The physical impacts of climate change – such as heatwaves, coastal inundation and drought - are already being felt and are projected to become increasingly severe. Increased public and private investment will be needed in activities that help to reduce harm or realise any potential opportunities due to the impacts of climate change (“adaptation investments”), such as the development of climate-resilient infrastructure, food systems and supply chains. The Climate Adaptation Investment Framework has been developed to help governments unlock increased investment in adaptation by strengthening their domestic policies. Building on the OECD's Policy Framework for Investment and Foreign Direct Investment Qualities Policy Toolkit, it provides non-prescriptive guidance covering critical policy areas for climate adaptation, as well as useful questions, examples of good practice and links to relevant resources.
Climate Adaptation Investment Framework
Abstract
Executive Summary
The Climate Adaptation Investment Framework (CAIF) aims to support governments’ efforts to unlock investment in adaptation to build resilience to climate change. Building upon the foundation of the OECD’s Policy Framework for Investment and the Foreign Direct Investment (FDI) Qualities Policy Toolkit, it identifies the key domestic policies that are particularly relevant for enabling climate change adaptation investment. The scope of the CAIF includes both public and private investment, given that both sources will be critical for climate adaptation.
The physical impacts of climate change are already being felt, with record-setting extreme heatwaves, droughts and wildfire. Losses from weather and climate-related disasters were USD 281 billion in that year, and mostly uninsured. Climate-related losses are projected to increase due to climate change, with extreme events become increasingly frequent and severe and slow-onset changes becoming increasingly evident. As the severity of these hazards increase, there is the risk of abrupt re-pricing and stranding of assets. A disorderly transition to growing physical climate risks would have grave socio-economic consequences, including on employment, health, productivity and public finances.
Increased public and private investment will be needed in activities that help to reduce harms or realise any potential opportunities due to the impacts of climate change (“adaptation investments”), such as the development of climate-resilient infrastructure, food systems and supply chains. Adaptation investments are economically and socially worthwhile. The benefits will be context specific, but there is a large volume of economically worthwhile investment opportunities: one study identified USD 1.8 trillion of adaptation investments, with benefit-cost ratios ranging from 2:1 to 10:1.
Despite this potential, investments are not yet occurring at scale, with recorded finance flows in the tens of billions of dollars and estimated needs in the hundreds of billions of dollars. This Framework identifies the domestic policies that can help to realise this potential, while recognising the importance of other areas of the enabling environment including capacity and domestic financial resources, particularly for developing countries. As such, it is intended to complement existing initiatives to strengthen capacity and increase developing countries’ access to finance.
This Framework identifies the policies that are required to ensure that the benefits of enhanced resilience to climate change are visible and reflected in the allocation of public and private resources. In doing so, it aims to remove barriers to investment in adaptation by proposing a comprehensive approach to address market failures, correct misaligned policies and provide incentives for investments that deliver wider social benefits. International cooperation will be essential for supporting action in developing countries.
Strategic planning processes, including the development of National Adaptation Plans (NAPs) and Nationally Determined Contributions (NDCs), provide a key entry point for unlocking investment in adaptation. These processes have already made progress in identifying climate risks and mainstreaming into policy development, but there remain significant challenges in translating planning into action on the ground. This Framework has been designed to help governments and partners identify potential gaps in the policy enabling environment and identify the resources and good practices that can help to address those gaps. It is non-prescriptive and flexible, reflecting the context-specific nature of climate impacts and differences between countries’ priorities, financial resources and capacities. It can be used for self-evaluation by countries, as part of peer-review processes or as an input into dialogues between the public and private sectors.
The Framework is arranged around six building blocks, identifying key policy areas for supporting investment in adaptation and addressing the following areas of good practice:
