might allow such climate resilience policies to incentivise businesses to act on climate resilience (Crawford, Church and Ledwell, 2020[33]; Casado Asensio, Kato and Shin, forthcoming[13]). The private sector often creates and facilitates networks that focus on resilience of businesses. For instance, to develop the resilience of micro, small and medium-sized entities (MSMEs) in the Philippines, the National MSME Resilience Core Group lays out strategies such as the National Roadmap for MSME Disaster Resilience. This group enables the government to collaborate with various private-sector actors, including the Philippines Chamber of Commerce and Industry. The priorities of the group include promoting business continuity planning for MSMEs so they can cope with a shock and continue to operate in the aftermath of a disaster (Casado Asensio, Kato and Shin, forthcoming[13]).

Participation by diverse stakeholders, including those mentioned above, is paramount for inclusive governance. There are, however, still a number of challenges that may undermine the effectiveness of the participatory approaches. For example, some stakeholders may be reluctant to participate in organised dialogues due to time constraints. Different stakeholders may have varying views on the underlying drivers of climate-related vulnerability; involving diverse stakeholders may make it challenging for them to reach a meaningful agreement. Asymmetries of political power can also discourage minority groups to express their perspectives. Participatory approaches can also be manipulated by the organisations promoting them, which may undermine trust between participating stakeholders (Munaretto, Siciliano and Turvani, 2014[35]; Tonmoy, Rissik and Palutikof, 2019[36]). Government actors also often lack capacity and resources for participatory approaches. Inclusive participation tends to be time consuming, and pressures on government officials to move policy development and implementation forward may discourage extensive engagement with stakeholders. These are all common challenges to building effective governance for sustainable development, and relevant to climate resilience as well.

Several governments and development co-operation providers have been working to address such challenges and build inclusive governance arrangements for climate resilience measures. Such approaches can include formal and informal consultation processes, multi-stakeholder advisory committees, social audits and organised discussion forums. The engagement processes should also ensure that participatory processes are transparent, for instance, by making information about the consultations publicly available and outlining opportunities for engagement. Table 3.3 summarises examples of many tools and guides that support such inclusive approaches.

3.1.4. Empower local action by facilitating collaboration across levels of governance

A focus on climate resilience requires a good understanding of the impact of climate change on local livelihoods and development, as well as on local ecosystems (Vermeulen et al., 2013[37]; LIFE-AR, 2019[4]). In most countries, national governments oversee development of climate-related policy objectives and frameworks. However, local actors – such as sub-national governments, communities, local businesses and their networks, and CSOs – are at the forefront of planning and implementing individual measures (Dazé, Price-Kelly and Rass, 2016[38]; OECD, 2020[11]; Casado Asensio, Kato and Shin, forthcoming[13]).

Local actors, including Indigenous groups, often have detailed knowledge on the specific climate hazards and causes of the underlying vulnerabilities in their communities, as well as local experiences of past weather- or climate-related events and local responses to them (ILO, 2017[23]). Such actors are also often in a good position to resolve tensions among different actors within the community (LIFE-AR, 2019[39]; OECD, 2020[5]). Local action for climate resilience can also better deal with issues of gender inequality and social exclusion through local women’s organisations or networks (Dazé and Church, 2019[6]). Some development co-operation providers support such organisations. Resilient, Inclusive, and Sustainable Environments (RISE) Challenge, for example, provides grants to environmental and gender organisations. RISE Challenge supports interventions to address gender equality through a range of environmental programmes around the world, including in Colombia, the Democratic Republic of Congo, Fiji, Guatemala, Kenya, Peru, Uganda and Viet Nam (USAID, 2019[40]).

Experience of developing countries, including Least Developed Countries (LDCs), suggests that locally planned actions for climate resilience tend to address local specificities in climate risks more effectively than top-down approaches (Ensora et al., 2016[41]; Dunford, 2018[42]; LIFE-AR, 2019[39]). Locally-led approaches are increasing (OECD, 2020[11]; LIFE-AR, 2019[39]; UNCDF, 2019[43]). For example, local climate change adaptation plans are being developed in countries such as Benin, Bhutan, Lao People’s Democratic Republic, Nepal, Mozambique, the Philippines and Tuvalu. In addition, local-level early warning systems are emerging in, for instance, the Pacific states and Viet Nam. Meanwhile, other countries such as South Africa, the Philippines, Fiji and Tanzania are embarking on urban climate change actions.

Despite the recognised role of local actors in managing climate risks, they often face significant financial, technical and human resource constraints to plan and implement locally-led actions effectively (Dazé, Price-Kelly and Rass, 2016[38]; OECD, 2020[11]). Multi-level co-ordination aims to help address such challenges by ensuring that annual, medium-term and long-term plans at the local level factor in climate risks and opportunities. Such processes should also have opportunities to access necessary funding (UNCDF, 2019[43]) (see examples in Box 3.5). Locally-led actions should also be connected to the national level actions, and multi-level co-ordination can, in turn, facilitate the inclusion of local realities into national policies on climate resilience [e.g. National Adaptation Plans (NAPs)] (Dazé, Price-Kelly and Rass, 2016[38]). In many countries, this top-down and bottom-up interaction is complemented by horizontal co-ordination across different stakeholders and sectors, including the private sector, CSOs and academia.

To operationalise multi-level co-ordination for climate resilience, lessons can be learnt from the ongoing development of NAPs and sector-specific development plans that focus on climate resilience These could include policies on climate-smart agriculture, sustainable forestry and resilient urban development (Ziervogel et al., 2019[44]; Dazé, Price-Kelly and Rass, 2016[38]; UNCDF, 2019[43]; Aytur, Hecht and Kirshen, 2015[45]).

Lessons can also be drawn from countries such as Ghana, Peru and the Philippines that already have governance arrangements to link climate resilience with national and local development planning (OECD, 2020[11]). Examples of such lessons are summarised below, while Table 3.4 outlines guidance and tools that may support local action by enhancing co-ordination across levels of governance:

• Facilitate dialogue among actors across levels of government to ensure that policies and plans for climate resilience at the national and local levels are complementary and mutually reinforcing.

• Build on existing local governance arrangements to link climate resilience with local policy processes.

• Identify local institutional arrangements that are already functioning well, and design technical assistance programmes on climate resilience accordingly to build upon or replicate such arrangements.

• Build on the government’s initiatives in decentralisation where relevant, revising any guidelines on decentralisation to incorporate issues related to climate resilience.

• Develop knowledge management systems (e.g. hosted by local research institutes or universities) that draw on both local knowledge and top-down scientific data and information.

3.1.5. Develop governance mechanisms for adaptive decision making

Most decisions related to climate resilience are made under the uncertainties presented by climate change and various other factors. They include the projections of climate change and its associated impacts; external shocks unrelated to climate change; and the evolution of socio-economic, as well as technological contexts. Governments and other stakeholders, including development co-operation, therefore need to adapt their ongoing or planned activities to evolving circumstances (Haasnoot et al., 2013[47]).

Governments and development co-operation may make their decisions adaptive based on multiple considerations. For instance, “flexibility” enables actions to change, evolve or be adjusted as new information or circumstances emerge. This could include nature-based solutions, business continuity management in disasters and beach nourishment against coastal erosion. “Robustness” makes actions and their functionality work over a range of climate scenarios to accommodate the increasing frequency and intensity of extreme events. One example of robustness would be building infrastructure to a higher standard. Another is having excess capacity and back-up systems for the infrastructure to help maintain core function in the event of a disaster (Hardoy et al., 2018[48]; WEF, 2012[49]; Vallejo and Mullan, 2017[50]).

A governance arrangement that enables such adaptive decision making can benefit from the perspectives of diverse national and local stakeholders, their shared objectives on climate resilience, and experimentation and learning (Fünfgeld, 2012[51]; Munaretto, Siciliano and Turvani, 2014[35]; IPCC, 2019[1]; Tonmoy, Rissik and Palutikof, 2019[36]). An adaptive governance arrangement should therefore facilitate vertical and horizontal exchange of information for consensus building among different stakeholders. These could include government agencies, local communities, development co-operation, the private sector, civil society and academia (Worker and Northrup, 2018[9]; Roelich and Giesekam, 2019[52]). To promote such exchange, scientific information on climate risks and their impacts should be in a form that is accessible and relevant to local stakeholders (Dazé, Price-Kelly and Rass, 2016[38]; Worker and Northrup, 2018[9]) (see also section 4.1).

The experimental nature of adaptive governance for climate resilience implies the continuous modification of measures as new information becomes available (Munaretto, Siciliano and Turvani, 2014[35]). For instance, coastal protection or water storage infrastructure could allow for mid-term adjustments as severity of storms increases and floods occur more often with climate change (Porthin et al., 2013[53]). This experimental aspect of adaptive governance is closely linked with learning about the evolving climate risks and the adaptive capacities of stakeholders and ecosystems in question. See section 3.4 for further discussion on MEL for strengthening climate resilience.

There has been a range of proposed approaches to support decision making as part of adaptive governance for climate resilience. Challenges remain to apply these approaches in practice. However, they explicitly recognise deep uncertainty in, and the interconnectedness among, various climatic and non-climate factors, as well as non-linearity between climate change and its impacts (McDermott and Surminski, 2018[54]; OECD, 2015[55]). Some examples are listed below and in Box 3.6, while Table 3.5 outlines tools and guidance documents to support adaptive governance for climate resilience.

• Dynamic Adaptive Policy Pathways approach aims to establish a framework for action that is informed by a strategic vision of the future and guided by short-term actions that can be adjusted to reflect changing circumstances (e.g. National Adaptive Flood Risk Management in Thailand) (Haasnoot et al., 2013[47]).

• Robust Decision Making supports processes to make robust – rather than optimal – decisions under deep uncertainty by testing large numbers of scenarios and identifying low- and no-regret options in different possible scenarios (e.g. an assessment of options for climate-resilient irrigation systems in Nigeria) (Mereu et al., 2018[56]; OECD, 2015[55]).

• Real Options Analysis allows economic analysis of future option values and economic benefits of different measures. This approach can be useful especially for infrastructure investments to identify options that are both robust and flexible. On the one hand, these options would be strong enough to withstand downside changes of circumstances. On the other, they would be flexible enough to capture upside benefits if favourable climate conditions arise (e.g. large water storage projects in Ethiopia along the Blue Nile) (Jeuland and Whittington, 2013[57]; OECD, 2015[58]).

• Storyline approaches combine climate information with other ecological, economic and social factors, and focus on the impact of actions in a context where changes in the climate are uncertain (Shepherd, 2019[59]).

3.1.6. Enhance governance for greater coherence across different development agendas

Climate resilience is closely linked to other development objectives such as poverty eradication, good health and well-being, gender equality and education, as well as water, energy and food security (GWP-Med, 2019[61]). The need for policy coherence is not unique to climate resilience. Implementing the Sustainable Development Goals (SDGs) requires strengthened governance arrangements to address policy interactions across sectors (OECD, 2019[62]). National and local administrations normally consist of different professional functions and institutions with their own internal interests and priorities. The institutional rigidity of these structures can often contribute to fragmentation of responsibilities, information and tasks (IPCC, 2014[8]; OECD, 2020[11]).

A fragmented approach to climate resilience without sufficient consideration for other development objectives may be sub-optimal in terms of efficacy. Moreover, it may also undermine efforts for the entire sustainable development agenda of the country. For instance, exploiting distant groundwater to address water scarcity might discourage investments in long-term solutions such as rainwater harvesting and water treatment and reuse. Some insurance policies may discourage insured farmers to allocate funding for risk reduction measures before disasters hit [see (UNEP, 2019[63]) for more examples]. A government body in charge of environmental issues and climate change (e.g. environment ministries, agencies, committees, co-ordination councils) typically develops climate policies and co-ordinates related government bodies. Planning and implementation of these policies, however, requires commitments and capacity of all implicated sectors. This is not always the case, and especially at local levels (Worker and Northrup, 2018[9]; GCA, 2019[64]). In addition, planning and finance ministries allocate public financial resources to climate resilience initiatives across different economic sectors. This role is important in the light of the impact of these resources on sustainable development. Integration of climate resilience into sectoral investment plans is discussed in section 3.2.5, while section 3.3.5 examines the role of finance ministries.

Governments and development co-operation are already taking steps to enhance the coherence between action on climate resilience and that for other development objectives (OECD, 2020[11]; UNFCCC, 2017[65]). The potential benefits of more coherent approaches are multidimensional, including:

• economic (e.g. increased long-term viability of economic activities, reduced costs of project implementation, greater value-added in the agriculture and tourism sectors)

• social and environmental (e.g. improved public health, increased employment, conservation of ecosystems)

• geopolitical (e.g. enhanced regional co-operation in the management of shared resources) (OECD, 2020[11]; GWP-Med, 2019[61]; UNFCCC, 2017[65]).

Box 3.7 provides some examples of approaches to promote policy coherence. Box 3.8 shows how development co-operation providers can support partner countries in prompting policy coherence for sustainable development at the strategic, operational and technical levels.

Based on experience in development co-operation, the list below outlines key considerations for enhancing governance between climate resilience and development in various areas, while Table 3.6 shows some tools and guides that could support such policy coherence (Worker and Northrup, 2018[9]; LIFE-AR, 2019[39]; OECD, 2020[11]):

• Gain high-level political support for policy co-ordination.

• Ensure that ministries and agencies at the national level have information and incentives to integrate climate resilience across their portfolios, and report back on progress centrally for evaluation.

• Make use of ministries and agencies with a presence at the local level to ensure that national-level directives on climate resilience are integrated into local development plans on different policy agendas (and vice-versa).

• Reinforce the mandate of relevant ministries and agencies to enforce regulations and provide incentives in support of climate resilience and other related policy objectives (e.g. land-use management and environmental protection).

• Enhance transparency of the co-ordination body to ensure its accountability.

3.1.7. Integrate climate risks and opportunities throughout a policy cycle

As an integral part of governance, a policy cycle entails different steps: from formulation, planning, resource allocation and implementation to MEL (OECD, 2009[12]; IPCC, 2019[1]). Efforts to strengthen climate resilience require explicit consideration of challenges caused and opportunities created by climate change. Different factors such as the political structure of a country, socio-economic conditions, values and development priorities will influence decisions at each step (IPCC, 2014[8]).

While recognising that policy making is rarely linear, Figure 3.1 aims to illustrate how different stages of developing and implementing policies (policy cycle) can consider climate resilience. The figure also distinguishes between national and sub-national processes, depicting the sequence and interaction between them. This involves centralised decision making at the national level; policy planning and implementation at the national and local levels; transfer of resources and information; and project implementation, monitoring and evaluation. The bullet points following the figure offer further examples of these steps.

Figure 3.1. Integration of climate resilience into a policy cycle (a stylised model)

1. Arrows represent flows of resources, information or feedback across different governance levels and stages.

2. NAPs: National Adaptation Plans; NDCs: Nationally Determined Contributions; MEL: Monitoring, evaluation and learning.

Source: Authors’ elaboration based on (OECD, 2009[12]) Integrating Climate Change Adaptation into Development Co-operation: Policy Guidance, https://doi.org/10.1787/9789264054950-en, (Dazé, Price-Kelly and Rass, 2016[38]) Vertical Integration in National Adaptation Plan (NAP) Processes: A Guidance Note, https://www4.unfccc.int/sites/NAPC/Documents%20NAP/Supplements/Vertical-Integration-in-NAP-Processes-Guidance-Note.pdf, (LDC Expert Group, 2012[69]) National Adaptation Plans: Technical Guidelines for the National Adaptation Plan Process, https://unfccc.int/topics/adaptation-and-resilience/workstreams/national-adaptation-plans-naps/guidelines-for-national-adaptation-plans-naps.

• Policy formulation: Identification of climate risks and vulnerabilities, as well as policy priorities to address them, and explicit recognition of these risks and vulnerabilities in the country’s long-term development plan (e.g. a long-term social and economic development vision that highlights climate resilience as a priority policy area).

• Planning: Development of multi-year national, local and sectoral development plans that include priority activities and timeframes. These include national and local climate adaptation plans (e.g. NAPs) and sector-specific climate action plans, or sector development plans that integrate climate resilience (e.g. a climate-smart agriculture strategy).

• Resource allocation: Translating national and sectoral plans into budget allocations and broader public financial management (PFM) systems on an annual or multi-annual basis (e.g. integration of resilience-related criteria into public investment plans, tracking of development finance flows, and tagging national and sub-national budgets and expenditures, facilitating private-sector investment) (see also section 3.3.4).

• Implementation: Implementation of specific actions to manage climate risks and programming of individual investments. Approaches include development and implementation by national and sub-national governments in light of objectives set by national, sectoral and local plans.

• Monitoring, evaluation and learning: Pursuing mutual accountability and responsibility for actions taken, and to extract and share learning for further improvements of policy formulation and planning processes in the future.

Countries develop climate-specific strategies or plans such as Nationally Determined Contributions (NDCs) and NAPs. They also develop sector-specific action plans (e.g. climate-smart agriculture strategies, sustainable forest management plans and national disaster reduction strategies). A NAP presents the overarching national vision on climate resilience. However, it may still leave room for local-level interpretation to enable effective implementation that is tailored to the local context. Yet the actions needed to strengthen climate resilience may also go beyond those covered in NAPs. This necessitates coherence between a NAP, sectoral, thematic and transboundary policies within a country. The NAP process aims to achieve this coherence by iteratively integrating climate change adaptation into other plans and policies over time. The UNFCCC website provides a list of supplementary technical guidelines for the NAP process published by the Least Developed Countries Expert Group in 2012 (see Box 3.9). Box 3.10 provides an example of India’s National Action Plan on Climate Change and related state-level action plans.

Box 3.10. National and state-level action plans on climate change in India

India adopted the National Action Plan on Climate Change (NAPCC) in 2008, which provides a policy framework for adaptation and mitigation to climate change. To achieve its missions, NAPCC called for a State Action Plan on Climate Change (SAPCC) from each state. Most of the Indian states have prepared their SAPCC based on their climate risks and priorities. Figure 3.2 depicts linkages between NAPCC and SAPCC in India and their objectives and relevant stakeholders, based on (Aryal et al., 2015[71]; Government of India, 2008[72]).

Figure 3.2. Linkages between the national and state action plans on climate change

Note: CC: climate change.

Source: Authors’ elaboration based on (Aryal et al., 2015[71]) Framework Guidelines and Governance for Designing Local Adaptation Plans of Action to Mainstream Climate Smart Villages in India, https://cgspace.cgiar.org/bitstream/handle/10568/68326/LAPA.pdf?sequence=1&isAllowed=y.

3.2.1. Checklist for action

3.2.2. Rationale

The nature of climate risks and vulnerabilities varies across sectors. Certain sectors are particularly sensitive to the impacts of climate change and variability. Hence, they have greater need to factor climate risks into their policies and plans as a priority. Examples of such sectors include agriculture, energy, health, insurance, tourism, transport and water. A review of 19 NAP documents available on the UNFCCC’s website as of the end of December 2020 found all included some reference to priority sectors (Dazé, forthcoming[73]).

The exposure and vulnerability to impacts of climate change can greatly differ between different groups of society within a given sector. Thus, in analysing sector-level climate risks, gender equality and social inclusion are a critical factor for identifying plans and policies to address the risks. For example, large-scale agricultural and extractive industries can be linked to increased human rights violations that disproportionately affect women, children or Indigenous peoples. Consequently, they require specific approaches to protect their rights and build their resilience (Bebbington et al., 2018[74]; ACHPR, 2018[75]).

The climate resilience goals and policies of individual sectors can directly affect their investment activities. Policies with a sector-wide reach include, for example, building codes, design standards, regulations on the price of crops and water tariffs, fiscal support for use of agricultural technologies, and standards for facilities and equipment in health sector. At the same time, development of new policies with a focus on climate resilience, or adjustment of existing ones, may lead to potentially conflicting priorities or interests between different sectors or among stakeholders within a sector (Clar and Steurer, 2019[76]). For instance, promotion of hydropower development for a better energy access might decrease availability of water for small-scale irrigation systems, riparian-corridor ecosystem services and other natural resource-based livelihoods in downstream areas (Buechler et al., 2016[77]).

There can be various entry points to address climate risks through specific sectoral policies, plans and projects. This section discusses how governments and development co-operation can better integrate climate resilience into sectoral policies, plans and projects in light of national commitments on sustainable development and climate change. In this section, the “sector level” includes bodies with policy and planning authority and functions within a given sector in a country (or, in a decentralised system, within a given sector in a state or province) (OECD, 2009[12]). The section uses the terms “policies”, “plans” and “projects” as follows based on EC (2005[78]), while recognising that there are many other definitions of these terms:

• A policy means guidance that rationalises the course of action of a government for a certain development agenda or agendas, including that on objectives on climate resilience.

• A plan means a set of proposed actions linked to objectives set out in the policy, possibly with a timeframe and associated costs and investment plans.

• A project means an individual activity that aims to contribute to, or is in line with, the objectives of the policy and plan.

A sectoral focus on climate resilience by individual ministries or development co-operation must build on the knowledge and expertise of those institutions and sector experts. In the agriculture sector, for example, several questions can be asked. How will changes in maximum temperature affect arable lands? Will crop changes or diversification of farming practices be needed? How will these adaptation measures affect the livelihood strategies of women and men? How will such changes be made, and by whom? In the energy sector, the risk of changes in precipitation due to climate change could lead to a significant change in a country’s long-term potential for hydropower development options. How might the relevant infrastructure be resilient to slow and rapid onset events?

Actors that play an important role in strengthening climate resilience at the sector level include line ministries and agencies, sector-specific commissions and parliamentary committees focused on sectoral issues (OECD, 2009[12]). They may also include local offices of sectoral ministries and sectoral departments of sub-national governments (see also section 3.1.4). In many developing countries, development co-operation and CSOs with a sectoral focus also support such efforts. The selection of priority sectors may be influenced by their perceived economic importance, the relative power of different ministries and entities, or the availability of information about climate risks on particular sectors (i.e. sectors whose climate risks are better understood might have a higher priority) (Dazé, forthcoming[73]). Nevertheless, sectoral approaches can present important and practical entry points for integrating climate resilience aspects into development of individual sectors.

Focusing on such sectoral processes, this section outlines approaches for governments and development co-operation to integrate climate resilience into policies, plans and projects. It focuses on individual sectors and issues listed below, and reflects national-level goals on climate resilience. Some of these approaches can also be closely linked to governance arrangements for policy coherence across policy agendas, integration of climate resilience into different steps of the policy cycle, and inclusive and multi-level engagement processes as highlighted in section 3.1:

• Establish linkages between national climate goals and sector-specific policies on climate resilience.

• Assess the climate risks to a sector, and reflect them in the development plans for that sector.

• Integrate climate resilience consideration into sector investment plans.

• Use environment assessments to enhance climate resilience of sector policies, plans and projects.

• Enhance climate resilience of the financial sector.

3.2.3. Establish linkages between national climate goals and sector-specific policies on climate resilience

A focus on climate resilience at the sector level needs to be aligned with the country’s development goals and complementary policies and plans, particularly those on climate resilience. These goals, policies and plans set out the strategic direction on different development agendas, including on economic growth, poverty eradication, well-being, gender equality and climate change. These, in turn, guide the development of sectoral policies, including their approach to climate resilience.

The development of sectoral policies on climate resilience often begins with a review of national-level policy documents. These could include national development visions and strategies, national-level climate change policies (e.g. NAPs, NDCs and national climate change strategies). The review could also examine sector-specific development plans (e.g. a national agriculture and food security strategy, an energy-sector development plan and a water sector development plan). This review process can provide an overview of commitments on climate action. It can also outline the broader national contexts that guide development of more detailed measures on climate resilience at the sector level, where most implementation takes place. The process also helps the government align sectoral and national-level objectives on climate resilience (see Box 3.11 for an example from Ghana’s National Climate-Smart Agriculture and Food Security Action Plan).

Translating national policy goals into sectoral policies, and establishing clear linkages between the two, benefits the government’s effort to strengthen climate resilience in different ways:

• Ensuring that sectoral approaches to climate resilience are consistent with national development frameworks [e.g. India’s National Action Plan on Climate Change established eight “National Missions” that guide sectoral and thematic actions (Government of India, 2008[72])].

• Improving understanding of sector-specific climate risks and vulnerabilities, complementing results of national climate risk and vulnerability assessments [e.g. Senegal has been developing its NAP through a sectoral approach, such as agriculture, fisheries, health and tourism, and other cross-cutting thematic components (Casado Asensio, Kato and Shin, forthcoming[13])].

• Informing future discussion on national policy development (e.g. national development strategies, NAPs and NDCs), based on experience in implementing sectoral action plans on climate resilience). See also section 3.4 on monitoring, evaluation and learning).

Coherence between national development goals and sectoral policies involves careful co-ordination across different ministries and agencies. Through budget processes, for instance, an economic or finance ministry, together with a ministry in charge of climate policies, may request sector ministries to identify and articulate the climate risks to their sectors. In this case, sector ministries may need to articulate how measures in their budget proposals consider such climate risks. In Peru, the Presidency of the Council of Ministers and the Ministry of Economy and Finance operate a multi-sectoral budget programme with a budget line for “Vulnerability Reduction and Disaster Response”. The budget programme aims to finance disaster risk reduction measures across sectors and levels of governments with objectives aligned to the country’s national disaster risk management plan (OECD, 2020[11]).

Table 3.8 provides examples of tools and guidance documents. It focuses on incorporating climate-related risks and opportunities into the formulation and implementation of sectoral policies, programmes and plans. These are considered in light of national goals on climate resilience and broader sustainable development.

3.2.4. Assess the climate risks to a sector, and reflect them in the development plans for that sector

A sectoral policy on climate resilience needs to be complemented by concrete plans that outline specific measures, responsible actors and relevant timeframes to be implemented effectively. Identifying and prioritising those measures require reliable climate and weather data and information. It also demands good understanding of the socio-economic, technological and market contexts that influence the nature of the climate risks faced by the sector. Finally, it requires knowledge of underlying factors that affect its vulnerability (see also section 4.1). Examples of such factors include the sector’s sensitivity or susceptibility to climate hazards, and its lack of capacity to adapt and cope. Assessment of these factors should also consider the social and gender dimensions within the sector.

A gender analysis as part of a climate vulnerability assessment of the sector, as well as incorporating actions for addressing gender inequalities into sectoral policies on climate resilience, can help promote gender-responsive measures for climate resilience. These actions include promoting equitable access to resources, information and support between women and men; involving gender experts in the planning processes of sectoral policies; training sector experts to better understand the gender dimensions of policy priorities for climate resilience; and articulating gender consideration in sectoral funding proposals for climate finance (Dazé and Church, 2019[6]).

Based on information on climate risks and other sectoral contexts, a ministry in charge of climate policies, or a sectoral ministry/agency, should communicate the level of climate risk that private-sector actors need to bear (Hallegatte, Rentschler and Rozenberg, 2020[68]). For instance, governments can set and communicate the level of flood protection which the government is required to provide. This could allow firms to decide where to operate their businesses. It could also help them plan for investment in any additional flood protection measures (Hallegatte, Rentschler and Rozenberg, 2020[68]).

Table 3.9 provides an example of steps to consider during a climate risk and vulnerability assessment at the sectoral level. It suggests how results of the assessment can inform the development or adjustments of sectoral climate resilience plans. Such an approach was used, for instance, in Afghanistan to facilitate multi-stakeholder consultation to promote drought- and disease-resistant wheat seeds in the agriculture sector in hilly mountain areas. The consultation also led to an agreement that farmers would take an active role in co-ordinating and implementing rainwater harvesting with support from Oxfam (Morchain and Kelsey, 2016[80]). Box 3.12 provides other examples from the Former Yugoslav Republic of Macedonia and Fiji on their sectoral plans on climate resilience that have been informed by a climate risk assessment.

Various tools have been developed to support assessment of climate risks and socio-economic contexts at sectoral levels (Table 3.10). For instance, the Energy Sector Management Assistance Program Hands-on Energy Adaptation Toolkit is a semi-quantitative risk assessment approach to prioritise hazards and risks to a country’s energy sector. This toolkit also helps identify adaptation options (World Bank, n.d.[81]). Another tool called Confronting Climate Uncertainty in Water Resources Planning and Project Design can help demonstrate the robustness of a project to climate change in the water resource management sector. It is based on a bottom-up assessment of the project’s vulnerabilities to climate hazards (Ray and Brown, 2015[82]). The Food and Agriculture Organization of the United Nations (FAO) has provided extensive climate risk assessment tools, e.g. for the fisheries and aquaculture sector and the agriculture sector (FAO, 2015[83]; FAO, 2007[84]).

3.2.5. Integrate climate resilience consideration into sector investment plans

A sectoral plan on climate resilience may be accompanied by an investment plan that includes information on the financial needs of planned measures. Examples of such needs include capital investments, operational expenditures and other expenses, such as for capacity building, policy development and feasibility studies (see also section 3.2.7). For instance, a tool called Climate Smart Agriculture (CSA) Investment Plans2 aims to identify concrete actions for the government, both in the form of investment opportunities, as well as policy design and implementation. CSA Investment Plans aim to inform government, development co-operation providers and the private sector about promising CSA technologies, as well as their associated costs. Zambia’s CSA Investment Plan has recommended investments in crop diversification, commercial horticulture, agroforestry and infrastructure to reduce post-harvest losses (World Bank, 2019[86]).

Many countries and development co-operation providers have applied a range of other approaches to consider climate resilience in their sectoral investment planning. For instance, the Rwanda Green Fund prioritises sector-specific projects on climate adaptation among its investment criteria (FONERWA, n.d.[87]). The Swiss Agency for Development and Cooperation (SDC) has also developed guidance for assessing climate, environment and disaster risks of strategies, programmes and projects by development co-operation providers (see Box 3.13). The Asian Development Bank has provided tools for climate-proofing investment projects and relevant technical guidelines (ADB, 2018[88]). These tools aim to help practitioners take a proactive approach to considering short- and long-term climate and disaster risks in sector planning processes, associated investment plans and relevant project development (see Box 3.14).

Infrastructure development often composes a major part of a sector-specific investment plan. Making infrastructure more resilient goes beyond questions of finance. It must also include good governance and the ability to make appropriate decisions on designs, operation and maintenance of the infrastructure. Such decisions should ensure infrastructure is resilient to current and future climate change. In particular, the early stages of infrastructure development (e.g. designing regulations, producing hazards data and developing master plans) can significantly improve its overall resilience with a relatively low resource requirement (Hallegatte, Rentschler and Rozenberg, 2020[68]).

For a systematic climate risk and vulnerability assessment for sectoral investment, governments can also greatly benefit from developing inventories of key infrastructure and assets. These could include power plants and energy networks, primary health care facilities, water utilities and schools, among others. Such an inventory helps government authorities identify facilities at risk or determine priorities for climate resilience investments (Hallegatte, Rentschler and Rozenberg, 2020[68]). The government of Viet Nam, for example, has an inventory of more than 750 health care facilities, detailing their georeferenced locations, types and capacities. This could inform development of climate-resilient investment plans for the sector (Hallegatte, Rentschler and Rozenberg, 2020[68]).

Climate resilience of infrastructure investments in a given sector can be pursued at three different levels (OECD, 2018[89]; Hallegatte, Rentschler and Rozenberg, 2019[90]). The first level is resilience of assets such as power plants, water supply and sanitation facilities, roads and bridges. The second is resilience of services such as interconnected networks, while the third is resilience of users such as people and supply chains. Governments and development co-operation therefore need to plan their investments, bearing in mind the resilience of both the assets and the broader infrastructure systems3 to manage the climate risks to them (OECD, 2019[91]; Hall et al., 2019[92]; Hallegatte, Rentschler and Rozenberg, 2019[90]). Several tools for sector-specific investment planning in support of climate resilience have been developed, with some examples introduced in Table 3.11.

3.2.6. Use environment assessments to enhance climate resilience of sector policies, plans and projects

Design of sectoral policies, plans and projects, including infrastructure development, should integrate climate resilience considerations from the outset (UNECE, n.d.[95]). Environment impact assessments (EIAs) and strategic environmental assessments (SEAs) have traditionally been applied to avoid negative environmental impacts of a particular policy, plan, programme or project (see Figure 3.3). Both EIAs (typically at the project level) and SEAs (at the policy, plan or programme level) also present opportunities for incorporating climate-resilience considerations into these different levels of activities.

Figure 3.3. An illustrative example of relations between strategic environmental assessment and environmental impact assessment

Source: Authors’ elaboration based on (Rodrigo-Ilarri et al., 2020[96]) Advances in implementing strategic environmental assessment (SEA) techniques in Central America and the Caribbean, https://www.mdpi.com/2071-1050/12/10/4039/pdf, (EC, 2013[97]) Guidance on Integrating Climate Change and Biodiversity into Strategic Environmental Assessment, https://ec.europa.eu/environment/eia/pdf/SEA%20Guidance.pdf.

Despite the application of EIAs over the past decades, it is often challenging to systematically assess interdependencies of multiple hazards, including those associated with climate change (UNDRR, 2020[98]). An EIA should ideally be integrated into a project preparation process from the outset. This process can be supported through explicit consideration of climate-related risks, broad consultations with relevant stakeholders, and thorough examination of the potential risks of maladaptation (EC, 2013[97]). Potential steps for integrating climate resilience considerations into an EIA include the following:

• Identify a methodology to assess climate risk on the project and the project area.

• Use regional climate models and hazard maps, when available, as input to the EIA process.

• Assess implications of the identified climate risks for the long-term environmental impacts of the planned project.

• Ensure that measures to reduce the environmental impacts, environmental management plans and monitoring efforts within the EIA adequately consider the management of climate risks.

• Consider impacts of extreme weather impacts on the planned project and develop contingency plans (see (IISD, 2016[99]) for further details).

Complementing project-level EIAs, an SEA systematically evaluates the environmental implications of proposed plans or programmes, and possibly also policies, including those at the sector level (Fortun, 2020[100]). SEAs aim to explore ways to address identified climate- and environment-related risks at the early stage of decision making (EC, 2013[97]). Applying SEAs to the development of policies and plans can offer opportunities to enhance the climate resilience of the sector. At the same time, SEAs can prevent its policies and plans from causing adverse effect on the environment or the well-being of the people affected by the intervention (EC, 2013[97]). (see Table 3.12 for examples of steps and key considerations in an SEA).

Many developing countries have already conducted SEAs for their policies and plans, including those on climate change. In El Salvador, SEAs are applied to assess environmental risks related to its policies on biofuel, energy and metal mining, as well as marine coastal strips (Rodrigo-Ilarri et al., 2020[96]). The government of Montenegro, with support of the European Commission, also conducted an SEA of the country’s National Climate Change Strategy (NCCS). The SEA aims to contribute to the reforms in the area of environment and climate change in Montenegro. It focuses on the impacts on the environment of climate change adaptation and mitigation measures proposed by the NCCS, including soft measures (e.g. use of fiscal instruments) (Palerm et al., 2015[101]). Further information on country- and sector-level SEAs to assess policies, plans and programmes are available at (Fortun, 2020[100]), while examples of tools and guides are outlined in Table 3.13.

3.2.7. Enhance climate resilience of the financial sector

Apart from real economy sectors (e.g. agriculture, energy, tourism, water), the financial sector can also be affected by negative impacts of climate change and disasters through different, and overlapping, channels (Feyen et al., 2020[102]). For instance, climate- and weather-related hazards can trigger losses and tighter liquidity conditions due to stricter risk premiums when a disaster occurs. Damages to infrastructure, higher prices of commodities and energy, and lower productivity, for instance, can negatively affect the repayment capacity of some borrowers, especially when their assets are uninsured. Physical risks of climate change can also impede the pricing accuracy of insurance liabilities. This challenge can cause losses to insurers, which could potentially raise premiums for policy holders, or even cause them to withdraw insurance covers. This may also increase fiscal costs as governments are forced to backstop losses (Feyen et al., 2020[102]; Hallegatte, Rentschler and Rozenberg, 2020[68]).

Central banks and other financial regulators can play a greater role in ensuring that policies, regulations and enabling measures (that guide financial actors across the financial system) address climate risks (Miller and Swann, 2019[103]). More central banks and financial regulators are exploring their roles in identifying and managing climate risks to the financial sector in their own country. As of December 2020, 83 central banks and financial regulators have become members of the Network of Central Banks and Supervisors for Greening the Financial System (NGFS). Of these, around 20% are from developing countries (NGFS, 2020[104]). The NGFS provides a forum for members to develop frameworks for financial policies and regulations in support of assessing climate risk in micro-supervision, integrating sustainability and climate risks into monetary policy frameworks and endorsing mandatory disclosure, among others. The Sustainable Banking Network (SBN) is another community of financial sector regulators and banking associations from emerging markets committed to work on sustainable finance, including for climate resilience (IFC, n.d.[105]).

Central banks and financial regulators have been rapidly developing their methodologies. A non-exhaustive list of examples of such approaches appears in the list below based on several sources (NGFS, 2020[106]; Hallegatte, Rentschler and Rozenberg, 2020[68]; Miller and Swann, 2019[103]; Feyen et al., 2020[102]; EU TEG, 2020[107]). These provide a range of tools developed over the past years, some of which are regularly updated (Table 3.14):

• Support financial institutions in raising awareness and developing internal technical and financial expertise to conduct analysis of climate risks and opportunities.

• Designate climate risk as a material risk for financial institutions, and encourage or require them to disclose information on climate-related risks to their assets and operations, using or based on robust and internationally consistent climate-related disclosure frameworks, including the framework developed by the Task Force on Climate-related Financial Disclosures.

• Integrate climate resilience considerations, informed by physical and transitional climate risk analyses, into relevant areas of the financial sector governance, including regulations, standards setting, incentives and monetary policy.

• For micro-supervision, map transition and physical climate risks (and their transmission channels) to better understand the impacts of climate risk on the financial system.

• Explore methodologies to integrating physical climate risk considerations into stress-testing methodologies for regulated financial institutions.

• Encourage domestic financial institutions to consider integrating enhanced understanding of climate resilience in all investments and lending via the employment of climate scenarios used for stress testing at the level of the financial system.

• Support development of a capital market that is also resilient to climate risks (e.g. credit enhancement issuances by municipalities, promotion of public-private partnership (PPP) projects related to climate-resilient infrastructure and climate resilience bonds).

• Scale up an appropriate use of catastrophe bonds and contingency funds to increase the country’s fiscal resilience to the negative impacts of disasters.

3.3.1. Checklist for action

3.3.2. Rationale

Governments, often in collaboration with development co-operation and the private sector, are the primary sources of finance for both structural (e.g. infrastructure investment) and non-structural (development of capacity, information and policies) measures. How and where a government invests will directly or indirectly contribute to the resilience of the country, its economy, people and ecosystems to climate change, either positively or negatively.

Infrastructure investments that strengthen the resilience of vulnerable sectors (e.g. agriculture, water supply and sanitation, tourism, transport, among others) create a structural foundation for achieving countries’ sustainable development objectives. It is crucial to integrate climate resilience consideration into the development and operation of infrastructure systems to protect public and private assets and their services from impacts of climate change. Finance also needs to be allocated to cover the cost of operation and maintenance throughout the lifecycle of the assets (Mahul et al., 2019[108]); see also section 3.2.

Finance is also needed for development of capacity, information and policies. This includes establishing and operationalising effective institutional arrangements, formulating policies and plans, producing and disseminating climate data and information, building capacity, and monitoring and evaluating progress on action, to name a few (OECD, 2020[11]). Finance for those non-structural measures for action on climate resilience is needed at all levels of governance (e.g. national, municipal, local and community levels) for a wide range of stakeholders (public and private, as well as CSOs and across sectors.

When disasters occur, governments bear a large share of contingent liabilities for response and recovery (OECD and World Bank, 2019[109]). Even when some sort of insurance is available, a government may need to fund response measures if the insurance cannot cover an especially costly disaster. Finance is therefore needed to meet such liabilities and provide fiscal transfers to sub-national governments for rehabilitation of damaged assets, immediate relief and livelihood support, and assistance to uninsured households and businesses. (Mahul et al., 2019[108]). Growing macroeconomic impacts of disasters, including those caused by climate change and now the COVID-19 crisis, create a vicious cycle. They lower economic growth, increase debt and worsen financial vulnerability, especially of small and vulnerable countries (IMF, 2019[110]).

Financial resources can be delivered from various sources through different mechanisms and instruments. As illustrated in Figure 3.4, national and sub-national budgets, bilateral and multilateral development co-operation and private-sector finance – whether from financial institutions or companies’ own balance sheets and savings – are all crucial sources of finance for strengthening climate resilience.

Decisions on how, when, to whom and by whom finance will be allocated, provided or mobilised to build climate resilience involves various factors. They include the acceptable level of residual risks for individual stakeholders despite efforts to adapt to climate change. They also involve the relative allocation of identified risks by reducing, transferring or retaining them.

Other factors not directly related to finance may also influence decisions. These could include capacities of stakeholders, political power dynamics and the cultural acceptability of the proposed measures. The psychological and emotional distress expected to be triggered by the impacts of climate change is another consideration.

Depending on the extent to which a country has integrated climate resilience consideration into its budget processes, gender-responsive budgeting can help ensure that allocations of public funds address the differentiated needs of women and men for enhancing their climate resilience. Gender-responsive budgeting can be based on gender analysis (see section 3.1.3), which enables better targeting of expenditures. A gender-responsive impact assessment of budgets and expenditures on climate resilience can also be effective [see for instance (Stephenson, 2018[111]; OECD, 2018[112]) for more information on gender budgeting]. Beyond domestic resources, mechanisms such as the Green Climate Fund, the Adaptation Fund and the Least Developed Country Fund have also integrated gender policies into the decision-making processes. The gender policies of these funds represent a key opportunity for countries to address gender consideration in their financing for activities in support of climate resilience.

Figure 3.4. Examples of financial sources for climate resilience

Source: Authors based on (OECD, 2018[113]), Global Outlook on Financing for Sustainable Development 2019: Time to Face the Challenge, https://doi.org/10.1787/9789264307995-en, (Price-Kelly and Hammill, 2016[114]) sNAPshot: Domestic Public Finance for Implementation of NAPs, https://napglobalnetwork.org/resource/snapshot-domestic-public-finance-implementation-naps/

This section focuses on the issues listed below to outline approaches to allocating and accessing financial resources effectively to support structural and non-structural measures to manage different climate risks:

• Identify necessary action on climate resilience and assess associated financial needs

• Integrate climate resilience into public financial management

• Elevate the role of finance ministries in enabling action on climate resilience

• Select and combine financial instruments for the management of climate risks

• Maximise the benefits of risk insurance solutions

• Link action on financial inclusion with action on climate resilience

• Further engage the private sector in climate-resilient investment

• Facilitate access to climate finance

3.3.3. Identify necessary action on climate resilience and assess associated financial needs

A government must take several key initial steps to plan its financing for climate resilience. First, it must understand the nature of the climate risks to vulnerable people and ecosystems in the country. Second, it must assess possible approaches to manage those risks (e.g. policies, technologies, technical assistance and other types of activities) (Parry, Dazé and Dekens, 2017[115]; Financial Protection Forum, 2018[116]). Relevant government bodies then compare and prioritise the approaches based on their costs and benefits (or broader effectiveness or coherence criteria, or both – see also section 3.1.6). In many cases, however, it remains methodologically challenging to make reliable cost estimates of such approaches (Chapagain et al., 2020[117]; Hallegatte, Rentschler and Rozenberg, 2020[68]). A recent study identified 44 NDCs and NAPs from developing countries that indicated adaptation costs over 2020-30. It observed most estimates either lack any methodological description or simply add up the budget items in the proposed adaptation actions (Chapagain et al., 2020[117]).

Nevertheless, practitioners in government and development co-operation providers could refer to one of several suggested approaches to assess financial needs for action on climate resilience and broader SDGs (see Table 3.15). Countries are also increasingly using costing measures to support climate resilience, especially as part of the NAP processes (e.g. Guatemala, Fiji and South Africa) (Casado Asensio, Kato and Shin, forthcoming[13]; Government of Fiji, 2020[118]) For instance, Fiji’s Ministry of Economy worked with the NAP Global Network on a rapid and comparable set of cost estimates. It has costed 160 priority measures in its NAP document for 2021-25 (Government of Fiji, 2020[118]).

A broad range of stakeholders is needed to understand climate risks, explore and prioritise approaches, and assess financial needs to implement them. While it may be resource-intensive, such processes can provide valuable input for discussion among various public- and private-sector stakeholders. These discussions can cover climate risks, drivers of vulnerabilities and priority actions on climate resilience in light of overall development objectives. Information on these issues obtained through stakeholder engagement can also provide a basis for further discussion on the scale of finance needed and potential sources of finance (Foss, 2017[119]; Parry, Dazé and Dekens, 2017[115]).

Central to this process are finance and economic planning ministries, other line ministries and agencies responsible for key areas. These areas include development, climate policies, disaster risk management and climate-sensitive sectors such as agriculture, fisheries, energy, transport and tourism. Co-ordination between these different ministries and agencies is crucial (see Box 3.15 for an example). The participation of sub-national governments, and representatives of local businesses and households that are particularly vulnerable, or that may be significantly affected by approaches, is also essential. Financial institutions can bring expertise and private-sector perspectives on building climate resilience into the process, and may provide financial solutions for implementation. These institutions could include insurance providers, development financial institutions, commercial banks and microfinance institutions.

Participation by bilateral and multilateral providers of development co-operation in the process may also provide opportunities. For example, they could help better align their country programmes and individual projects with the country’s climate and overall development objectives. Such engagement could also help mobilise further resources through better donor co-ordination or catalysing private-sector finance. Development co-operation can also provide governments with technical support in assessing financial needs, identifying targeted beneficiaries and exploring potential sources and delivery mechanisms (OECD, 2015[120]).

3.3.4. Integrate climate resilience into public financial management

Bilateral and multilateral development finance are likely to remain important sources for climate action, especially in lower income countries. However, national and sub-national budgets still play a crucial role in financing efforts to build climate resilience (Allan, Bahadur and Vidya, 2019[121]; OECD, 2018[113]). As shown in Figure 3.5, public finance can anticipate hazards (risk reduction and prevention) or react to their occurrence (response and recovery) (Hubert, Evain and Nicol, 2018[122]; GCA, 2019[64]). Having finance available for response and recovery also help a government absorb impacts of disasters on debt levels, costs of capital and overall fiscal stability in the country. Such finance could take the form of contingent credit, insurance or contingency reserves. Table 3.16 outlines tools for governments and development co-operation to integrate climate resilience consideration into public financial management (PFM), while the following paragraphs analyse some of these approaches.

Figure 3.5. Financial needs for different phases of strengthening climate resilience

Note: The examples included in the figure are indicative and some could be related to more than one phase (e.g. results of vulnerability assessments could be used in all three phases).

Source: Authors’ elaboration based on (GCA, 2019[64]) Adapt Now: A Global Call for Leadership on Climate Resilience, https://gca.org.

Governments can better manage various public spending in support of climate resilience, when they have better understanding of how the public finance is being spent, and when they consider climate risks in PFM (Mahul et al., 2019[108]; Financial Protection Forum, 2018[116]) (see Box 3.16. for a definition of PFM). Integration of climate resilience into PFM also requires closer collaboration between different government bodies. These include finance and planning ministries, as well as those in charge of climate policies and individual sectoral policies. As they do for other government functions, many countries conduct budgeting in siloes (Moser et al., 2019[123]).

On the expenditure side of PFM, budget allocations to sector ministries and agencies can strengthen climate resilience components of development plans in the sectors (see also section 3.2). Some measures may not be explicitly focused on climate resilience, but rather embedded in broader sector development projects (Price-Kelly and Hammill, 2016[114]). Budget allocations to ministries and agencies directly responsible for promoting climate resilience are also crucial for ensuring adequate resourcing of core functions. These functions include implementation of measures under NAPs, enforcement of related environmental regulations, and monitoring and evaluation of implementation (OECD, 2012[124]).

A government holds a fundamental responsibility to provide social safety nets to complement activities that reduce climate risks and help poor households cope with devastating impacts of disasters (Tenzing, 2020[125]; Aleksandrova, 2019[126]; Hallegatte, Rentschler and Rozenberg, 2020[68]). For instance, cash transfers can help households build resilience to climate-related hazards and their impacts on livelihoods. Governments can also create employment through public works. For example, beneficiaries could provide community services or build assets in support of climate resilience for cash or in-kind benefits (e.g. reforestation, irrigation, mitigating soil erosion and water security).

Social safety nets should not discourage risk reduction activities over the long term. For example, support to areas that are increasingly affected by natural hazards (e.g. droughts or floods) should not be designed in ways that lock people in those places (Hallegatte, Rentschler and Rozenberg, 2020[68]). Further, governments should recognise that approaches to social safety nets can have long-term benefits for human health, livelihoods, poverty and inequality, and social exclusion, which are root causes of the vulnerability to climate hazard. For these reasons, social safety nets must target the most disadvantaged groups (Tenzing, 2020[125]; Aleksandrova, 2019[126]).

Tagging budgets and reviewing public expenditures for activities that contribute to national, sub-national and sectoral targets on climate resilience can support integration of climate risks into PFM. Such a tagging exercise can help governments understand where, how and how much of the public budget is being allocated and disbursed for climate resilience measures through a broad selection of line ministries. Mapping the sources of finance available (i.e. domestic budgets, and where relevant, development finance provided to complement them) can also help planning and sectoral ministries see potential financing gaps (OECD, 2020[11]; UNDP, 2019[127]). Several countries have already introduced tools for tracking public budget allocation. These include Bangladesh, Cambodia, Ghana, Indonesia, Nepal, Pakistan, Peru, Philippines, Samoa, Thailand and Vanuatu (OECD, 2020[11]; UNDP, 2019[127]; NDC Cluster, n.d.[128]; Storey, 2016[129]).

Multi-annual cycles for policy planning and budgeting can be a useful tool for countries to increase predictability of their financing plans. Many countries have adopted a fiscal arrangement called a medium-term expenditure framework (MTEF). This allows them to extend the horizon of fiscal policies, thereby increase the predictability of budget outcomes (Martí, 2019[131]; Di Francesco and Barroso, 2015[132]). MTEF may also, in turn, inform annual sectoral-level budgeting that would ideally reflect the funding needed for strengthening climate resilience in the sector (Price-Kelly and Hammill, 2016[114]).

MTEF could also complement multi-year strategic and implementation plans on climate resilience (e.g. NDCs, NAPs, national disaster risk reduction strategies, among others) (Allan, Bahadur and Vidya, 2019[121]; Parry, Dazé and Dekens, 2017[115]). For instance, as part of its NAP process, Togo developed a practical guidebook on how to integrate climate change into different steps of its planning and budgeting cycle (Price-Kelly and Hammill, 2016[114]). Several other countries have developed climate-related budget planning processes along with their MTEFs. Cameroon and Thailand, for example, link their mid-term national development and climate change plans to the budgeting processes (GIZ, 2014[133]; Kohli, 2018[134]).

3.3.5. Elevate the role of finance ministries in enabling action on climate resilience

The role of finance ministries in supporting national strategies to address climate risk is increasingly recognised. This is exemplified by the number of countries that have joined the Coalition of Finance Ministers for Climate Action (World Bank, 2019[135]). The role of finance ministries in supporting action on climate resilience may be closely linked with their traditional mandates as shown in Table 3.17. Many finance ministries are already working to help build their countries’ financial resilience to disasters, including those related to climate. To that end, they collaborate with government bodies responsible for economic planning, climate policies, and disaster risk reduction and management. Finance ministries in many countries have also led exercises in tracking climate finance over the past decade (OECD, 2020[11]; UNDP, 2019[127]; NDC Cluster, n.d.[128]; Storey, 2016[129]).

Finance ministries can also promote the use of national development banks and funds to address barriers to domestic investment in climate resilience (Miller and Swann, 2019[103]). They can do this, in part, by putting climate resilience at the core of strategic frameworks of those banks and funds. Developing criteria for their credit risk assessment and financial decision making may increase allocation of their financial resources to projects that support climate resilience. Finance ministries can also encourage the banks and funds to de-risk domestic investment in climate resilience (e.g. by using guarantees), to increase direct and indirect project origination, and to identify and report on climate risks associated with their operations.

Maintaining fiscal space in normal conditions is in many cases the most reliable way of managing unexpected shocks (Hallegatte, Rentschler and Rozenberg, 2020[68]) (see also section 3.3.6 for different financial instruments to support this). Finance ministries in many countries lead efforts and co-ordinate with other government bodies to manage explicit and implicit contingent liabilities to compensate for part of disaster losses. In so doing, they bear a significant share of the costs of responding to negative impacts of disasters (OECD and World Bank, 2019[109]). Relating to this, finance ministries also play a central role in developing and implementing financial protection strategies for managing residual risks. Such financial protection strategies help disaster-affected people to secure access to financing in advance of shocks. At the same time, the strategies protect the country’s fiscal balance and budget when disasters strike. Ethiopia, Indonesia, Peru and the Philippines, for example, have developed their financial protection strategies (OECD and World Bank, 2019[109]; OECD, 2020[11]); (Mahul et al., 2019[108]). Financial protection strategies combine different financial instruments to address different types of climate and disaster risks. In this way, they help ensure that each instrument matches the funding needs during different phases of disaster response and recovery (Mahul et al., 2019[108]; UNDRR, 2020[136]). Those instruments include budgetary measures, contingent credit facilities and risk transfer instruments (e.g. insurance), among others (OECD and World Bank, 2019[109]).

3.3.6. Select and combine financial instruments for the management of climate risks

No single financial instrument can address all risks. Thus, the government and development co-operation providers normally combine different financial instruments to manage climate-related risks in the country efficiently (Financial Protection Forum, 2018[116]). Yet selecting the most effective financial instruments could also be a challenge in itself. This is due to the deep uncertainty associated with climate scenarios and their possible consequences, as well as complex and dynamic socio-economic circumstances surrounding target beneficiaries.

Governments and development co-operation are increasingly aware of the benefit of combining multiple types of financial instruments to pursue a more comprehensive approach to climate risk management (Martinez-Diaz, Sidner and McClamrock, 2019[137]). Various methodologies can guide the choice of instruments. These include the layering approach that uses frequency and severity of hazards as the key selection criteria along with other factors such as economic and social preferences of beneficiaries. [For more information on the layering approach, see for instance (Financial Protection Forum, 2018[116]) and section 5.2 of (GIZ, 2019[138])].

Box 3.19 outlines examples of several financial instruments for climate resilience, provided ex ante (i.e. before a disaster occurs) or ex post (after a disaster), and short descriptions of their characteristics. The table also shows activities for which these financial instruments may be used. The expected effectiveness of these instruments is assessed against various criteria. These include financial costs and benefits, timeliness, volume and discipline in terms of when and how resources can be available (see World Bank Group (2014[139])) for further information on approaches to the selection). There are also emerging financial instruments and mechanisms such as forecast-based financing, climate resilience bonds, application of blockchain technologies (see Box 3.17).

Table 3.20 gives examples of tools and guidance documents that help governments and development co-operation providers select and combine such financial instruments to support action on climate resilience. Apart from these instruments, equity and mezzanine finance has been used to finance projects in support of climate resilience, but their application is still at an early stage of development.

3.3.7. Maximise the benefits of risk insurance solutions

Insurance, as a type of risk transfer instrument, plays an important role in protecting individuals, businesses and countries against the negative impacts of climate change and other natural hazards. Insurance can operate at various levels: international (e.g. multi-country risk pools), national (e.g. sovereign disaster insurance, catastrophe bonds) and sub-national or local (e.g. indemnity- or index-based crop insurance, flood insurance) (InsuResilience Investment Fund, 2018[149]). Table 3.21 summarises major benefits of risk insurance products in promoting climate resilience (see also Box 3.18 for more examples).

Insurance solutions should be embedded in broader measures for climate resilience. This means that the expansion of insurance instruments should be accompanied by a broader range of risk transfer and retention instruments by governments. This, in turn, may receive support of development co-operation (e.g. contingency funds, catastrophe bonds, cash transfers and concessional loans) and investments in risk reduction and preparedness (e.g. early warning systems and resilient infrastructure) (GIZ, 2019[138]). Insurance has shown to provide benefits for strengthening climate resilience. However, it is generally more suitable for weather events that occur with low frequency but high intensity than those that occur with high frequency (e.g. recurrent excessive rainfall leading to floods). Insurance that covers the latter type of events could lead to disproportionately high insurance premiums (Väänänen et al., 2019[150]). To address these issues, public funding from governments, possibly with support from development co-operation, may be necessary. Such funding would bear top-tier disaster risks so that climate and disaster insurance markets or schemes continue to exist. Technical and political challenges still limit the uptake of insurance for climate risks, including the following (Martinez-Diaz, Sidner and McClamrock, 2019[137]; Väänänen et al., 2019[150]; OECD, 2020[11]):

• limited willingness by policy makers to pay the premium due to lack of awareness of the benefit of such disaster risk insurance schemes

• competing development priorities for potential beneficiaries, making it difficult to justify the relatively high up-front premiums with uncertain returns

• poor management of unmet expectations (and the lack of confidence among stakeholders towards insurance), which result from gaps between modelled losses and actual losses, or from instances of non-payouts where the catastrophe models worked properly but policy holders still anticipated a payout

• risk of increase in premiums and decrease in the viability of insurance mechanisms due to increased frequency and intensity of climate-related disasters in the mid- to long-term

• insufficient uptake of a risk-layering approach in developing countries despite the importance of combining risk transfer instruments to address the various “layers” of risks.

Various practices and studies provide valuable insights into how to overcome the barriers and maximise the benefits of insurance for countries’ efforts to strengthen climate resilience and pursue inclusive and sustainable development (Väänänen et al., 2019[150]; InsuResilience Investment Fund, 2018[149]; Martinez-Diaz, Sidner and McClamrock, 2019[137]; Jarzabkowski et al., 2019[153]). Such efforts can target various areas including comprehensive management of climate risks; enhancement of data and information; engagement with policy makers, target beneficiaries and insurers; and improvement of affordability of insurance solutions.Box 3.19 provides some examples of such approaches, while Table 3.22 provides examples of relevant tools and guides.

3.3.8. Link action on financial inclusion with action on climate resilience

Effective approaches to improving financial inclusion can promote further savings by households and businesses and access to formal financial products, including insurance. Financial inclusion means “individuals and enterprises can access and use a range of different financial services offered in a well-regulated environment” (UNCDF, n.d.[154]). A greater level of savings and access to finance can in turn help these actors strengthen their abilities to reduce risks, and cope with and recover from climate-related hazards. Key targets are low-income households, small businesses, women, and other vulnerable groups (IPA, n.d.[155]; Moore et al., 2019[156]; Calderone, Weingärtner and Kroessin, 2019[157]). Access to credit can also allow households to finance investments in climate resilience measures they could not afford through their own savings. In many cases, loan repayments cost less than what households would have paid in repairs or coping with impacts of disasters (Hallegatte, Rentschler and Rozenberg, 2020[68]).

Key pillars for the promotion of financial inclusion include: i) provision of financial consumer protection; ii) development of national financial inclusion strategies; and iii) promotion of financial education (GPFI, 2010[158]). Increasing formal savings accounts, for instance, has been shown to encourage productive investments. They do this by providing a more secure means of storing money than informal savings methods (e.g. investment in livestock) (Moore et al., 2019[156]). Enhanced access to credit with appropriate consumer protection may also enable farmers and small businesses to invest in climate resilience (e.g. more resilient crops and agroforestry practices). For rural households, enhancing financial inclusion may require specific measures such as mobile banking to access savings and credit. This is especially the case for women given their roles within their households.

Good practices in financial education have also helped strengthen climate resilience through improved financial inclusion (Moore et al., 2019[156]). For instance, a study shows that a financial education programme in India increased the adoption of rainfall insurance from 8% to 16% (Gaurav, Cole and Tobacman, 2011[159]). Purchase of insurance products can mitigate losses caused by extreme weather events (IPA, n.d.[155]). At the same time, it can encourage farmers to increase spending on productive inputs such as water-efficient irrigation equipment that could contribute to their resilience to climate change.

A number of tools to facilitate financial education in general could also be useful for building climate resilience. These tools include some developed under the International Network on Financial Education and the Alliance for Financial Inclusion (AFI). Examples include development of nationally co-ordinated frameworks for financial education policies, and related mechanisms for co-ordination between government, civil society and the private sector (Bel and Eberlein, 2015[160]).

There has been some work to link the promotion of green finance and financial inclusion. For policy makers in financial regulators and finance ministries, AFI (2019[161]) proposes the “4P Framework for Inclusive Green Finance” (Table 3.23). A broader range of tools and guides to help governments link financial inclusion with climate resilience can be found in Table 3.24.

3.3.9. Further engage the private sector in climate-resilient investment

The role of the private sector in financing climate resilience is increasingly recognised, as discussed in section 3.1 (see also Table 3.2). On the one hand, private-sector actors have been adjusting their operations in response to changes in their business environments, including a changing climate, for decades or centuries. On the other, they generally do not invest in action for climate resilience unless the investment generates acceptable risk-adjusted returns, or is required by law.

Various factors can prevent private sector investment in climate resilience. They include uncertainty in the expected impacts of climate change on individual businesses; regulatory frameworks that do not adequately consider social costs of climate change; and limited knowledge among businesses about climate risks and potential solutions as well as opportunities. These challenges, in turn, increase uncertainty in the financial viability of investments in climate resilience (Crawford and Church, 2019[162]; UNDP, n.d.[163]; UNEP DTU Partnership, 2018[164]).

Clear and bold policy goals set by national or sub-national governments in support of building climate resilience can enhance private sector confidence in the co-benefits and risk-return profiles of projects that aim to support climate resilience (UNDRR, 2020[98]). Those goals, in turn, can drive market interest and foster stronger partnership between public and private sectors (UNDRR, 2020[98]).

Laws and regulations can also provide private-sector actors with greater predictability in the quality of goods and services they should supply or purchase (e.g. material that meets building standards). There are various approaches to laws and regulations (Hallegatte, Rentschler and Rozenberg, 2019[90]; UNDRR, 2020[98]; Sudo, 2019[165]; Moser et al., 2019[123]; Casado Asensio, Kato and Shin, forthcoming[13]). Market regulations, for example, can be used in sectors such as water, electricity, agriculture and financial markets. Business registration processes, such as granting of business permits, is another option. Other approaches are procurement rules that consider climate resilience, and disclosure principles on physical risks of climate change to financial institutions. The private sector can also develop and promote its own quality standards for better climate resilience. Energy performance standards, for example, could consider climate risks. With these standards in place, it can then help clients become more resilient.

Financing models through PPPs can help transfer risks that the private sector cannot bear, such as default, to public partners better placed to handle them. The private sector may better address risks associated with, for instance, management and operations of infrastructure systems than the public sector can. By transferring such risks, PPPs can decrease downside risks of investment, provide strengthened resilience capacities to beneficiary communities and reduce burden on the government’s balance sheet (Hallegatte, Rentschler and Rozenberg, 2019[90]; UNDRR, 2020[98]). Many governments still hold great potential to further improve legal frameworks and institutional arrangements to ensure that climate resilience is incorporated into the countries’ PPP projects. For instance, many countries have their own disaster risk framework and PPP legal framework, but these two policy frameworks often do not interact sufficiently (Hallegatte, Rentschler and Rozenberg, 2019[90]).

Blended finance, defined as the strategic use of development finance to mobilise additional finance towards sustainable development (OECD, 2018[166]), has great potential to scale up private-sector investment in climate resilience. Pilots may have good potential to deliver impacts on climate resilience and generate a revenue stream or other benefits, for example. However, they may be unable to reach scale due to a high degree of risks or costs for the private sector. Blended finance can act as a bridge from reliance on grants and other donor financing towards more self-sustaining financing approaches to climate resilience (OECD, 2019[167]). The OECD Development Assistance Committee (DAC) endorsed the following Blended Finance Principles for Unlocking Commercial Finance for the Sustainable Development Goals as a policy tool for all providers of development finance (OECD, 2018[166]). The Principles are complemented by the Blended Finance Guidance, a practical tool for donors to design and implement quality blended finance approaches, adopted by the DAC in 2020 (OECD, 2020[168]).

• Principle 1: Anchor blended finance use to a development rationale.

• Principle 2: Design blended finance to increase the mobilisation of commercial finance.

• Principle 3: Tailor blended finance to local context.

• Principle 4: Focus on effective partnering for blended finance.

• Principle 5: Monitor blended finance for transparency and results.

Most multilateral development financial institutions, as well as many bilateral donors, deploy blended finance approaches to strengthen climate action (Miller and Swann, 2019[103]). There have already been applications of blended finance to projects for climate resilience in sectors such as water supply, sanitation, agriculture and energy sectors. See Box 3.20 on the use of blended finance to strengthen climate resilience in the water supply and sanitation sector.

3.3.10. Facilitate access to climate finance

Article 2.1c of the Paris Agreement requires ratifying Parties to make finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development (UNFCCC, 2015[2]). There is emerging evidence of effective co-ordination in building climate resilience on the ground between providers of development finance, national governments and sub-national actors, as well as non-state actors (e.g. civil society and the private sector) (LIFE-AR, 2019[4]).

Accessing climate finance nevertheless remains a challenge for governments of many developing countries (Shine, 2017[170]). It is also challenging to ensure that climate finance reaches stakeholders at the local level where action on climate resilience is needed most (LIFE-AR, 2019[4]) and those who are particularly vulnerable to climate risks. For instance, a study shows that only 11% of climate finance flowed to the local level between 2003 and 2015 (Soanes and Shakya, 2016[171]). Small-scale agriculture actors encounter a number of technical, political and commercial barriers to accessing climate finance. Only a small percentage of climate finance has been targeted at small-scale producers [see (Chiriac and Naran, 2020[172]) for more information]. Further, women also often face greater challenges in accessing climate finance. Further engagement of women’s organisations, feminist advocates and gender-related groups in climate finance is important for ensuring their access to funding for gender-responsive action on climate resilience (WEDO, 2019[173]).

Accessing climate finance is resource- and time-intensive for governments, creating several practical barriers to accessing climate finance. For example, governments need to obtain data on climate risks facing people and ecosystems in the country to develop project proposals. They must also understand costs of needed measures to manage the risks and promote the development of project pipelines. In addition, they must identify appropriate financial sources and solutions. It is even harder to obtain such information in a disaggregated way by gender or social group. The architecture of climate finance sources is complex for many developing countries. Navigating it can often be resource-intensive, especially for countries with constrained capacity (OECD, 2015[120]). Further, different ministries and agencies are often in charge of different international funding channels. Thus, information can be fragmented across those different government institutions (NDC Partnership, 2018[174]).

Understanding and meeting procedures and standards required by providers of finance can also be a challenge. Some countries seeking climate finance lack sufficient in-country institutional structures or capacities. Many potential beneficiaries, including governments and non-state actors, often struggle to design well-articulated proposals. These proposals must demonstrate effectiveness and transformational impacts on climate resilience, while meeting standards for economic, environmental and social due diligence. As a result, many stakeholders with project ideas lack confidence about whether their projects are good enough to receive international funding (NDC Partnership, 2018[174]; OECD, 2015[120]). Countries that pursue direct access modalities to the Green Climate Fund or the Adaptation Fund also need strong national institutions that can meet robust fiduciary standards, and environmental and social safeguards, among other factors.

There has been accumulating experience of dealing with these challenges and enhancing access to climate finance by both governments’ own efforts and support of development co-operation to strengthen the needed capacities. While the tools and guides that can be useful to facilitate access to climate finance are summarised in Table 3.26, some examples of recommended actions are also outlined in Box 3.22.

3.4.1. Checklist for action

3.4.2. Rationale

As countries across levels of governance and sectors are identifying, prioritising, developing and implementing climate resilience interventions (strategies, policies, plans and programmes), they need mechanisms that facilitate assessments of progress made, impacts achieved and lessons learnt. Most countries have reporting mechanisms to monitor domestic policy processes. Many also have auditing mechanisms. These assess the compliance of domestic expenditures with agreed national and international goals and targets, and the extent to which expenditure is allocated cost-effectively in accordance with rules, regulations and principles of good governance (OECD, 2015[180]). The global agendas on development, climate change and disaster risk reduction further call for national and global stocktakes of progress, including on climate adaptation and resilience. Monitoring and evaluation has also been recognised as a critical phase of the NAP process, playing an important role in defining progress and evaluating effectiveness (see Box 3.23 for an example from Ghana).

The wealth of data available can inform domestic monitoring, evaluation and learning (MEL) frameworks for climate resilience. Ongoing monitoring of progress in implementing agreed deliverables must be complemented by evaluations of the extent and the efficiency by which outputs, outcomes and impacts have been achieved. Regular assessments of the nature of climate risks and an understanding of how these change over time can also guide discussions. Changes in the climate risk profile, for example, can be due to emerging hazards, changes in the exposure or vulnerability to those hazards, a reflection of the response taken to manage them or something else entirely (OECD, 2015[180]). For this information to guide subsequent approaches, mechanisms must be in place that encourage and facilitate learning (see Box 3.24). This is particularly important given the uncertain nature of current and projected climate impacts.

Approaches to strengthening climate resilience may result in varying impacts to different groups of society, including women, men, Indigenous people and other socially marginalised populations. By monitoring and evaluating the impacts of interventions on the climate resilience of marginalised groups, MEL systems can contribute towards a more inclusive process and access to any emerging benefits (Dazé and Church, 2019[6]). For example, a focus in MEL on gender differences in participation and benefits can help redress observed imbalances and track progress on gender equality and women’s empowerment. Over time, this can lead to increased levels of ambition (Dazé and Church, 2019[6]).

Climate change is inherently uncertain. It interacts with other risks and the diverse set of drivers that determine nature’s and society’s response to climate change. This means that climate resilience interventions are often based on a range of ex ante assumptions. An effective MEL framework needs to identify, reflect on and deal with these sometimes implicit assumptions (Dinshaw, 2018[181]). This uncertainty in the evolution of climate risks and how best to approach climate resilience highlights the importance of a flexible and iterative approach. Further challenges in developing MEL frameworks are noted by several other researchers are highlighted below (Dinshaw et al., 2014[182]; Bours, 2014[183]; AF-TERG, 2020[184]; Noltze et al., forthcoming[179]):

• Long-time horizons: the objective of climate resilience measures to strengthen the resilience of sectors or communities to current and future climate variability and change is a long-term process. Outcomes and impacts will often become evident only years or potentially decades after the introduction of a resilience measure. Progress will in some cases be difficult to assess in the absence of an event. Examples include the effectiveness of coastal protection measures or nature-based solutions in reducing the impacts of sea-level rise. Success in some cases will mean no observable changes but instead maintaining status quo.

• Moving baselines and targets: baseline data collected at the start of an intervention provide a reference point for assessing progress. Given the uncertain nature of climate change, simply comparing the situation before and after a climate resilience intervention may not be sufficient for assessing its effectiveness or impact. Instead, the baseline may have to be revised to provide a more accurate understanding of what would have happened in the absence of the intervention.

• Attribution: the challenge of the long timeframes is compounded by changes in social, economic and environmental variables. Multiple drivers (e.g. behavioural or technological change) may also contribute towards a desired outcome, which makes it challenging to attribute the outcome to a particular intervention.

Given these challenges, the focus to date has primarily been on monitoring progress in implementing climate resilience interventions rather than evaluating their impact. While the interactions between climate and development are not fully understood, the MEL and climate resilience communities also need to further examine the lessons learnt from past performance. In so doing, they can build more systematically on lessons in both the design and implementation but also in the associated MEL approaches (Barrett et al., 2019[185]).

Providers of development co-operation and dedicated climate finance mechanisms increasingly recognise the challenges of MEL for climate resilience and the importance of taking this agenda forward. This, for example, is reflected in recent discussions of the Adaptation Fund Board (AF-TERG, 2020[184]) and by the OECD DAC Network on Development Evaluation. This section outlines key elements to be considered when developing MEL frameworks for climate resilience:

• Identify the objectives of the MEL framework to determine the most suitable approach.

• Develop indicators consistent with human and financial capacities that can inform monitoring and evaluation.

• Conduct climate resilience portfolio and allocation analysis.

3.4.3. Identify the objectives of the MEL framework to determine the most suitable approach

A MEL framework will be guided by the objectives of the intervention, whether a strategy, policy, plan or programme (see discussion in sections 3.1 and 3.2). These, in turn, may be informed by international commitments on climate change and disaster risk reduction, among others (see Box 3.25 on defining objectives for climate change adaptation interventions). The impact or contribution of the intervention can be assessed against these objectives. Indicators provide the basis against which the intervention is monitored and evaluated. In the context of climate resilience, the time horizon (i.e. impacts today versus impacts in future) and the coverage (i.e. impacts at the place of implementation versus in areas indirectly affected by the intervention) must be carefully considered when choosing the MEL approach.

MEL frameworks for climate resilience must factor in the potential impact of climate variability and change to be supportive of an adaptive management approach that facilitates learning (AF-TERG, 2020[184]) (see also section 3.1.5). This requires a good understanding of climate risks and the broader socio-economic context. It can be challenging for MEL frameworks to address this complexity while remaining simple and operational tools (Douxchamps et al., 2017[187]). Selecting the most appropriate MEL approach requires good understanding of climate resilience priorities and the questions the MEL framework aims to answer. Examples of potential questions are listed below, each requiring a different approach and focus:

• Whose resilience was strengthened and which climate risks were addressed? Which segments of society did not benefit, or potentially were harmed by the initiative? Did the initiative fail to address certain risks?

• How were the particular causes of climate vulnerability affecting women and men, and marginalised groups, addressed?

• Taking into account the socio-economic context in which the initiative was implemented, how effective was it in strengthening resilience?

• What elements of the initiative were effective in addressing climate risks and how was that impact brought about?

• What are the impacts of the initiative in the near- and medium-term? Locally, nationally, regionally? For women and for men?

MEL frameworks for climate resilience will in most cases include multiple objectives, highlighting the need for tailored frameworks that draw on different MEL methods. The objectives can broadly be grouped in three ways. Formative objectives focus on the evolving nature of an intervention, with the aim of learning and improving over the course of implementation. Summative objectives summarise the results of an intervention and provide final assessments of its success. Participatory objectives focus on the importance of inclusive and participatory approaches to enhance transparency and buy-in. In the context of development co-operation, an additional objective may be that of accountability. See (Noltze et al., forthcoming[179]) for an overview of different MEL methods and approaches.

OECD (2015[180]) analysis of country approaches to monitoring and evaluation of climate change adaptation highlighted the potential of a portfolio of tools. Individual tools only capture distinct components, while a combination of tools sheds light on progress in strengthening climate resilience. The applicability of the tools will vary across countries and over time:

• Climate risk and vulnerability assessments at the outset of a national focus on climate resilience (e.g. with the introduction of a related strategy or plan) can contribute to a baseline understanding of the nature of climate vulnerability and exposure against which changes in the country’s climate resilience can be assessed. When such assessments are repeated regularly, they point to changes in the risk and vulnerability profile over time. These must be complemented by analysis of how those changes have come about.

• Indicators to monitor agreed climate resilience priorities over time and between locations are resource-intensive to identify, collect and use. It is therefore important to define a manageable set of qualitative and quantitative indicators that capture the climate resilience priorities. At the same time, the indicators must reflect data already available and the capacity to monitor them. Sampling strategies for data collection or focus group interviews may also be useful to improve efficiency. Further, indicators alone will not provide adequate insights into, and understanding of, the changes observed.

• Project and programme evaluations can help identify approaches to climate resilience that are effective in achieving agreed objectives. They can further contribute to a better understanding of the role of the broader socio-economic contexts in determining the outcomes of such initiatives.

• National audits and climate expenditure reviews can help answer several questions related to public expenditures. Are the expenditures aligned with national and international climate resilience objectives? Do they respect rules, regulations and principles of good governance? Are they cost-effective? Audits and expenditure reviews can also support accountability where resources from development co-operation may be earmarked for specific initiatives.

Climate resilience often will be mainstreamed across sectoral policies, plans and programmes. Consequently, a MEL framework may not aim to show how strengthened resilience can be attributed to individual interventions. Rather, it may point to how they have contributed to national climate resilience objectives over time (OECD, 2015[180]). This is particularly the case when evaluations are conducted before the full outcomes or impacts have manifested (EEA, 2020[189]).

Engagement with different non-state actors can play an important role in pointing to, and sharing, data and information that can inform monitoring and evaluation. Examples include the role of Indigenous groups in providing knowledge and local understanding of the natural environment and traditional approaches to manage risks (AF-TERG, 2020[184]). Stakeholder engagement can play an equally important role to support translation of findings from monitoring and evaluation into learning. To that end, stakeholder should be incorporated in subsequent decision-making processes (EEA, 2020[189]). Communicating the findings to a broader audience through established mechanisms can also contribute to a strengthened evidence base (Dinshaw, 2018[181]). The credibility of MEL frameworks, in fact, relies on the consent and participation of the people and institutions the intervention aims to support (AF-TERG, 2020[184]). In practice, top-down approaches continue to be prevalent where the target groups of an intervention will not necessarily participate actively in the MEL process (AF-TERG, 2020[184]).

Guidelines and standards at international, national, sectoral or programme levels will also inform MEL frameworks for climate resilience. Examples include reporting requirements agreed upon internationally, e.g. for the SDGs or the Sendai Framework for Disaster Risk Reduction; national or sectoral priorities in key strategy documents; or reporting requirements by providers of development co-operation. Those guidelines may facilitate some aggregation across comparable thematic interventions. However, in all cases, ensuring the framework reflects local capacities will be a priority; where possible, it should use local systems to further develop that capacity (Noltze et al., forthcoming[179]).

A range of knowledge products have been developed that can guide efforts to identify the objectives of the MEL framework and determine the approach, some of which are summarised in Table 3.27.

3.4.4. Develop indicators consistent with human and financial capacities that can inform monitoring and evaluation

Climate resilience initiatives will often be closely aligned with and directly contribute to broader development objectives. Most national-level indicators for monitoring and evaluating climate resilience interventions will therefore be informed by socio-economic or sectoral data systematically collected by most countries (Hallegatte, Rentschler and Rozenberg, 2020[68]). Different types of indicators can be considered (e.g. process, output, outcome and impact indicators; qualitative and quantitative; indicators and indices) (Lamhauge, Lanzi and Agrawala, 2012[190]). Gender-disaggregated data can contribute to a better understanding of whether and how the impacts differ among women and men. Over time it can shed light on the effectiveness of different approaches in addressing those aspects of the risks that are gender-specific.

Determining how to use the data available, identifying gaps and potentially collecting new data for monitoring is resource-intensive. This highlights the importance of setting priorities that match the human and financial resources available to support MEL. Drawing on established indicators provides opportunities for aggregating information across levels of reporting. Examples include initiatives that cut across sectors or levels of government, national or global processes (e.g. countries’ NDCs or NAPs or reporting on resilience-related SDG or Sendai indicators). In practice, such exchanges of information have often proven difficult or limited in value given the context-specific nature of climate resilience initiatives (Leiter and Pringle, 2018[191]) (EEA, 2020[189]).

Regular monitoring of indicators provides a good basis for assessing progress made but also where it may be lagging. To understand changes, quantitative assessments must be complemented by qualitative information that explores different factors contributing to the outcome (Lamhauge, Lanzi and Agrawala, 2012[190]) (see an example from development co-operation in Box 3.27). When learning is an integral part of the process, regular monitoring can also guide course corrections in the implementation of the initiative. In this way, adjustments need not be considered admissions of failure (Hallegatte, Rentschler and Rozenberg, 2020[68]). This is important in the context of climate change where the risk landscape changes or where scientific or technological advances facilitate a better understanding of the risks and enable more targeted approaches (Hallegatte, Rentschler and Rozenberg, 2020[68]).

The inclusion of milestones and triggers can also facilitate an adaptive approach to climate resilience and learning. For example, new information on climate risks (e.g. new climate projections) or the reaching of certain milestones (e.g. sea-level rise) provides an opportunity to assess if the approach is still appropriate (Haasnoot, van ’t Klooster and van Alphen, 2018[192]; DEFRA, 2020[193]). In some cases, adjustments may suffice; in others, more fundamental changes may be needed (see section 3.1.5 on adaptive pathway approaches). Table 3.28 points to some guidelines and tools that can inspire the development of indicators for climate resilience.

3.4.5. Conduct climate resilience portfolio and allocation analysis

For providers of development co-operation, a good understanding of the portfolio and the patterns of the allocation of financial resources is useful. This can provide an overview of whether financial commitments reflect national or organisational priorities on climate finance. A portfolio analysis can shed light on the relevance, complementarity and coherence of financial commitments for climate resilience. This can also inform discussions on the allocation of resources, say between bilateral and multilateral channels, or between programme- and project-based support. Moreover, it can highlight the contributions of core development partners, including civil society, academia and the private sector in achieving set objectives (Noltze et al., forthcoming[179]).

Complementary analysis on the determinants of allocation patterns can examine a country’s vulnerability to climate change or the capacities of local implementing partners. This, in turn, can shed light on past allocation decisions to identify room for improvement. Further analysis may entail qualitative content analysis of strategy documents and expert interviews. These could help determine whether allocation patterns are consistent with global development agendas and national priorities. Finally, results should be triangulated with an investigation of different development partner perspectives. These include government, CSOs, the private sector and the beneficiaries themselves (Noltze et al., forthcoming[179]) (see example in Box 3.29).