Reforming Climate Finance: Adaptation Finance in Africa

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This briefing was written in partnership with Africa Climate Insights.

Key points

  • Adaptation finance remains far below needs. The goal of doubling funding to USD 40 billion by 2025 will not be met “unless trends in adaptation financing turn around,” according to UNEP. Latest figures show that international public adaptation finance flows from developed to developing countries fell from USD 28 billion in 2022 to USD 26 billion in 2023. 
  • COP30 aims to finalise the Global Goal on Adaptation, with around 100 adaptation indicators to be discussed and finalised. The President of COP30 has said that adaptation and climate resilience will strengthen fiscal stability, reduce investment risk and enhance productivity. 
  • Public finance remains the backbone of adaptation efforts. In Africa, 95% of all adaptation funding in 2023 came from public sources. Given that 57% of Africa’s population live in countries that spend more on debt interest than health or education, non-debt and concessional instruments are essential. 
  • Adaptation is harder to finance than mitigation. Projects tend to be smaller, localised, long-term and without standard metrics or predictable returns. Their benefits are often indirect – avoided losses, social stability and ecosystem protection – making them ‘less bankable’ for private investors. Even with reforms, private finance should play a supporting, not substitutive, role in adaptation. 
  • Structural barriers prevent adaptation plans from becoming executable projects and require reform. Less than half of committed adaptation funds in Africa were actually disbursed between 2014 and 2018 due to insufficient institutional capacity, coordination challenges and complex international funding procedures. 

The amount of adaptation financing mobilised annually for Africa and other developing markets remains far below what is needed, despite progress in recent years. 

At the same time, it is likely the world will fall short on progress towards the goal of limiting global heating to 1.5°C. UN Secretary General António Guterres has said it is now “inevitable” the 2015 Paris Agreement target will be missed. Global temperature rises, intensifying impacts and insufficient climate ambition mean efforts to limit the overshoot are now crucial if we are to avoid “devastating consequences”.

Against this backdrop, work is underway to strengthen national adaptation planning and implementation, and to demonstrate the value of adaptation finance and investment in climate resilience. 

The growing finance gap

Global efforts to shore up adaptation finance are failing, according to the Adaptation Gap Report 2025: Running on Empty. The United Nations Environment Programme (UNEP) report is its latest on international adaptation finance flows from developed to developing countries. 

UNEP’s findings suggest the goal to double adaptation finance to USD 40 billion by 2025 as part of the Glasgow Climate Pact will not be met “unless trends in adaptation financing turn around”. Instead, the report found that international public adaptation finance flows fell from USD 28 billion in 2022 to USD 26 billion in 2023.

The report also warns of a growing funding shortfall. The updated cost of adaptation finance needed by developing countries is between USD 310 billion and USD 365 billion per year by 2035. Sub-Saharan Africa, for example, already requires USD 51 billion in adaptation finance per year, yet data collated by the Climate Policy Initiative shows that flows to the region reached just USD 12.9 billion in 2023.

According to UNEP, in addition to public funding, there is scope for the private sector to boost its adaptation finance to developing countries from USD 5 billion per year today to USD 50 billion. Reaching this goal will require targeted policies and blended finance solutions involving concessionary public finance to de-risk and scale up private investment.

UNEP’s report further states that concessional and non-debt instruments like grants will be essential to adaptation finance flows given the risk of over-indebtedness. This increases the vulnerability of developing countries and makes it harder to invest in adaptation planning and implementation. UNCTAD data for 2022, for example, show that rising debt outpaced GDP growth in Africa since 2010.

Ahead of COP30, UNEP is calling on both public and private finance to “step up to increase adaptation”. However, even with a successful rise in private sector funding to USD 50 billion per year, the vast majority of adaptation finance will still need to come from public sources to meet the annual USD 310 billion to USD 365 billion required by developing countries by 2035.

Prior progress but continued shortfall

The Glasgow Climate Pact to double international public adaptation financing signed by nations at COP26 recognised that support for mitigation activities dwarfed funding for adaptation action. Adaptation projects accounted for only 20-25% of committed concessional climate finance across all sources, the 2021 agreement noted.

The COP26 text urged developed nations to address the imbalance with a twofold increase of adaptation financing to USD 40 billion by 2025. This helped establish “a clear way forward” on the Paris Agreement’s adaptation target – the Global Goal on Adaptation (GGA) – COP26 President Alok Sharma said at the time. 

The GGA is the central framework for addressing adaptation within international climate negotiations. It aims to develop adaptation targets and define how progress is measured and reported. Approximately 100 draft adaptation indicators will be discussed at the upcoming COP30 in Belém, as nations work to finalise and advance the GGA framework.

The new climate finance goal and an adaptation COP

Three years after Glasgow, at COP29 in Baku, nations agreed on the new collective quantified goal (NCQG) on climate finance. At least USD 300 billion annually by 2035 was pledged to support developing countries’ climate action, with the text also urging all actors to work towards mobilising USD 1.3 trillion in international climate finance by the same year.

While the USD 300 billion remains the core obligation of developed countries, and covers both mitigation and adaptation efforts, the far bigger USD 1.3 trillion target is closer to the amount needed by developing countries – illustrated by the fact UNEP’s updated cost of adaptation finance alone exceeds the core benchmark. 

Brazil’s COP30 presidency has collaborated with the COP29 presidency on a Baku to Belém Roadmap that outlines what needs to be done to achieve the USD 1.3 trillion figure. Part of this collaborative workstream sought input on strategies “to enhance and scale up public and private financing mechanisms for climate adaptation, especially in vulnerable regions”. 

The COP30 President, André Corrêa do Lago, has urged that the upcoming conference “must be the COP of adaptation”. Adaptation can strengthen fiscal stability, reduce investment risk, and enhance productivity, as every resilience-building action “pays back in avoided losses,” he said.

The Independent High-Level Expert Group on Climate Finance (IHLEG) finds in this year’s report that adaptation and resilience as a sector has grown as a share of total investment needed.

Structural blocks to adaptation funding

Yet, for adaptation finance to meet agreed targets, reach the most vulnerable and return its benefits, structural obstacles need to be overcome. Less than half of committed adaptation funds in Africa were disbursed between 2014 and 2018, for example, due to procedural blocks such as the effort to coordinate across fragmented government ministries. 

From the donor perspective, climate finance architecture also disadvantages Africa, preventing funds from reaching vital projects. Accessing international public financing like the Green Climate Fund (GCF), for instance, involves complex processes favouring countries with stronger bureaucracies. 

Adaptation funding overall – both public and private – remains fragmented, conditional and short-term. At the same time, reliance on imported technology and knowledge limits local ownership and lasting impact. 

Unique characteristics of adaptation

Climate adaptation is action taken to build resilience to climate impacts by adjusting social, economic and ecological systems. Unlike climate mitigation, it is more qualitative and not as easy to quantify for investment decisions. 

Adaptation projects tend to be localised and therefore are often deemed ‘not bankable’ due to high-uncertainty risk and limited measurable outcomes. This means multilateral development banks struggle to mobilise private sector investment for adaptation projects. 

The table below compares selected investment metrics for climate adaptation versus mitigation. 

Key metrics for investors Adaptation Mitigation
Time horizonLong termShort or long term
MetricsNot standardised and often qualitative – progress on adaptation is wide-ranging, diverse and regionally varied Standardised and quantifiable, e.g. greenhouse gas emissions avoided
Return profileLess predictable, with indirect benefits – avoided losses and economic benefits, social and environmental benefits Predictable and stable cash flows and low risk profile
Scale Mostly small-medium scale to address localised vulnerabilities Large infrastructure projects, e.g. solar farms 

As climate impacts increase and worsen, the need for international adaptation finance is more urgent. Providing adaptation finance to developing countries supports global supply chains, which is in the interest of investors in developed economies. For instance, prolonged droughts in West Africa in 2023 drove up global cocoa prices as the region produces around two-thirds of the world’s cocoa. Funding for drought resilience could have reduced the shock.

Given the importance of adaptation financing for both recipient and donor countries, combined with the shortage of investment-grade projects for many African countries, public finance remains the most appropriate mechanism to rapidly scale adaptation finance.

Grants and concessional loans will be key to advancing adaptation. Debt distress can quickly turn non-concessional adaptation funding into a fiscal burden for receiving countries. Already 751 million people in Africa, around 57% of Africa’s population, live in countries that spend more on debt interest than on health or education. 

Columbia University’s Climate and Finance Vulnerability index highlights low-income African economies such as Malawi and South Sudan that face high climate risk exposure, narrow fiscal space and limited reserves. Grants and concessional public finance should therefore focus on these regions.

The majority of Africa’s adaptation finance comes from public sources

Africa’s adaptation financing mix is dominated by public sources of funding. Grants from foreign governments, development finance institutions (DFIs) and multilateral climate funds accounted for approximately half of all adaptation finance flows into Sub-Saharan Africa in 2023, according to the Climate Policy Initiative. Together with concessional and market-rate project debt from public institutions, 95% of all adaptation funding in 2023 came from public sources. 

While contributions from the private sector more than quadrupled in the four years to 2023, from USD 144 million to USD 654 million, this segment accounted for just 5% of the region’s adaptation funding at last count. Philanthropic grants comprised the vast majority of private sector funding in 2023, with non-philanthropic private debt and equity making up just 0.3% of the total adaptation funding mix.

Adaptation as private sector risk management

Lack of adaptation poses real material risks to businesses worldwide. Shipping and manufacturing companies were left stranded by low water levels in the Rhine, Danube and Vistula in 2022, for instance, with cargoes left to operate at 30-40% capacity, disrupting an USD 80 billion trade artery. The Panama Canal drought in 2024 bottlenecked one of the world’s most important trade routes, forcing authorities to cut ship crossings by over a third and delay billions worth of cargo.

Despite this, businesses need financial regulation that incorporates climate risk exposure to incentivise investment. Adaptation benefits are in many cases non-rival and non-exclusive – when one person benefits, others can enjoy the benefits equally and no-one can be excluded, making them public goods and services. Current finance standards incorporating physical climate risks mostly remain voluntary such as the Physical Climate Risk Appraisal Methodology (PCRAM). Reforms introducing mandatory requirements are needed to scale climate conscious private investment. 

Another option would involve institutional mechanisms, like compensation or market models, to facilitate the flow of capital or rewards from adaptation benefits back to private finance providers. Standardised adaptation metrics are essential to support instruments like adaptation bonds that could facilitate this type of approach. 

Private sector adaptation finance is vital to de-risking business, securing supply chains and supporting international channels of collaboration and influence in an increasingly volatile global trade environment, but it is not a silver bullet. The structural changes in climate finance regulation, incentives and mechanisms required to leverage private participation will take too long to meet today’s urgent adaptation needs.

Public finance must remain the mainstay for adaptation funding. 

Tracking adaptation finance in Africa

 Adaptation needs in Sub-Saharan Africa are estimated at USD 51 billion per year (2023 prices). Tracking adaptation finance is crucial to ensure concessional funds are effectively allocated, impacts are measured, additional funding mobilised and policy design informed. The main channels by which adaptation finance is currently tracked are: 

Barriers to tracking adaptation finance 

There are several key obstacles to tracking adaptation finance that exacerbate the difficulty of getting funds to where they are most needed to build climate resilience in Africa and worldwide.

  • Dual use cases: nearly half of adaptation investments have both adaptation and mitigation benefits, complicating attributions. Multilateral development banks only agreed the definition of adaptation co-benefits in 2016. The 2024 UNEP Adaptation Gap Report states that only 5% of reported mitigation co-benefits came from Africa, highlighting data gaps in attribution.
  • Geographical and timeline uncertainty: adaptation projects are context-specific, making geographic boundaries hard to define, with impacts often emerging over long timescales. This complicates impact assessment timing.
  • Adaptation indicators: the lack of standardised metrics to effectively measure social, economic and ecological adjustments to diverse climate impacts hinders adaptation tracking. COP30’s plan for consensus-based indicators on adaptation marks progress towards standardisation. 

Given the different nature of, and metrics for, evaluating adaptation finance, there is a nascent body of research on how to quantify the investment benefits of adaptation. 

A recent analysis suggests that climate and nature resilience could generate 280 million additional jobs in emerging markets and developing economies over the next decade. By another measure, the benefit-to-cost ratio for adaptation investments is around 4:1 or higher, meaning a potential USD 6 trillion in missed economic benefits to Africa by 2035. Finally, GDP gains by 2050 could be up to 20% in Africa relative to the current policy scenario. 

Recommendations

Adaptation is not just a series of projects or an issue of assistance. 

Adaptation finance scale-up benefits developing countries and emerging markets while offering indirect benefits to international donors and investors. It should be treated as a design problem for the international community, requiring new models of financing and governance. 

For example, mandatory employment of local workers on adaptation projects would retain technical expertise and know-how in developing countries worldwide, while financing climate resilience would help secure food supply chains for international markets.  

In Africa, private finance can complement public leadership in climate resilience investment, but should not be thought of as a substitute. Given that 95% of Africa’s adaptation action in 2023 was publicly funded, this should continue to be the foundational driver for adaptation finance. 

The investment characteristics of adaptation combined with growing over-indebtedness associated with non-concessional finance cannot be ignored. Brazil’s upcoming “COP of adaptation” must therefore address the multiple structural barriers that stop vital adaptation finance reaching the places it is most needed.

This briefing was co-authored by Samuel Onyango, Head of Strategy at Africa Climate Insights.

Delivering indicators for the Global Goal on Adaptation can drive climate action

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Key points:

  • Climate impacts such as heatwaves, extreme weather events and sea-level rise are already taking a severe toll on many communities and causing billions of dollars in damages each year. The need for increased investments in adaptation measures is greater than ever.
  • The many ways climate change can impact communities mean that tracking the implementation and efficacy of adaptation measures has, so far, proven difficult.
  • The Global Goal on Adaptation (GGA) is one of the key elements to deliver at COP30. This central framework aims to set specific, measurable targets for adaptation action and define indicators to track how far and how well those measures are implemented. Around 100 draft indicators have been shared to be agreed on at COP30 in Belém. 
  • Having quantifiable metrics for adaptation projects can help incentivise governments and businesses to make investments and take action.
  • Financing for adaptation has been shown to attract high returns on investment, as well as offering broad-ranging social, environmental and other non-monetary benefits. 
  • However, adaptation action remains critically underfinanced. COP30 presents an opportunity for countries to discuss how to close the adaptation financing gap, and is a critical time to do so, as many climate finance pledges from developed countries are about to expire.

What is the Global Goal on Adaptation?

The UNFCCC considers adaptation a critical element of the long-term response to climate change (see Box 1). The Global Goal on Adapation (GGA) is the central framework for addressing adaptation within international climate negotiations. It aims to develop universally-understood and accepted targets for adaptation and to define how progress is measured and reported. 

Although the GGA was established as part of the 2015 Paris Agreement, countries only agreed on an overarching framework for adaptation action in 2023. So far, seven broad thematic targets and four dimensional targets have been decided on (explored further below), with the work due to be completed and ready for adoption by November 2025. 

The missing piece that will help countries to work with the GGA is agreement on a set of adaptation indicators. There are approximately 100 draft indicators to be discussed and agreed upon at COP30, narrowed down from an initial list of 9,529 suggestions.

Box 1. Why prioritise adaptation?

Climate impacts are already severe and global. In 2024, the majority of datasets put the world’s surface temperature at above 1.5°C, a level of warming that resulted in stronger heatwaves, extreme weather events and sea-level rise, among other impacts.

‘Adaptation’ refers to the process of making adjustments to better anticipate and cope with the many harmful effects of climate change. Adaptation seeks to reduce vulnerability, improve resilience and minimise damage; it is one of the central pillars of climate action, alongside mitigation and loss and damage. 

It is estimated that nearly half of the global population – 3.6 billion people – are highly vulnerable to the impacts of climate change. Between 1993 and 2022, nearly 9,500 extreme weather events resulted in the loss of more than 765,000 lives, as well as direct economic losses of almost USD 4.2 trillion.

Many African countries already report spending up to 9% of their GDP on coping with ever-more extreme weather patterns. The UN estimates that between 2025-2035, the average annual cost of all developing countries’ adaptation needs will reach USD 365 billion.

Why do we need indicators for adaptation?

For climate mitigation, there are clear targets for the global and national action needed to keep global temperature rise within safe limits. We know how many tonnes of greenhouse gas (GHG) emissions we need to stop emitting by when. Countries set informed national targets and track progress towards mitigation goals as part of their nationally determined contributions (NDCs).

Adaptation is more complex. It’s about how people, places, ecosystems and economies are being impacted by climate change, now and in the future. Each community has its own level of vulnerability and exposure to climate change, and so will feel the impacts differently. When dealing with such vastly wide-ranging, diverse, regionally varied and at times unpredictable impacts, there are a number of ways in which progress on adaptation could be tracked. In this complex landscape, the GGA seeks to offer a universal framework for monitoring and evaluating adaptation progress.

Acting on adaptation can achieve more than preventing the worst impacts of climate change – it can help spur better environmental, social and economic outcomes across the globe. In a letter from the COP30 presidency, COP30 President Designate André Aranha Correa do Lago writes that “the GGA is not merely a negotiation item – it is an economic and moral compass. … Finance ministers and development banks must treat adaptation as a core policy instrument, not as charity.”

What are the proposed indicators?

The GGA will offer globally-relevant adaptation indicators  for countries to work towards, assess and report on. Currently, around 100 draft indicators have been shared for negotiation at COP 30. 

Crucially, the indicators cover both outcomes (for example, access to safe water or reduced mortality from heat) and the means of implementation (such as finance, technology and capacity-building). These are grouped under the seven thematic targets, which track progress on adaptation outcomes, and four dimensional targets, which cover how work on adaptation will be implemented (see Table 1).

Table 1. Targets under the GGA and examples of proposed indicators

CategoryTargetExample of proposed indicator
Thematic targets Water supply and sanitationChange in water stress levels over time
Food and agricultural productionProportion of Parties that have integrated climate risks into national food security 
Health impacts and health servicesChange in the annual rate of reported heat-related occupational injuries and deaths
Ecosystems and biodiversityExtent of ecosystems that contribute to climate resilience covered by protected areas and other effective area-based conservation measures
Infrastructure and human settlementsProportion of informal settlement upgrading programmes that (i) include climate change adaptation and (ii) are locally led and co-designed
Poverty eradication and livelihoodsProportion of population living below the international poverty line in areas highly exposed to climate-related hazards
Cultural heritage and knowledgePercentage of at-risk cultural and natural heritage sites with adaptation measures implemented
Dimensional targetsImpact, vulnerability, risk assessmentNumber of Parties that have established multi-hazard early warning systems
PlanningNumber of Parties with adopted national adaptation plans, policy instruments, and planning processes and/or strategies
ImplementationAnnual adaptation finance expenditure
Monitoring, evaluation, and learningNumber of Parties that have designed a system for monitoring, evaluation and learning for their national adaptation efforts

Source: UNFCCC (2025) Potential indicators for the targets of the GGA framework proposed by the expert group_2025-09-08

How will the GGA indicators be used?

At the international level, countries have not previously agreed on a shared set of indicators for adaptation. Once signed off, the GGA and its indicators will serve as the benchmark for assessing both how well countries are coping with climate impacts and how effectively they are implementing measures to adapt to their effects.

This will provide a clear and reliable benchmark for both developed and developing countries to understand progress on adaptation and to identify where efforts need to be ramped up. This would resolve long-standing contention around the lack of reliable tracking and transparency.

Ultimately, countries’ updates on their progress towards meeting the adaptation targets will feed into the UN Global Stocktake process, providing analysis on areas where they are making progress and where they are lagging behind. In time, this should provide the first full picture of how countries are preparing for extreme weather events and their consequences (for example, supply chain disruptions).

The inclusion of indicators on finance will be essential for the national and international-level tracking of adaptation funding and will help shape discussions on how much should be channelled towards adaptation action. The indicators will also provide strategic support at the country level, informing the development of National Adaptation Plans. 

The indicators will also support other initiatives, such as the Belem Health Action Plan. Due to be announced at COP30, the Plan aims to foster collective action around preventing, detecting and responding to growing health-related climate challenges.

How well are countries preparing for climate adaptation?

National Adaptation Plans (NAPs) are the main way in which countries outline how they are preparing for and adapting to climate impacts. NAPs will be an important channel for achieving the indicators set out in the GGA, although countries will require guidance and assistance to integrate these measures into their planning processes. Some countries have also developed sectoral NAPs, which identify vulnerabilities and set adaptation priorities for specific sectors, such as agriculture, water resources, or infrastructure.

Increasingly, countries are developing national policies on adaptation, with 171 countries having at least one national adaptation planning instrument, such as a policy, strategy or plan, in place.

According to the latest official progress report, 67 developing countries and 13 developed countries have submitted NAPs. 121 developing countries have successfully applied for funding to support the development of their NAPs and other types of adaptation planning. Further evaluation of NAP progress and a discussion on next steps will be on the agenda at COP30.

How will the GGA encourage governments and businesses to act?

Right now, most pledges on adaptation are broad, promising to “build resilience”, “protect livelihoods”, or similar statements. But after the introduction of agreed, quantifiable indicators at COP30, governments will need to show measurable progress. Ideally, this development will prompt governments to integrate adaptation targets into a range of national plans and budgets. Research indicates that public investment in adaptation can, in turn, attract private investment. 

Adoption of the GGA and its indicators will not radically shift government or business policy overnight; it will take time to filter down to ministries and departments. The initial stages of other UN processes have demonstrated that some poorer countries will struggle with capacity gaps unless they receive support. In time, likely by the mid-2030s, we will have a clearer picture of how countries are preparing for climate impacts.

For mitigation, tracking progress in renewable energy has been relatively straightforward to date, thanks to the availability of relevant data at the country and global levels. National-level information on clean energy is used to assess where renewable energy sources are growing. In turn, businesses can use data to inform their investment decisions.

Adaptation action is likely to be one of the world’s major investment opportunities over the coming decades, as the effects of climate change increasingly push countries to prepare for a range of impacts. The more data countries can provide on how, where, and when these investments are being made, the stronger the global dataset of investment opportunities and funding gaps will be, which in turn presents a set of best practices for adaptation.

What are the benefits of investing in adaptation?

Today, more research is highlighting the wide-ranging benefits of financing adaptation projects – a picture which was previously not always clear. A 2025 study by the World Resources Institute (WRI) analysed 320 adaptation and resilience investments across 12 countries, totalling USD 133 billion. It found that every dollar invested in adaptation and resilience may generate more than ten dollars in benefits over ten years – including avoided losses, economic benefits, and social and environmental benefits.

These benefits might, for example, be seen in fewer people being affected by extreme weather events, but also in job creation, a healthier population, better transport, reduced soil erosion, greater social benefits for women, and increased carbon uptake, among many others. WRI found that USD 133 billion in investment may result in benefits of around USD 1.4 trillion – which is likely an underestimation, as many benefits are not monetised. Investment in adaptation has also been shown to bring benefits to a community even when a climate shock does not occur.

Investment is also necessary to adapt to worsening climate impacts on health. For example, rapid warming has led to a 23% increase in heat-related deaths since the 1990s, resulting in an average of approximately 546,000 deaths per year in 2012–21. The changing climate is also playing a role in increasing the transmission of infectious diseases such as dengue.

Other reports highlight the risks posed by climate impacts and estimate the finance required for adaptation. A 2021 report found that investing USD 68 billion in agriculture, water and infrastructure globally each year would prevent around 78 million people from starving or experiencing chronic hunger caused by climate change impacts. Estimates from a 2025 report suggest USD 443 billion is needed each year for small-scale family farmers – who produce around half of the world’s food calories – to adapt to the impacts of climate change.

The wide-reaching benefits of sufficient investment in adaptation include preventing drought-driven crop failures that have caused malnourishment in millions of people, protecting global supply value chains and billion-dollar food industries, as well as safeguarding the employment of those working in the agricultural sector. Additional analysis suggests investing USD 350 billion in adaptation each year could create 280 million jobs in emerging markets and developing economies over the next decade.

When will the GGA take effect, and will it be enforced?

COP30 in Belém will serve as a critical checkpoint on adaptation and specifically on the GGA, where countries will review the framework and its early progress. In 2028, a comprehensive review of progress towards the GGA will take place during the second Global Stocktake.

By 2030 – the initial time horizon for achieving measurable progress under the GGA’s 11 targets – countries should be able to demonstrate strengthened adaptive capacity, reduced climate vulnerability and improved resilience across key systems. Subsequent stocktakes in the early 2030s will inform the next phase of adaptation ambition.

Submitting communications on adaptation is mandatory under some UNFCCC reporting mechanisms. However, like other mechanisms under the Paris Agreement, implementation is nationally determined and voluntary – countries are not legally required to meet adaptation targets or outcomes. Countries have also agreed that reporting on the indicators remains voluntary, so as not to add to reporting burdens.

Is the GGA backed by finance?

Adaptation has consistently been underfinanced: it currently receives around one-third of public climate finance, with the majority going towards mitigation. Other estimates looking at all sources of climate finance suggest as little as 3% went towards adaptation in 2023.

In the COP26 summit outcomes, developed countries were urged to at least double the adaptation financing going to developing countries from 2019 levels by 2025. Achieving that goal would mean reaching around USD 40 billion in public adaptation funding by the end of the current year. However, funding was only tracked at USD 26 billion in 2023, meaning the goal is likely to be missed if current trends continue.

The world’s adaptation finance needs are now estimated at between USD 310 and 365 billion a year for developing countries – 12-14 times the current finance flows. In 2024, the New Collective Quantified Goal (NCQG) agreed at COP29 went some way to acknowledging the sheer level of climate finance needed. Parties set the ambition of at least tripling funding for developing countries to USD 300 billion per year by 2035, with the ultimate goal of providing USD 1.3 trillion per year in climate finance within the same timeframe.

However, the NCQG does not suggest how much of that finance should be allocated towards adaptation. 

At COP30, discussions will continue on how to “close the adaptation-finance gap”. With the objective of doubling adaptation finance from developed nations coming to an end in 2025, countries and civil society are considering what should come next for adaptation financing, for example, if a specific target for adaptation is situated within the agreed financial goal of USD 300 billion a year. At the same time, countries need to step up their contributions to dedicated existing funds, such as the Adaptation Fund. 

Promises and reality of climate finance flows in Latin America and the Caribbean

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This briefing is also available in Spanish.

Key points:

  • Developed nations pledged USD 100 billion annually by 2020 to support developing countries with climate initiatives. This goal was achieved only in 2022, primarily by adjusting existing development finance.
  • Latin America and the Caribbean (LAC) countries face severe climate impacts, including droughts, heat waves and rainfall variability, which affect key sectors like agriculture, mining, and tourism. Economic impacts are significant, with potential GDP losses between 0.8% and 6.3% by 2030, reaching up to 23% by 2050.
  • The Inter-American Development Bank estimates that 7% to 19% of LAC’s GDP (up to USD 1.3 trillion by 2030) is needed for sustainable, resilient growth.
  • Current climate finance flows to LAC are only 0.5% of GDP, requiring an 8-10x increase to meet commitments outlined in Nationally Determined Contributions (NDCs).
  • LAC received 17% of international climate finance between 2016 and 2020, mostly in loans rather than grants, increasing regional debt burdens.
  • Many LAC countries spend more on debt interest than on social and climate expenditures, complicating sustainable financing for climate adaptation and mitigation.
  • Brazil, Mexico, Costa Rica, and Colombia received nearly half of the climate finance directed to the region, focused on mitigation over adaptation.

A little bit of climate finance history and why it matters

As evidenced by the increasing frequency and intensity of extreme weather events worldwide, managing the impacts of climate change requires substantial financial resources, which are out of reach of Global South countries. 

To tackle the challenges associated with financing climate change mitigation and adaptation, developed nations pledged under the Copenhagen Accord (December 2009) and the Cancun Agreements (December 2010) to allocate new and additional funding for climate initiatives in developing countries. Through the Copenhagen Accord, developed economies committed to jointly mobilising USD 100 billion annually by 2020 for developing countries. 

In 2021, during the Parties to the Paris Agreement meeting, the New Collective Quantified Goal on Climate Finance (NCQG) was settled as an upcoming global target for climate finance, expected to establish a baseline of USD 100 billion per year by 2025. This last commitment is expected to be negotiated during COP29 in Azerbaijan in 2024.

These efforts resulted in approximately USD 30 billion through the Fast-Start Finance initiative between 2010 and 2012. In 2022, developed countries provided and mobilised USD 115.9 billion in climate finance for developing nations, according to figures from the Organisation for Cooperation and Economic Development (OECD), finally meeting their annual target of USD 100 billion for climate action two years later than initially planned.

However, there have been some challenges to the OECD’s figures, with other bodies pointing out that some financing was overstated or double-counted with other assistance. The Center for Global Development (CGD) estimated total climate finance in 2022 at USD 106.8 billion, noting that the target was partially met by incorporating climate objectives into existing development finance flows and therefore not “new or additional,” as outlined in the Copenhagen Accord.

According to Climate Policy Initiative (CPI), climate flows continue to “fall short of needs”, particularly in developing and low-income economies and those especially vulnerable to climate change. As of 2023, less than 3% of the global total went to or within least developed countries (LDCs), while 15% went to or within emerging markets and developing economies (EMDEs), excluding China. The ten countries most affected by climate change between 2000 and 2019 – Puerto Rico, Myanmar, Haiti, Philippines, Mozambique, the Bahamas, Bangladesh, Pakistan, Thailand and Nepal – received less than 2% of total climate finance.

Figure 1: Climate finance provided and mobilised between 2013 and 2022

Climate change poses significant challenges  in Latin America and the Caribbean

As a region, Latin America and the Caribbean (LAC) accounts for only 6.7% of global greenhouse gas emissions but is highly vulnerable to climate change. Most countries are located in geographical areas that are particularly exposed to extreme weather events caused by greenhouse gas emissions, including heat waves and significant variability in precipitation levels and patterns. 

The region is also highly dependent on economic activities at risk from climate change, such as agriculture, mining and tourism, creating further economic need for adaptation and mitigation financing. Studies estimate a decline in regional per capita GDP due to climate change impacts ranging between 0.8% and 6.3% by 2030. By 2050, this fall could reach 23%.

Agriculture is expected to be the economic sector most affected by climate change in LAC, facing challenges such as soil erosion, changing rain patterns and pest infestations. This is a significant problem for the region as the World Bank estimates that agriculture, fishing and forestry represent 5.9% of LAC’s GDP in 2023. 

Energy presents another major challenge, as LAC is projected to have one of the highest increases in energy consumption globally, driven by anticipated economic growth. This pending demand highlights the importance of adopting a low-carbon development pathway to supply electricity to the region’s people and industry.

The region’s financing needs are not being met

The region’s financial frameworks are ill-equipped to deal with these challenges. LAC has the lowest levels of public investment globally, hindering its ability to build dynamic, job-creating economies resilient to climate change.

The Inter-American Development Bank (IDB) indicates that addressing the climate crisis in LAC will require annual spending on infrastructure services amounting to 2% to 8% of GDP, alongside 5% to 11% of GDP dedicated to tackling social challenges. Altogether, this would mean redirecting 7% to 19% of annual GDP – equivalent to between USD 470 billion and USD 1.3 trillion by 2030 – toward sustainable, resilient, low-carbon development goals.

The United Nations Economic Commission for Latin America and the Caribbean (ECLAC) estimates that annual investment needed to meet regional climate commitments, as outlined in the Nationally Determined Contributions (NDCs) under the Paris Agreement, ranges between 3.7% and 4.9% of the region’s GDP until 2030. 

ECLAC breaks this total down by type of financing. Mitigation actions related to the energy system, transportation, and deforestation reduction will require between 2.3% and 3.1% of regional GDP annually by 2030. Adaptation efforts, including early warning systems, poverty prevention, coastal protection, water and sanitation services, and biodiversity protection, will require investments of between 1.4% and 1.8% of regional GDP each year until 2030.

These financing needs translate to an annual flow between USD 215 billion and 284 billion between 2023 and 2030. However, climate finance flows to the region amounted to only 0.5% of regional GDP in 2020, requiring an increase of 8 to 10 times to close the funding gap. 

From 2016 to 2020, the region received an average of 17% of international climate finance each year, with 81% of this funding provided as loans rather than grants, further intensifying the region’s debt crisis. Climate action funding is nearly evenly split between public and private sources in LAC, highlighting a strong contribution from private sector players compared to other Global South regions. Africa, for example, gets nearly 90% of its climate financing from public sources.

Box 1: Climate change and debt, interrelated crisis?

According to the United Nations Trade and Development (UNCTAD), global public debt1According to the IMF, public sector debt “combines general government with public nonfinancial corporations and public financial corporations, including the central bank”. It also covers publicly guaranteed debt and external public debt. reached a record of USD 97 trillion in 2023, of which LAC countries account for 17% above the region’s share of the global population at 8.2%.  

The region faces significant debt-related challenges, particularly in light of the increasing financial demands of climate change – including adaptation, mitigation, and addressing loss and damage.

These issues are common across the Global South. Since 2022, interest payments on public debt have grown faster than public expenditures in developing economies: one out of every three countries spends more on interest payments than on social spending (which includes climate investment). 

In 2024, debt servicing is projected to consume 41.5% of expected budget revenue across developing countries. For context, this is a higher proportion than was seen during the debt crisis in Latin America in the 1980s before debt relief was provided.2The Latin American debt crisis was a financial crisis that began in the early 1980s when public debt of Latin American countries surpassed their capacity to generate income, making them unable to repay it. Debt service accounted for 35.3% of national incomes in Latin America in 1981, one year before the debt crisis began.

The reality of financing flows

Between 2013 and 2020, an annual average of just over USD 20 billion was mobilised in LAC to fund climate change mitigation and adaptation, which amounted to over USD 161 billion in this period. 

In 2020, the total reached USD 22.9 billion, representing a 14% increase from 2019 and a 32% increase from 2018, regaining much-needed upward momentum after falling from a 2017 peak. However, this represents only around 10% of the low-end annual total ECLAC estimates will be needed between 2023 and 2030 to meet climate finance needs, highlighting the inadequacies of financing provided and the gap left to fill going forward.

Of the 2020 total – which represented 0.5% of the region’s GDP – 90% came from multilateral development banks (MDBs) and green bonds, adding to the region’s debt burden.

Figure 2: Climate finance for LAC between 2013 and 2023

Climate Funds Update tracks multilateral climate funds, covering the period between 2003 and 2023. Though it does not capture the full financing picture, it is a useful tool to access regional financing over time and at the country level. 

With some exceptions, climate fund commitments have risen from USD 26.8 million in 2006 to USD 902.2 million in 2021, with notable jumps in 2009, 2014, 2018 and 2021, and a short period of declining commitments from 2014-2017. The most recent peak, in 2021, also marks the end of the growth trajectory for financing approvals, which have fallen to USD 311.5 million by 2023 (figure 3). 

The approval-to-disbursed ratio is notably higher during the first years of the analysis, largely tracking approvals through 2014 before falling off through 2017. Recorded disbursements rise in 2018 before tapering off again to very low levels by 2023. However, it should be noted that as well as a delay in disbursement, either as a result of slow contributor disbursal or slow recipient uptake, this may indicate a lack of information on the status of funds after approval.

Figure 3: Multilateral climate change funds for LAC per year

On a national level, climate finance in LAC is heavily concentrated in four countries – Brazil, Mexico, Costa Rica, and Colombia – that receive nearly half of the region’s funding. Mitigation activities – such as forest protection and reforestation – receive over five times the amount allocated to adaptation efforts from multilateral climate funds. Nearly all of this finance has been issued as concessional loans.

  • 1
    According to the IMF, public sector debt “combines general government with public nonfinancial corporations and public financial corporations, including the central bank”. It also covers publicly guaranteed debt and external public debt.
  • 2
    The Latin American debt crisis was a financial crisis that began in the early 1980s when public debt of Latin American countries surpassed their capacity to generate income, making them unable to repay it.

Loss and damage funding for Africa will be back on the table at COP28

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Key points:

  • A landmark decision was reached last year at COP27 to create a loss and damage fund to provide financial assistance to countries most vulnerable to climate change.
  • Key details for the fund still have to be agreed on at COP28, and the main hurdle will be ensuring adequate financing is available for vulnerable countries.
  • African countries are disproportionately affected by climate change, with many facing extreme weather events, such as heatwaves and floods, that are increasing in frequency and severity.
  • Weather, climate and water-related hazards in Africa caused more than USD 8.5 billion in economic damages in 2022.
  • Low-income countries can become trapped in a cycle of borrowing and debt that prevents investments in climate resilience and economic development.
  • Malawi faced significant destruction from Tropical Cyclone Freddy in March 2023, with reconstruction costs topping USD 680 million.
  • Climate change impacts in Malawi could result in annual GDP losses as high as 20% by 2040.

Loss and damage fund

At COP27 last year in Egypt, a milestone achievement was reached with an agreement to establish a new loss and damage fund. The fund is aimed at assisting “developing countries that are particularly vulnerable to the adverse effects of climate change”. A committee of developed and developing countries has begun work on the fund, and key details will be discussed during COP28 later this year in the United Arab Emirates. In their last meeting in early November, the committee agreed on a draft proposal for consideration at COP28, that would see the fund housed under the World Bank, with only voluntary contributions.

The debate on what is considered loss and damage, as well as who should compensate for it and how, has been ongoing for decades. While high-income countries are responsible for the majority of carbon dioxide emissions, they have been reluctant to commit to loss and damage funding due to concerns around legal liability.

What is loss and damage?

Loss and damage refers to the inevitable impacts of climate change experienced by the Global South that have not been avoided through mitigation and adaptation due to socio-political or economic constraints, or that cannot be avoided because it is impossible to do so. It may include circumstances such as:

  • Extreme weather or rapid-onset events, such as storms, cyclones, heatwaves and floods
  • Slow-onset events, such as drought, desertification, increasing temperature, land degradation and sea level rise
  • Non-economic impacts, such as loss of cultural heritage, animals, plants and tradition
  • Economic impacts, such as loss of lives, livelihoods, homes, agriculture and territory

Some of these risks can be addressed through adaptation measures. If the measure is not yet available but could become available in the future, the risk is considered to be a soft adaptation limit. An example of this might be the development and implementation of an early warning system for floods in a region that is becoming increasingly flood prone. However, some risks have a hard adaptation limit, meaning the available technologies and actions for averting this risk are not feasible. An example is when an island becomes uninhabitable because of sea-level rise.

It is helpful to think about climate risks as being situated along a continuum of risks that have or will be avoided through mitigation, unavoided risks that cannot presently be avoided or reduced due to socio-economic constraints, and unavoidable risks with hard adaptation limits (see Figure 1).1Adapted from Finance for loss and damage: A comprehensive risk analytical approach. Loss and damage is centered around unavoided and, particularly, unavoidable risks.

Fig. 1: Climate risks along a continuum of avoided, unavoided or unavoidable risks
Source: An introduction to loss and damage, Zero Carbon Analytics, 2022.

Loss and damage in Africa

Despite Africa being responsible for just 3% of all carbon dioxide emissions since the industrial revolution, it is the most vulnerable continent to the impacts of climate change. Nine of the 10 countries ranked as most vulnerable to climate disruptions are in Africa.

The loss and damage costs in Africa are estimated to range between USD 290 billion and USD 440 billion between 2020 and 2030, depending on the level of warming.

In 2022 alone, weather, climate and water-related hazards in Africa caused more than USD 8.5 billion in economic damages. More than 110 million people were affected by weather, climate and water-related hazards in Africa in 2022, and 5,000 deaths were recorded. However, the true toll is likely to be much higher due to underreporting.

Africa is already losing between 5% and 15% of its per capita economic growth due to climate change and related impacts, according to the African Development Bank.2Gross domestic product per capita measures a country’s economic output per person and is calculated by dividing the GDP of a country by its population. Studies estimate that African countries may face a 34% reduction in gross domestic product (GDP) per capita by 2050 on average even if warming is limited to 1.5°C.

The costs from climate change come in addition to the large amounts of funding African countries need for development and debt repayments. “The disasters triggered by the growing climate-related hazards threaten to undo decades of development gains and push millions back to poverty,” according to the United Nations Office for Disaster Risk Reduction.

Malawi’s vulnerability to climate change

Malawi is one of the poorest countries in the world, with over 50% of its population living below the national poverty line, and about 15% of its population experiencing acute food insecurity.3A national poverty line represents the cost of basic needs in a country, while an international poverty line represents the average national poverty line for the poorest 15 countries. The World Bank estimates 72% of Malawi’s population live under the international poverty line of less than USD 2.15 a day.

The southeast African country has contributed less than 0.01% of cumulative global carbon dioxide emissions associated with human activities, but is extremely vulnerable to climate impacts. This is partly because Malawi’s economy is heavily reliant on the agriculture sector, which employs up to 80% of the population. Around 90% of people live in rural areas and are mostly reliant on rain-fed and smallholder farming, which is vulnerable to changes in rainfall patterns and extreme weather.

Tropical Cyclone Freddy

In March 2023, Tropical Cyclone Freddy broke records as the longest-lasting cyclone since weather records began, according to the World Meteorological Organization. Malawi received six months’ worth of rain in six days. The government of Malawi estimates that about 2.3 million people were affected, with 659,000 people displaced, 669 killed and over 500 people declared missing by mid-March 2023.

The housing and transport sectors suffered the worst damage, with more than 260,000 houses affected and damage to road networks limiting relief and recovery efforts. The agricultural sector was also significantly affected, with the loss of crops and expected reduction in output having serious impacts on peoples’ livelihoods and worsening food insecurity.

A post-disaster needs assessment estimated the total cost of damage at USD 507 million, while the total cost of recovery and reconstruction came to USD 680 million – equivalent to almost 6% of Malawi’s GDP. The amount of climate finance received by Malawi – estimated at USD 130 million in 2021 – does not come close to the amount of funding needed for the country to recover and rebuild.

The assessment also highlighted many non-economic impacts, such as the destruction of fragile ecosystems in the districts of Zomba, Chikwawa and Nsanje and damage to cultural heritage sites, including the Mbona Sacred Rain Shrines.

Cumulative impacts

Cyclone Freddy is not a stand-alone event. Climate change induced extreme weather events in Malawi are becoming more frequent and causing losses and damages faster than the country is able to recover from them. Cyclone Freddy was the third extreme weather event to hit Malawi in just over a year, following Tropical Cyclone Ana and Gombe in 2022. The cyclones, as well as Cyclone Chedza in 2015 and Tropical Cyclone Idai in 2019, all led to significant loss of life, livelihoods and damage to infrastructure.4See here for additional case studies on the impacts of tropical cyclone Ana in Mozambique and Malawi.

The cumulative costs of damage and losses from these events came to well over USD 1 billion (Figure 2). When Cyclone Freddy hit, Malawi was still yet to recover from these disasters – alongside the lingering effects of the COVID-19 pandemic, Russia’s invasion of Ukraine, which disrupted supply chains and raised prices, and the deadliest outbreak of cholera in the country’s history.

Fig. 2: Costs of recent extreme weather events in Malawi
Source: Government of Malawi, 2023.

The urgent need for emergency response and rehabilitation efforts in the aftermath of disasters can divert resources away from long-term recovery and development efforts. Frequent and consecutive disasters, like those experienced by Malawi, can deplete financial and natural resources. The government of Malawi said that climate-induced shocks are worsening macroeconomic instability and “making it harder for Malawi to break the cycle of vulnerability”.

The government estimates suggest the country loses an average of 1.7% of its GDP every year as a result of climate change-related disasters. Climate change impacts could result in annual GDP losses as high as 20% by 2040 if Malawi remains on its current low-growth development trajectory, and are likely to exacerbate existing social and economic inequalities, particularly for vulnerable groups. National data has shown that households in Malawi are 14% more likely to fall into poverty after a climate shock.

Debt spirals and climate vulnerability

Analysis by ActionAid found that 93% of countries at the forefront of climate disasters “are drowning in debt”. When countries are hit with natural disasters and do not have the resources to respond and recover, they must borrow money. Finance is largely provided through loans, not grants, resulting in more debt. This often comes on top of existing loans that have to keep being paid back, which can push countries into a costly debt spiral. Borrowing money is expensive due to the perceived risk of lending to countries in crisis. The average cost of borrowing for the group of 58 climate-vulnerable nations is 10.5% – much higher than borrowing costs for developed countries, which is around 3.5%.

Currently, 38 out of the 63 most climate-vulnerable countries are spending so much on debt repayments that they are likely cutting spending on public services. Malawi is no exception – borrowing with high rates has “not only increased debt service costs but has also exacerbated vulnerabilities in public debt and pushed it to unsustainable levels”. Public debt in Malawi reached around 60% of GDP in 2022. Reserving a large part of the budget for debt servicing and disaster response threatens the allocation of funding for building climate resilience and slows progress towards development goals.

Next steps

Key details for the loss and damage fund that still need to be resolved at COP28 include:

  • Where the fund will sit: At its meeting in early November, the transitional committee agreed on a draft proposal that would see the fund sit under the World Bank for at least four years. Developing countries want the fund to be an entirely new mechanism in the hope that this would avoid institutional challenges they face when attempting to access funds. However, developed countries have suggested that housing the fund in an existing entity would avoid delays and the further fragmentation of climate finance.
  • Purpose of the fund: Developing countries agree that the fund should be demand-driven and cover all types of economic and non-economic losses. Some developed countries, such as the US and New Zealand, have suggested a more limited scope: that finance only covers slow-onset events, such as sea level rise, and that it should only cover non-economic loss and damage, such as loss of heritage.
  • How funds will be sourced: The committee’s draft proposal states that contributions towards the fund would not be obligatory. Wealthy countries that have historically contributed the most greenhouse gas emissions would pay into the fund, but there is disagreement over whether other major polluters, such as India and China, and high-income oil-producing states should also contribute. Developing countries agree that loss and damage finance needs to be “new, additional, predictable and adequate” as well as “grants-based”. Ensuring that these funds are not drawn from existing climate financing or overseas development assistance is also a priority.
  • Who will receive funds: Countries agreed at COP27 that the fund is intended to support “developing countries that are particularly vulnerable” to climate change. However, some countries want all developing countries to benefit from the fund while others claim only specific nations, such as Least Developed Countries and Small Island Developing States, should benefit.
Scaling up funding

The key hurdle will be ensuring adequate levels of funds are available to deal with the scale of current and future loss and damage. Estimates of total global costs of loss and damage by 2050 range from USD 500 billion to USD 4 trillion, depending on the level of warming. In 2020, developed countries provided and mobilised a total of USD 83.3 billion in climate finance, with only a quarter of that going to African countries.

Developing countries have proposed that the fund should provide at least USD 100 billion by 2030 as a “minimum”. So far, seven United Nations member states as well as the government of Scotland and the Belgium region of Wallonia have pledged financing, amounting to around USD 294 million, with about 61% of that coming from Germany. Some of this funding comes from existing commitments. 

Previous climate finance agreements, such as the 2009 goal to raise USD 100 billion in climate finance each year by 2020, have fallen short. It is critically important that the global loss and damage fund attracts adequate levels of funding to reinstill trust in international climate negotiations.

Smallholder farmers, agricultural sustainability and global food security

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Key points:

  • Smallholder farms of two to five hectares produce 46% of the world’s food on around one-third of the world’s agricultural land. They are major producers of key global agricultural products, such as rice, peanut, coffee, cocoa, bananas and tea.
  • Smallholder farms tend to have higher food yields per hectare than larger farms, attributed to dedicating a larger share of their land to food crops (rather than animal feed or fuel), employing family members (which lowers transaction costs and increases labour intensity per unit of land) and high fertiliser and seed use.
  • Smallholder farms tend to have higher crop and non-crop biodiversity than larger farms. This is due to their use of varied crops and ecological land management practices, including limited insecticide use, more field edges providing a habitat and breeding ground for insects, and diverse land cover types, such as forests, fields and wetlands.
  • Sustainable and climate-smart agricultural practices are already implemented in many smallholder farming systems. In Africa, organic manure, agroforestry, crop rotation and crop diversification are common practices.
  • The availability of finance has been identified as one of the most significant variables influencing whether or not smallholder farmers in Africa adopt climate-smart agricultural practices.
  • Ensuring that smallholder farmers can access modern agrifood chains is critical for ensuring food security, productivity and nutrition.
  • Growth and investment in smallholder agriculture has significant potential to alleviate poverty for smallholder farmers while supporting global food security.

Smallholder farmers are important for rural and national economies, development and food security

Smallholder farming is the most common type of agriculture in the world.1Smallholder farmers are small-scale farmers, pastoralists, forest keepers and fishers who manage smaller tracts of land, using mainly family labour and dedicating at least some of the produce to household consumption. Farms of less than two hectares in size produce around one-third of the world’s food, while those two to five hectares in size produce almost half. Farms of less than five hectares located in developing countries account for more than half of the global production of nine staple crops – rice, peanut, cassava, millet, wheat, potato, maize, barley and rye – demonstrating their importance for global food security. As shown in Figure 1, farms of less than two hectares produce the majority of rice (>80%), peanut (75%), cassava and millet (~60%) globally. Smallholder farmers are also major producers of food that is consumed in their country. For example, smallholders in Tanzania meet around 69% of national food demand, and 2.7 million smallholder farmers in Nepal produce around 70% of their country’s food.

Fig. 1: Share of global production of major food crops in developing countries according to farm size
Source: Subnational distribution of average farm size and smallholder contributions to global food production.2This study used data on smallholder farms from 83 countries in Latin America, Sub-Saharan Africa, and South and East Asia, which is where 90% of the world’s farms are located. Farms over 50 hectares are largely grazed lands.

The role different size smallholdings play in producing food calories varies by region (Figure 2). In Asia, farms of less than five hectares produce 90% of food calories, whereas in Sub-Saharan Africa, farms of this size produce around half of food calories and farms of 5-15 hectares produce another 26%. By contrast, 70% of food calories in Latin America are produced on larger farms (> 15 hectares), while only 7% are produced on farms of less than five hectares.3This estimate is based on 41 major food crops.

Fig. 2: Calories produced by farms of different sizes in Asia, Latin America and Sub-Saharan Africa
Source: Subnational distribution of average farm size and smallholder contributions to global food production.4This study used data on smallholder farms from 83 countries in Latin America, Sub-Saharan Africa, and South and East Asia, which is where 90% of the world’s farms are located.
Despite their size, smallholder farms are highly productive

Farms of smaller than two hectares produce around one-third of the world’s food on just one-quarter of the world’s agricultural land and those two to five hectares in size produce 46% of food on one-third of agricultural land. Small-scale farms have been found to have higher land productivity – the farm’s output per unit of land area – than larger farms. For example, in Kenya, a farmer farming on less than half a hectare of land produces USD 888 of food per hectare on average, whereas a farmer farming on two hectares of land produces food to the value of USD 330 per hectare.

On average, smallholder farms dedicate a larger share of their land to food crops – rather than animal feed or fuel – compared to larger farms. Around 70% of the calories produced on smallholder farms of less than five hectares are available as food, compared to 55% for the global agricultural system.2

Another reason smallholder farms are able to achieve high productivity is their high labour intensity. Employing family members allows for a higher number of labourers per hectare and keeps labour transaction costs low.

As smallholder farmers need to optimise production on small tracts of land, they also tend to use more inputs, such as fertiliser and seeds, than larger farms.5This comparison is between small and large farms within the same country. For example, smallholder rice farmers in Bangladesh apply 181 kg of fertiliser on average per hectare, whereas larger farms only apply around 130 kg.

Though smaller farms are more productive than their larger counterparts in many developing countries, yields could be improved with the adoption of modern technologies and optimised inputs, such as fertiliser, manure and seeds. This ‘yield gap’ – the amount by which yields could be improved – ranges from 11% in East Asia to up to 76% in Sub-Saharan Africa, emphasising the significant potential for farmers in developing countries to contribute even further to rural and national food security.
Reaching this potential is contingent on smallholder farmers having access to and participating in modern food supply chains. For example, smallholder farmers may not have access to roads or transport to get their produce to market, they may lack access to suitable storage facilities to reduce food spoilage, or they may not have access to the technology needed to communicate with buyers or to learn about food safety and quality control requirements.

Smallholder farmers and global food supply chains

Ensuring that smallholder farmers can access modern agrifood supply chains is critical for ensuring food security, productivity and nutrition. Smallholder farmers produce some of the world’s most important agricultural products. For example:

Smallholder farms have a potential competitive advantage over larger farms when producing labour-intensive and high-value products, though they face difficulties linking these products to modern value chains. Growth and investment in smallholder agriculture has significant potential to alleviate poverty for smallholder farmers while concurrently supporting global food security.

For example, obtaining an Ecocert Organic Standard certification allowed pineapple growers in Zimbabwe to sell their organic produce internationally. Accessing these supply chains will enhance the farmers’ livelihoods – their pineapples could fetch as much as a 30% premium in European supermarkets. Obtaining this certification was made possible with assistance from organisations including the Committee linking Entrepreneurship – Agriculture – Development (COLEAD), the Embassy of Netherlands in Zimbabwe, the Netherlands-based Programma Uitzending Managers (PUM) and the Netherlands Enterprise Agency (RVO), highlighting the importance of collaboration in facilitating access of smallholder farmers to international food supply chains.

Similarly, smallholder avocado farmers in Tanzania were able to access the European export market through help from the private sector companies Africado and Rungwe Avocado Company, both supported by US food security initiative Feed the Future. Another example is macadamia nuts in Malawi, where a Dutch-Malawian partnership has facilitated the export of sustainably-produced macadamias to the European market.

Smallholder farming is important for GDP

Agriculture contributes substantially to the GDP of many developing nations, with smallholder farming playing a significant role. For instance, in Sub-Saharan Africa, where the majority (up to 80%) of farming is done by smallholder farmers, agriculture contributes 23% to GDP. Agriculture GDP values are even higher for certain African countries – for example, 41% of the GDP of Liberia and 31% of the GDP of Guinea-Bissau is attributed to agriculture.

In Sub-Saharan Africa, more than 60% of the population are smallholder farmers and smallholder farms employ up to 65% of the labour force. Around 73% of the population of Tanzania lives in rural areas, where 3.7 million smallholdings support up to 19 million people. In Malawi, smallholder farmers produce 80% of the country’s food and more than 80% of the working population are employed in agriculture.

Smallholder farmers practise climate resilient and sustainable agriculture

Sustainable and climate-smart agricultural practices are already an integral part of many indigenous farming systems. For example, traditional fallow systems, crop rotation and water harvesting practices in the Sahel aim to improve crop yields and livelihoods, and conserve water. In Nigeria, indigenous knowledge and practices are implemented by farmers to improve agricultural productivity and food availability, including mulching, using organic manure, using locally made pesticide, no-tillage and treating seeds with ash for long-term preservation. In South Africa, subsistence farmers use indigenous knowledge and practices such as planting in different soil types, fertilising soil with manure, selecting seeds by colour and size, and storing seeds in ash in clay pots and baskets to preserve them.

Fig. 3: Climate-smart agricultural practices used by smallholder farmers in Sub-Saharan Africa
Source: Contribution of smallholder farmers to food security and opportunities for resilient farming systems. See our explainer on sustainable agriculture in small-scale farming.

Figure 3 shows 17 different climate-smart farming practices that are used by farmers in Sub-Saharan Africa.6Fourteen Sub-Saharan African countries were included in the analysis: South Africa, Zimbabwe, Malawi, Zambia, Tanzania, Kenya, Uganda, Ethiopia, Cameroon, Nigeria, Niger, Burkina Faso, Ghana and Senegal. The most widely-adopted practice is using organic manure, followed by agroforestry (where annual crops or pastures are farmed together with trees or shrubs), crop rotation and crop diversification. In Ghana, smallholder farmers use a range of climate-smart agricultural practices, including timely harvesting and storing of produce, crop rotation, appropriate and timely weed and pest control, appropriate fertiliser use, mixed cropping (where two or more crops are grown simultaneously), planting legumes among crops, conservation agriculture (agriculture focused on regenerating degraded lands and preserving arable land) and agroforestry, among others. The primary motivations for adopting these practices are improving household food security, reducing pests and diseases, increasing yields and farm income, and controlling erosion and protecting soil. In Nicaragua, smallholder coffee producers implement agroforestry to reduce production costs, improve livelihoods and diversify income.

Table 1: Comparison of the yield, crop and non-crop biodiversity and efficiency of small farms and large farms
Source: Higher yields and more biodiversity on smaller farms

Smallholder farmers tend to plant a greater diversity of crops than larger farms in order to improve nutrition, mitigate drought risk and for market diversification (Table 1). Smallholder farms also have higher non-crop biodiversity than larger farms, which has been attributed to the use of ecological management practices, such as limited insecticide use, the presence of field edges – which provide a habitat and breeding ground for insects – and diverse land-cover types, such as forests, fields and wetlands. Smallholder farms within and around cities can also improve the environment by reducing urban heat island effects and can improve access to easy and affordable nutritious foods for city dwellers.

Encouraging climate-smart agriculture for smallholders farmers

The availability of finance has been identified as one of the most significant factors influencing whether smallholder farmers in Africa adopt climate-smart agricultural practices. In Malawi, access to credit was found to be a major factor dictating the adoption of climate-smart agriculture. In Ghana, maize farmers farming smaller lands face more credit constraints than those farming larger lands. Both private and public financing approaches are needed to encourage the adoption of sustainable agricultural practices by smallholder farmers, who are often lacking the necessary financial resources.

In Kenya, farmers that are more likely to adopt climate-resilient farming practices are those that sell their produce to markets (as opposed to farming entirely for subsistence) and have off-farm activities related to agricultural supply chains, such as milling their grains to add value to their produce or hiring out their farm equipment. Having individual land tenure rights and having middle to high school education were also found to be factors.

  • 1
    Smallholder farmers are small-scale farmers, pastoralists, forest keepers and fishers who manage smaller tracts of land, using mainly family labour and dedicating at least some of the produce to household consumption.
  • 2
    This study used data on smallholder farms from 83 countries in Latin America, Sub-Saharan Africa, and South and East Asia, which is where 90% of the world’s farms are located.
  • 3
    This estimate is based on 41 major food crops.
  • 4
    This study used data on smallholder farms from 83 countries in Latin America, Sub-Saharan Africa, and South and East Asia, which is where 90% of the world’s farms are located.
  • 5
    This comparison is between small and large farms within the same country.
  • 6
    Fourteen Sub-Saharan African countries were included in the analysis: South Africa, Zimbabwe, Malawi, Zambia, Tanzania, Kenya, Uganda, Ethiopia, Cameroon, Nigeria, Niger, Burkina Faso, Ghana and Senegal.

An introduction to sustainable agriculture in smallholder farming

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Key points:

  • Smallholder farmers produce at least one-third of the world’s food 
  • Smallholder farmers are disproportionately experiencing the effects of climate change and are particularly vulnerable to climate shocks, yet it is estimated that they receive only 1.7% of total climate finance
  • The FAO describes sustainable agriculture as meeting “the needs of present and future generations, while ensuring profitability, environmental health, and social and economic equity”
  • Various farming approaches can be considered sustainable, such as sustainable intensification, climate-smart agriculture, regenerative agriculture, organic farming and agroecological farming
  • The WEF recognises that farmers are key to addressing the current ecological and climate crises and need to be supported through the provision of financing and fair economic opportunities in order to embrace sustainable food production practices
  • Ninety-five percent of climate finance for small-scale agriculture comes from the public sector, including government donors, multilateral development finance institutions and bilateral development financial institutions
  • Smallholder farmers are vulnerable to production risks, so they need initiatives and investments that are relatively low-risk and that offer short-term returns on investment
  • Impact-oriented funds, blended finance and green bonds offer finance solutions for climate resilient and sustainable agriculture. 

Smallholder farming

More than half of agricultural land globally is degraded, leading to productivity losses of USD 400 billion every year. Projections indicate that globally, agricultural production will need to expand by 60% by 2050 to meet increased demand, and most of this will need to come from increased productivity. Food production also makes up more than a third of greenhouse gas emissions worldwide, of which 58% is from animal-based agriculture (including livestock feed) and 29% is from the production of plant-based foods. 

Smallholder farms of less than two hectares in size produce around one-third of the world’s food. Farms of up to 20 hectares produce over half (see the chart below).1Small-scale farmers are typically those that produce food on up to two hectares of land in Asia and Africa and up to 15 hectares in Latin America. Small-scale farmers may or may not hold land titles. These farms face various production risks due to a range of factors, including they are small in size, are held under traditional or informal land tenure, are more vulnerable to market shocks, are constrained by low soil productivity and low-quality or marginal lands, feature complex production systems hosting a diversity of plants and animals, face regulatory regimes in the Global North that have strict and ever-changing policies on food security and safety, suffer from isolation and low levels of technology, and may be subject to armed conflict and state fragility.

Source: Our World in Data

Small-scale farmers, particularly in developing countries, therefore play a crucial role in ensuring food security despite experiencing major food insecurity themselves. Smallholder farmers are disproportionately vulnerable to the effects of climate change and climate shocks, yet it is estimated that they receive only 1.7% of total climate finance. The World Economic Forum (WEF) recognises that farmers are key to addressing the current ecological and climate crises and need to be supported through the provision of financing and fair economic opportunities in order to embrace sustainable food production practices.

Sustainable agriculture

The Food and Agriculture Organization (FAO) describes sustainable agriculture as meeting “the needs of present and future generations, while ensuring profitability, environmental health and social and economic equity”. Various types of agricultural production can be considered sustainable, and these are discussed below.  

Sustainable intensification

The main aim of sustainable intensification is to increase crop and livestock yields and the associated economic activity without negatively impacting soil, water or the integrity of natural ecosystems. In general, this means a move away from the typical seed, fertiliser and pesticide technologies used in modern agriculture to restorative practices that rely more on ecological processes and internal resources. It also means increasing output on existing agricultural land and reducing the loss of natural habitat for agricultural production. Examples of how agricultural systems in both developed and developing countries may be redesigned to fit the principles of sustainable intensification are provided in the table below:

Source: Global Assessment of Agricultural System Redesign for Sustainable Intensification

Many argue that sustainable intensification can only be achieved if public investments encourage the adoption of innovations and support farmers by making technologies accessible and affordable. As smallholder farmers are vulnerable to production risks, they need initiatives and investments that are relatively low-risk and that offer short-term returns. 

For example, agroforestry, which is one of the tools that can be used in different types of sustainable agriculture and involves planting trees alongside pasture and crops, is being supported by the non-profit research institute CIFOR-ICRAF. Their Trees for Food Security II project trained smallholder farmers in Africa in agroforestry principles and business skills, allowing them to participate more effectively in timber, fruit and fodder value chains while increasing outputs and improving sustainability. Another initiative is designed to demonstrate to smallholder oil palm producers in Cameroon that the use of industrial mills is more efficient than small local mills and could improve their productivity and income. Research supported by research centre CIFOR-ICRAF has shown that pests in Zambia and Malawi that would ordinarily be controlled using pesticides can be managed through the use of low-cost agroecological farming principles.2Conventional pesticides are expensive for these farmers, who often do not have access to adequate protective clothing.

Sustainable intensification and climate-smart agriculture (discussed below) are closely interlinked, with sustainable intensification forming the foundation of climate-smart agriculture. Therefore, the constraints, solutions and financing options discussed below under climate-smart agriculture will be broadly applicable to sustainable intensification.

Climate-smart agriculture

Climate-smart agriculture aims to guide agricultural systems towards supporting food security in the context of a changing climate, through “integrating climate change into the planning and implementation of sustainable agricultural strategies”. As climate change presents considerable risk in terms of unpredictable weather patterns, climate-smart agriculture focuses on building resilience in order to respond more rapidly to these risks and reduce the chances of becoming food insecure. It has three broad principles:

  • Increased sustainable production to meet food security and equitably increase incomes, food security and development 
  • Enhanced resilience to climate shocks and risks through adaptation and resilience building
  • Development of opportunities to reduce greenhouse gas emissions from agriculture, thereby reducing the greenhouse gases emitted per calorie of food. 

Climate-smart agriculture uses existing approaches focused on supporting ecosystem services for achieving these principles, with sustainable intensification being a foundation.3Ecosystem services are the basic services that are provided by the natural environment that offer benefits to humans, such as pollination The tools and approaches that are used will vary depending on the regional context, but some examples include:

  • Integration of crop, livestock, agroforestry and aquaculture systems 
  • Improved management of pests, water and nutrients, including using nitrogen fertiliser more efficiently  
  • Landscape approaches, which focus on the use of collaborative initiatives in farming
  • Improved management of forests and grasslands, and the integration of trees into agricultural systems  
  • Reduced tillage and the use of a variety of breeds and varieties
  • Restoration of degraded land
  • Manure management, which may include the use of anaerobic bio-digesters.

A recent analysis of climate-smart agriculture on small-scale farms found the common barriers to be poor education, skills and knowledge; potentially high investment costs and delayed benefits; and uncertainty.

The constraints and potential solutions have been summarised in the table below:

Source: Climate-Smart Agriculture on Small-Scale Farms: A Systematic Literature Review

This analysis highlights that knowledge sharing and education, among other factors, are key to realising climate-smart agriculture. Solutions also need to consider that the benefits and costs of agricultural transitions differ in different social groups and contexts. 

An analysis by McKinsey identified the approaches that could be taken by government, development partners and the private sector to encourage the adoption of climate-smart agricultural measures for smallholder farmers. Among other things, it recommended the following:

  • Provision of opportunities for land-use optimisation linked to financing and incentive mechanisms 
  • Redesign of subsidies and tax incentives for the adoption of adaptation and mitigation measures 
  • Design of agricultural lending products that are are linked to the adoption of adaptation and mitigation measures 
  • Investment in infrastructure to reduce postharvest losses and investment to make infrastructure more resilient (such as flood protection) 
  • Improvement of traceability and sustainability certifications for applicable crops 
  • Launch of a results-based payment scheme tied to specific goals 
  • Scaling of investment in research and development of technologies for mitigation and adaptation, such as  pest-resistant seeds, biostimulants and livestock breeds.

The World Bank Group is supporting the development of climate-smart agriculture and is committed to working with countries to increase productivity, improve resilience and reduce agricultural emissions. It has developed more than 10 Climate Smart Agriculture Investment Plans, offering financing of over USD 2.5 billion for climate-smart agriculture projects that are aligned with its objectives. Two examples include: 

  • Investment of USD 50 million in a Livestock and Dairy Development Project in Bangladesh
  • Supporting the design of the USD 50 million second phase of the Smallholder Agricultural Development Project in Lesotho through identifying potential climate change challenges and solutions.

Various green bonds have also been developed to support climate-smart agriculture in the Global South. For instance:

  • Bank Windhoek has issued green bonds for climate-smart agriculture in Namibia
  • The Nigerian sovereign bond includes investments in sustainable agriculture and climate-smart farming
  • The Trust Funds for Agricultural Development (FIRA) supports water efficiency and protected greenhouses in Mexico
  • The Sovereign Bond Issuance in Egypt supports the development of crop species that are resilient to salinity and temperature increase. 

The CGIAR, a global partnership linking international organisations concerned with food security, aims to improve the resilience of small-scale farmers to climate shocks through providing climate adaptation solutions through national innovation schemes. Examples include ‘climate-smart villages’, which identifies villages or regions that are likely to be badly affected by climate change and then connects community representatives and researchers to work together to identify climate-smart solutions.   

The African Development Bank Group and the International Fund for Agricultural Development (IFAD) have launched the ‘Mission 1 for 200’ initiative, which aims to “double agricultural productivity through the use of state-of-the-art, climate-smart technology and advice” and “build resilience by helping food systems and farmers adapt to climate change and reducing agriculture’s environmental impact and emissions”.

Organic farming 

The aim of organic farming is “to create integrated, humane, environmentally and economically sustainable production systems, which maximize reliance on farm-derived renewable resources and the management of ecological and biological processes and interactions, so as to provide acceptable levels of crop, livestock and human nutrition, protection from pests and disease, and an appropriate return to the human and other resources”. Increasing awareness of the negative impacts on inputs, such as pesticides, on human health and the environment has spurred public interest in organic products. It is suggested that organic agriculture has room to expand globally, and given its various sustainability benefits over conventional farming, such as improved soil and food quality, greater biodiversity, less pollution and greater social benefits, it could contribute greatly to feeding the world.      

Organic farming systems can promote food security by using minimal external inputs and promoting environmentally-friendly techniques. They are characterised by the following five features:

  • Respect for the environment and animals, such as through reduced pesticide pollution and lower nitrate leaching
  • Promotion of sustainable cropping methods, such as crop rotation and legume intercropping, as well as the promotion of crop and livestock diversity
  • Use of non-chemical fertilisers and pest/disease/weed control means, such as green fertilisers, compost and animal manures, natural pest control and no prophylactic antibiotics 
  • Production of high-quality foodstuffs, such as those with no pesticide residue 
  • Zero use of genetically modified crops.

There are various advantages of organic farming for small-scale producers, including: 

Some disadvantages include: 

  • Yields are approximately 25% lower than yields from conventional farms4Despite the lower yields, the economic profitability is around 22%-35% higher than conventional agriculture. 
  • It may not be possible to produce sufficient compost and green manures in certain regions due to landscape constraints
  • The average return on investment for farmers is around five years
  • Achieving organic certification requires around three years, and during this time farmers will need to produce organic products but will not be able to sell their products at premium and will also need to endure reduced yields at the same time
  • Higher labour costs5In certain regions, this could be viewed as an advantage, such as by promoting rural employment. 
  • Challenges with soil nutrient management.    

Compared to intensively-managed agriculture, organic farming tends to improve species richness and abundance, although there may not be a major difference between organic farms and small-scale farms made up of different agricultural fields and species. Organic farming has been found to have higher soil carbon levels, better soil quality and less soil erosion than conventional farms. Organic farming, on average, has a lower climate impact than conventional farming, whether considering the carbon footprint per land unit (43% fewer greenhouse gas emissions) or the carbon footprint per product unit (12% fewer greenhouse gas emissions). However, there are some examples of where organic farming performs less well than conventional farming:

Source: Our World in Data

As the chart above shows, while organic farming mostly performs better in certain impacts, such as greenhouse gas emissions, it performs less well in others, such as land use. For some impacts, the effects might be mixed – for example, energy use for producing vegetables in organic farming is higher because of certain alternative pesticides that may be used. The eutrophication (enriching a body of water with minerals and nutrients) potential in organic farming is high due to differences in the nutrient release of synthetic fertilisers versus manures. 

Regenerative agriculture

Regenerative agriculture has been broadly defined as “a system of farming principles and practices that increases biodiversity, enriches soils, improves watersheds and enhances ecosystem services”. It strongly emphasises the improvement of soil health and the restoration of degraded soils, which in turn enhances the quality of water and vegetation, improves land productivity and restores the carbon content of the soil. Another core feature of regenerative agriculture is the reversal of biodiversity loss. 

A wide variety of practices may be promoted under regenerative agriculture, as summarised in the table below:

Source: Regenerative Agriculture: An agronomic perspective

In terms of financing, in Brazil Rizoma-Agro has issued green bonds for regenerative agriculture, while Biotrop has issued green bonds worth BRL 100 million for regenerative agriculture. PepsiCo has issued a 10-year USD 1.25 billion green bond focused on investments into environmental sustainability, including regenerative agriculture.    

Agroecology

Agroecology is “the integrative study of the ecology of the entire food system, encompassing ecological, economic and social dimensions”. It offers a framework for supporting sustainable agriculture and food systems that is focused on three aspects: 

  • The scientific aspect, which uses modern ecological knowledge to design and manage sustainable farming ecosystems 
  • The practical aspect, which values the local, empirical and indigenous knowledge of farmers to develop innovative and effective farming practices 
  • The social change aspect, which advocates for changes to the food system that ensure food security for all. 

Rather than altering the practices of existing unsustainable agricultural systems, agroecology requires the complete transformation of food and agricultural systems. The way in which agroecological principles are applied will depend on the local context. 

The 10 Elements of Agroecology, which is a framework that was developed by the FAO and multiple stakeholders, offers a guideline: 

  • Diversification is key to agroecological transitions to ensure food security and nutrition while conserving, protecting and enhancing natural resources
  • Agricultural innovations respond better to local challenges when they are co-created through participatory processes
  • Building synergies enhances key functions across food systems, supporting production and multiple ecosystem services
  • Innovative agroecological practices produce more using less external resources
  • More recycling means agricultural production with lower economic and environmental costs
  • Enhanced resilience of people, communities and ecosystems is key to sustainable food and agricultural systems
  • Protecting and improving rural livelihoods, equity and social well-being is essential for sustainable food and agricultural systems
  • By supporting healthy, diversified and culturally appropriate diets, agroecology contributes to food security and nutrition while maintaining the health of ecosystems
  • Sustainable food and agriculture requires responsible and effective governance mechanisms at different scales, from local to national to global
  • Circular and solidarity economies that reconnect producers and consumers provide innovative solutions for living within our planetary boundaries while ensuring the social foundation for inclusive and sustainable development.
Source: International Fund for Agricultural Development

For a project to be considered agroecological, it should be:6This is according to the International Fund for Agricultural Development Agroecology Framework

  • Increasing resource use efficiency while reducing and/or substituting external inputs
  • Recycling water, nutrients, biomass and/or energy
  • Diversifying and integrating different farming sectors (various crops and/or animals)
  • Facilitating efficiency and recycling, spreading risks, increasing resilience and producing a greater variety of nutritious food.

The Scaling-up Agroecology Initiative is a UN-led platform that aims to support national agroecology processes through policy and technical capacity. The International Fund for Agricultural Development (IFAD) supports the initiative, and of the 207 IFAD-supported projects completed between 2018-2023, around 60% are implementing agroecological principles. The total investment in all IFAD projects in these years was USD 8.25 billion, though more financing was allocated to non-agroecological farming projects. Financing from the Adaptation for Smallholder Agriculture Programme (ASAP) and the Global Environment Facility (GEF) has been key in providing access to funds for agroecological practices – around 87% of projects with ASAP financing and 90% of projects with GEF financing entirely or partially promote agroecology. While the public sector is the primary financing source for both agroecological and non-agroecological IFAD, ASAP and GEF-supported projects, the private sector has played very little role in this financing, highlighting a key financing source to be developed.

Finance for small-scale farms in the Global South

IFAD is a UN-linked international financial institution focused on small-scale agriculture and supporting farmers through projects that provide small-scale farmers with access to finance, markets and technology, including via grants and low-interest loans. Together with finance and policy advisory organisation the Climate Policy Initiative (CPI), it released a report on the climate finance gap for small-scale farming. Climate finance is aimed at “reducing emissions and enhancing sinks of greenhouse gasses, and aims at reducing vulnerability and maintaining and increasing the resilience of human and ecological systems to negative climate change impacts”. The report found that 95% of climate finance for small-scale agriculture comes from the public sector, including from government donors, multilateral and bilateral development finance institutions (see the chart below).

Source: International Fund for Agricultural Development

The financial instruments used by the public sector mostly include grants (50%), followed by concessional (low cost) debt (33%) and non-concessional debt (16%). Of these grants, the majority (80%) were provided by governments, while concessional debt was largely issued by multilateral and bilateral development finance institutions. Multilateral development banks also provided the majority of the non-concessional debt. 

There are various impact-oriented funds aimed at small-scale agriculture, including: 

  • The Land Degradation Neutrality (LND) Fund, which is an “an impact investment fund blending resources from the public, private and philanthropic sectors to support achieving LDN through sustainable land management and land restoration projects implemented by the private sector”.
  • The Meloy Fund, which is an “impact investment fund focused on proving the triple bottom line viability of investing in fishing and seafood-related enterprises that will lead to better management and protection of these formerly under-appreciated and undervalued natural assets”.
  • &Green, which aims to “finance the delinking of major commodity supply chains from deforestation in a way that is commercially viable and replicable” through offering “innovative financial instruments that take away part of the risks of investing”.
  • Root Capital, which “provides credit and capacity building to small and growing agricultural businesses around the globe”.

Blended finance, which is “the strategic use of development finance and philanthropic funds to mobilise private capital flows to emerging and frontier markets”, is viewed as a finance solution for climate resilient and sustainable agriculture. Blended finance helps reduce both real and perceived risks in an investment, thereby facilitating private capital investment. Between 2014-2019, around 22% of blended finance transactions globally went to rural and smallholder farmers (see the chart below). The median transaction size for smallholder farmers during this period was USD 35 million, though the scale of these transactions has increased in recent years.

Source: Convergence

Blended finance is helping small-scale farmers through market initiatives such as Aceli Africa, which is supporting loans to agricultural small and medium sized enterprises in Africa. For instance, Aceli’s financial incentives helped Tanzania Commercial Bank provide loans for business to purchase cassava from smallholder farmers. Another example is the African Agricultural Capital Fund, which has made investments ranging from USD 250,000 to USD 2.5 million in small and medium sized agricultural businesses in Africa. 

The Commission on Sustainable Agriculture Intensification (CoSAI) commissioned a report that found that around USD 60 billion was spent each year on agricultural innovation in the Global South between 2010-2019, of which 60%-70% came from national governments, 20%-25% from the private sector (mostly related to the research and development and marketing of new products related to mechanisation, crop protection, and seed development and biotechnology), and 10%-20% from development partners, including institutional investors, bilateral and multilateral agencies, and international philanthropies.7Examples of innovation funding in the report included research into new seed varieties, training on new agroforestry practices, the adoption of agricultural policies such as fertiliser subsidy reforms, digital marketplaces for agricultural sales and purchases, and the maintenance and management of research institutes or infrastructure, such as the modernisation of slaughterhouses. Of this funding, less than 7% was directed at sustainable intensification specifically.

  • 1
    Small-scale farmers are typically those that produce food on up to two hectares of land in Asia and Africa and up to 15 hectares in Latin America. Small-scale farmers may or may not hold land titles.
  • 2
    Conventional pesticides are expensive for these farmers, who often do not have access to adequate protective clothing.
  • 3
    Ecosystem services are the basic services that are provided by the natural environment that offer benefits to humans, such as pollination
  • 4
  • 5
    In certain regions, this could be viewed as an advantage, such as by promoting rural employment.
  • 6
    This is according to the International Fund for Agricultural Development Agroecology Framework
  • 7
    Examples of innovation funding in the report included research into new seed varieties, training on new agroforestry practices, the adoption of agricultural policies such as fertiliser subsidy reforms, digital marketplaces for agricultural sales and purchases, and the maintenance and management of research institutes or infrastructure, such as the modernisation of slaughterhouses.

Exploring a comprehensive loss and damage facility for African countries

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Key points:

  • Africa is responsible for just 3% of all carbon dioxide emissions since the Industrial Revolution but is the most vulnerable continent to the impacts of climate change
  • These impacts will increasingly exacerbate poverty and inequalities and disrupt livelihoods 
  • Comprehensive loss and damage facilities could be established at the national level in order to address country-specific needs
  • These would function at multiple levels to cover unavoided and unavoidable, economic and non-economic losses and damages, and would encompass risk and curative (i.e. compensatory) finance mechanisms, with funding obtained through multiple avenues 
  • The finance sources could include philanthropy and solidarity funds, multilateral sources such as grants, loans and multi-donor trust funds, and other finance sources such as carbon levies and taxes, collected and distributed through a formal financing mechanism that is yet to be established.

The politics of loss and damage

Loss and damage – which refers to the negative impacts of climate change that may or may not be reduced by adaptation – is a contentious and highly politicised topic. This is because while developed nations are responsible for most of the greenhouse gases emitted since the Industrial Revolution, the warming caused by them is disproportionately impacting less developed countries that have contributed the least to global warming. For example, Africa is responsible for just 3% of all carbon dioxide emissions over the last few centuries but is the most vulnerable continent to the impacts of climate change.

Though the concept of loss and damage is formally recognised by the UN Framework Convention on Climate Change (UNFCCC) and has always been discussed at COPs, no provision has been made for the financing of loss and damage. Indeed it was a key sticking point in last year’s COP negotiations. Wealthy nations are reluctant to commit to loss and damage funding due to concerns around legal liability, fearing they may become locked into open-ended litigation and compensation for climate-induced disasters. A proposal for a dedicated financing facility for loss and damage at COP last year by the negotiating bloc of the Group of 77 + China – which was supported by many climate-vulnerable and developing countries and civil organisations – was rejected by the US and EU. A formal mechanism for collecting and distributing funds for loss and damage – whether by establishing a dedicated financing facility or placing it in an existing fund (such as the Adaptation Fund) –  will be high on the agenda for the Global South at this year’s COP 27 meeting.

Avoidable, unavoided and unavoidable risks

Loss and damage may encompass a wide range of circumstances, including:

  • Extreme weather or rapid-onset events, such as storms, cyclones, heatwaves and floods
  • Slow-onset events, such as drought, desertification, increasing temperature, land degradation, sea level rise and salinisation (an increase in concentrations of salt in soil)
  • Non-economic impacts, such as the loss of cultural heritage, native animals and plants and tradition 
  • Economic impacts, such as loss of lives, livelihoods, homes, agriculture and territory.  

These impacts will further exacerbate poverty and inequalities and disrupt livelihoods, and increasingly so as temperatures rise. Some of these risks can be addressed through adaptation measures. If the measure is not available yet but could become available in the future, the risk is considered to be a ‘soft adaptation limit’. An example of this might be the development and implementation of an early warning system for floods in a region that is becoming increasingly flood prone. However, some risks have a ‘hard adaptation limit’, meaning that the available technologies and actions for averting this risk are not feasible. An example of this might be when an island becomes uninhabitable because of sea-level rise. 

When considering risk financing mechanisms for loss and damage, it is helpful to think about risks as being situated along a continuum (see Fig. 1, adapted from here) of avoided risks (risks that have or will be avoided through mitigation), unavoided risks (risks that cannot presently be avoided or reduced due to socio-economic constraints) and unavoidable risks (hard adaptation limits). Loss and damage is centered around unavoided and, particularly, unavoidable risks.

The different finance mechanisms available

Risk finance

A comprehensive climate risk management strategy to avert, minimise and compensate for unavoided and unavoidable loss and damage would include ambitious mitigation, adaptation and disaster risk-reduction action. Various risk financing mechanisms based on risk pooling (spreading risk by sharing it across different lenders/insurers) and transfer exist that could be used to address loss and damage:

  • Catastrophe/disaster risk insurance
    • Aimed at developing tailored financing strategies for improving financial resilience to natural hazards
    • One example is the National Agricultural Insurance Scheme (NAIS) in India, which aims to mitigate risks related to crop and livestock loss from climate events. The NAIS is funded by a state-owned insurer and receives technical support from the World Bank
    • Microinsurance can provide financial support to low-income households following disasters. One example is Acre Africa, a World Bank initiative offering innovative and tailored microinsurance products to help small-scale farmers mitigate against crop failure from adverse weather   
  • National social protection schemes or social funds
    • These consist of a wide range of policies and interventions aimed at reducing poverty, inequality and vulnerability, including social protection programmes, contributory social insurance and social health protection
    • An example is South Africa’s Working for Water programme, which employs people in public sector projects to conserve water and ecosystems, thereby improving climate change adaptation and disaster risk reduction. The programme is funded by both government and private entities      
  • Contingency finance
    • Governments set aside public funds or obtain loans from multilateral financing institutions in order to respond rapidly in the aftermath of a disaster 
    • If a loan is secured from a development bank, governments will only incur a cost in the event that funds need to be drawn from the loan
  • Catastrophe-linked bonds
    • Risks are transferred from developing countries to the capital markets – financial markets where buyers and sellers trade bonds and other financial assets – in the event of a catastrophe, thereby filling in the financing gap for immediate post-disaster relief from extreme events 
    • For example, the World Bank issued a catastrophe-linked bond (listed on the Singapore Stock Exchange) to provide support for losses of up to USD 150 million from tropical cyclones in the Philippines   
  • Climate-themed and green bonds
    • These are instruments that finance green or climate-themed projects and provide investors with regular or fixed income. Investors hedge against climate risks and receive returns on their investments
    • The International Finance Corporation (IFC) – a World Bank institution – has contributed substantially by issuing and investing in green bonds
    • For example, in 2021, the IFC invested USD 100 million in Egypt’s first private sector green bond to help finance sustainable projects and the transition to a greener economy
  • Forecast-based financing
    • These are funds that are released for pre-defined actions based on scientific forecasts and risk analysis
    • For instance, in Bangladesh, emergency kits are distributed prior to a cyclone.  

These risk financing mechanisms are mostly appropriate for avoidable/unavoided loss and damage. However, it is not possible to prevent or minimise loss and damage that go beyond hard adaptation limits (unavoidable loss and damage) – such as many impacts from slow-onset events. For risks that cannot be addressed using these risk pooling and transfer mechanisms, curative finance may be needed:

Curative finance
  • Loss and damage funds
    • These are trust funds that facilitate access to international finance and raise local money for climate change mitigation, adaptation, risk management and compensation 
    • A significant amount of donor support is required for these funds, which may be sourced from various entities (see the box on ‘where the money comes from’ below) 
    • An example is Bangladesh’s National Mechanism for Loss and Damage, which  is financed through multi-donor trust funds and the national budget 
  • Impact investment funds
    • Environmental and climate projects are financed by private and public funds, providing investors with returns on their investment
    • An example is Livelihood Carbon Funds, which invest in projects such as mangrove restoration in Africa 
  • Trust funds
    • Funds are especially established to deal with a specific need, such as relocation due to climate change
    • For example, the Fiji Climate Relocation and Displaced Peoples Trust Fund for Communities and Infrastructure that was developed to respond to displacement due to sea-level rise
    • Funding is obtained from a climate and adaptation levy (whereby certain services, incomes and items are taxed) and, potentially, bilateral and multilateral funding. 

The finance sources discussed in the box below could be used for both risk finance and curative finance mechanisms.

Where might the money come from? 

Philanthropic and solidarity funds 

  • Philanthropic funds
    • At COP 26, several philanthropic climate funders, including the European Climate Foundation, Open Society Foundations, and Hewlett Foundation,  committed an initial USD 3 million in loss and damage finance as ‘start-up assistance’    
  • Solidarity funds. Here are examples of what solidarity funds could look like:
    • The European Union Solidarity Fund (EUSF) – financial contributions are made by EU member states and are administered by a flexible governing mechanism 
    • Unitaid – finance is obtained through national aeroplane levies, voluntary contributions by countries and philanthropy 
  • Government pledges
    • At COP 26, Scotland and Wallonia committed USD 2.5 million and USD 1 million respectively to financing loss and damage 
    • Denmark committed USD 13 million to loss and damage financing this year.

Multilateral sources 

  • Within the UNFCCC, the Green Climate Fund (GCF) is the only source providing adaptation and loss and damage financing.  Approximately 24% of GCF-approved projects refer to loss and damage
  • Global Facility for Disaster Reduction and Recovery (GFDRR), which is a grant-funding mechanism 
  • Global Risk Financing Facility (GRiF), which is a multi-donor trust fund that provides grants
  • Multilateral development banks, which could provide assistance in the form of grants (need not be paid back) and loans (need to be paid back)   
  • The multi-donor trust fund of the Climate Vulnerable Forum and the Vulnerable Twenty Group 
  • The World Bank’s International Development Association (IDA), which provides finance via concessional loans and grants and policy advice to developing countries   
  • Official development assistance (ODA) – between 2010 and 2019, 11% (USD 133 billion) of international aid was disaster-related, suggesting that ODA could be an important source of loss and damage finance. 

Innovative finance sources 

  • Luxury carbon tax or wealth tax
    • Levies and taxes could be added to luxury or high-emissions intensity products or activities, such as space tourism, buying luxury yachts and sports cars and using private jets 
  • Financial transaction tax
    • A small levy could be placed on the buying and selling of financial assets, which could provide up to USD 16 billion in revenue. 
  • International airline passenger levy
    • A modest fee on international aeroplane tickets could be paid directly into a loss and damage fund
  • Bunker fuels levy
    • The emissions and fuels of cargo transportation by ship and aeroplane could be taxed. The International Monetary Fund (IMF) estimated that a tax of USD 30 per tonne of carbon emitted by aeroplanes and ships (advanced economies only) would have raised USD 25 billion in 2014   
  • Fossil fuel majors carbon levy
    • The Carbon Majors report in 2013 found that 63% of emissions in the atmosphere are from coal, gas, oil and cement from only 90 companies
    • A global fossil fuel levy could be imposed on these companies and directed into a loss and damage fund that could be supplemented by a one-off fee from each company based on its historical emissions
    • For instance, the prime minister of Barbados has proposed a 1% tax on sales revenues for fossil fuels, which could raise USD 70 billion each year 
  • Global carbon tax
    • A global system of carbon pricing could help fund loss and damage either through taxation or auction revenues generated from trading schemes, such as the EU Emissions Trading System. 

What would a comprehensive loss and damage facility look like for African countries?

Comprehensive loss and damage facilities could be established at the national level in order to address country-specific needs. The facility would need to function at multiple levels to cover unavoided, unavoidable, economic and non-economic losses and damages and would encompass the risk finance and curative finance mechanisms discussed above, with funding obtained through multiple avenues. It would also require close cooperation and coordination among different levels of government, the multilateral system and various sectors across society. A potential loss and damage facility could be broken down into four main components:

  • Knowledge and capacity development
  • Resilience building
  • Funding collection and allocation
  • Compensation for, and recognition of, unavoidable loss and damage.
Knowledge and capacity development

These are knowledge and technology-sharing measures for averting and minimising loss and damage impacts:

Establish centralised and reliable climate change databases 

  • The database should include high-quality meteorological data, climate projections and warnings and archives of climate events 
  • National governments and research institutes need access to sophisticated technologies such as numerical flood monitoring and flood mapping infrastructure, and improved data collection tools and capacity in order to better understand trends and respond appropriately  
  • These tools would be fundamental for developing early-warning systems for floods, droughts, fires and other climate hazards
  • This information is also important for climate change attribution.  

Build collaborative and inter and trans-disciplinary research 

  • Encourage skills sharing between research institutes and universities in developing and developed nations to ensure that local entities have access to the latest and most sophisticated tools for monitoring events
  • For example, the University of KwaZulu-Natal in South Africa is working with the Dutch research institute Deltares to develop an early warning system for floods 
  • Increase university funding for research on loss and damage and climate change from international donors and public funding sources. 

Strengthen technical capacity building for local governments

  • Provide local governments with the tools, expertise and capacity to effectively coordinate preparations for and responses to climate disasters  
  • For instance, the Council for Industrial and Scientific Research (CSIR) in South Africa has developed a state-of-the-art online risk profiling and adaptation tool, called the Green Book, for assisting municipalities in assessing risks and vulnerabilities to climate change. The tool is co-funded by the Canadian International Development Research Centre and was produced together with South Africa’s National Disaster Management Centre.
Resilience building

These are physical measures for averting and minimising loss and damage impacts that prioritise climate-resilient interventions:

Investment into projects that promote climate resilience 

  • For example, Access Bank in Nigeria issued a certified green bond that will mostly go towards building coastal flood defenses to protect against sea-level rise.

Construction of physical climate barriers and adaptation measures 

  • For example, the construction of sea walls along Tanzania’s coastline, funded by the US Adaptation Fund and the Global Environment Facility’s Least Developed Countries Fund 
  • Through the Adaptation Fund Climate Innovative Accelerator, grants are being administered for innovative adaptation technologies. An example is Slamdam, an inexpensive technology for protecting people from flooding that is being piloted in Burundi. 

Preventative building measures, such as retrofitting houses to improve resilienceFor example, low-cost homes in South Africa were retrofitted with ceiling insulation through a local government project financed by South Africa’s Green Fund, which has a portfolio of investment projects and is managed by the Development Bank of Southern Africa.

Case study 1: Extreme precipitation in Durban, South Africa

Earlier this year, extremely intense rainfall (> 450 mm in 48 hours) led to flash floods and landslides in Durban in South Africa, killing more than 450 people, destroying 4,000 houses, displacing around 40,000 people and causing ZAR 1.7 billion in damages. This event is considered one of the worst natural catastrophes in South African history in terms of economic and human life loss and was made twice as likely due to climate change.

The floods disproportionately affected marginalised communities and the impacts were worsened by pre-existing structural vulnerabilities – a legacy, in part, of centuries of colonialism and apartheid, further exacerbated by current exploitative international relationships and global power imbalances.   

South Africa was ill-prepared to respond to the event:

  • There is no reliable disaster risk database
  • Local, provincial and national governments have not been proactive in planning and building resilience, which may be due to a lack of coordination, finance, capacity or expertise 
  • Early-warning systems and flood mitigation measures are inadequate, and so no rapid-response system is available. 

Other factors compounded the risks from this event, including uncontrolled urbanisation and a lack of land-use zoning enforcement (e.g. stopping people from building below the flood line). In addition, poor education in many communities means that people may not fully understand the danger posed by such an event and may be reluctant to move when asked to. The region is also reeling from the negative economic impacts of the Covid-19 pandemic and socio-economic unrest. 

Who paid for the impacts?

In addition to this, a comprehensive loss and damage facility for averting, minimising and compensating for this disaster might cover the following:

  • Developing an advanced early-warning and rapid-response system
    • Acquire funding from international sources, including research grants, to facilitate research
    • Facilitate skills and expertise sharing with international experts 
  • Relocating at-risk communities to suitable land above the flood line
    • Financed through trust funds set up for relocation  
  • Protecting at-risk infrastructure through flood control mechanisms
    • This could be funded through green bonds or impact investment funds.
  • Providing facilities in anticipation of events
    • Allocate forecast-based financing for distribution of health packs or mobile health facilities 
  • Uplifting local communities through resilience measures
    • Invest in national social protection schemes and preventative measures (i.e. retrofitting houses to make them flood or rain proof)
    • Invest in projects that empower local government to educate and communicate with communities on flood impacts.
Fund collection and allocation 

These are approaches for maximising fund collection and allocation for loss and damage impacts:

Diversify funding sources 

  • Design funding options that are not currently in place, such as from innovative sources
  • Encourage funding to be based on grants and concessional loans (i.e. loans that offer more favourable terms than market-based loans).

Streamline funding acquisition 

  • Maximise overall loss and damage financing through comprehensive risk management frameworks that include a range of funding sources, rather than relying on ex-post (after the event) aid, which is unreliable and difficult to monitor
  • Diversify social protection measures and the financing thereof 
  • Improve government capacity to undertake international negotiations on loss and damage financing.

Establish trust funds 

  • Multilateral development banks and national development banks have great potential to address loss and damage through trust funds
  • Trust funds geared towards country-specific needs should be established, such as the Fiji Climate Relocation and Displaced Peoples Trust Fund for Communities and Infrastructure, which was developed to respond to displacement due to sea-level rise.

Develop a dedicated loss and damage financing mechanism

  • A dedicated financing facility should be established to track and prioritise which aspects of loss and damage need funding
  • Ensure that the funds are reaching the most vulnerable.
Case study 2: Tropical cyclone Ana in Mozambique 

Mozambique experienced extreme rainfall from tropical cyclone Ana this year, displacing 180,869 people, destroying 12,000 houses, damaging 26 health centres, 2,275 km of road and 765 schools, and flooding 37,930 hectares of crops, severely impacting food security. Climate change increased the likelihood and intensity of the rainfall associated with these cyclones, and these events are projected to become increasingly severe with climate change. Mozambique has contributed 0.01% of global carbon dioxide emissions since the Industrial Revolution. 

Sixty percent of the population of Mozambique lives along the coastline and is vulnerable to tropical storms. Mozambique ranks 9th out of 191 countries globally in terms of high vulnerability to climate impacts, exposure to risk and lack of coping capacity. Recent military insurgence in some parts of the country, rooted in unemployment, underdevelopment, poor governance and poverty, has led to the death of around 4,000 people and the displacement of nearly one million. 

Current funding sources and mechanisms for climate disasters in Mozambique include: 

  • Contingency finance
    • This is the main disaster funding source in the country, but it only covers the initial emergency phase and is limited
  • Donors
    • Donations are a significant source of funding for extreme events but are difficult to monitor and predict, in part because there is no centralised monitoring and coordinating mechanism 
  • Emergency loans
    • These are organised in advance and can deliver funds in the event of an emergency. However, they are unpredictable, difficult to monitor and require long negotiations that cause delays in recovery and reconstruction
  • Contingency budget
    • The Ministry of Public Works, Housing and Water Resources is the only sector to use a contingency budget, which allocates emergency funds to the recovery of roads and bridges.

How could the response to tropical cyclones be improved under a comprehensive loss and damage facility?  

  • The Disaster Management Fund, which has been created by the Mozambican government to proactively budget for events rather than reallocate funds after the event. This has received funding in the form of a grant from the World Bank   
  • Contingent loans are being discussed by the Mozambican government and World Bank and would provide immediate access to liquidity for emergency response and recovery following a disaster. This is especially important for providing immediate relief while funds are being obtained from other sources  
  • Comprehensive rural insurance schemes, including microinsurance for agriculture, supported through entities such as the Global Index Insurance Facility, a multi-donor trust fund that supports smallholder farmers  
  • Trust funds and loss and damage funds, such as relocation trust funds for those living in high-impact areas
  • National social protection schemes and other resilience measures for uplifting vulnerable communities. Examples might include retrofitting houses, medical centres and schools to make them storm proof. Investment in infrastructure for protecting communities from storm impacts could be funded through green bonds and impact investment funds   
  • A comprehensive database on disasters as well as a sophisticated early-warning system could be developed with international expertise and financing. This would include means for disseminating information on imminent events, as rural areas are isolated and do not have reliable telecommunications.
Case study 3: Tropical cyclone Ana in Malawi

Together with Mozambique and Madagascar, Malawi experienced intense rainfall and winds from tropical cyclone Ana, affecting around one million people, destroying 115,388 hectares of crops and leaving 114,218 children without school facilities. Climate change increased the likelihood of this event in Malawi and is likely to increase the likelihood and intensity of tropical cyclones in the future. Malawi’s department of disaster management estimated that its four-month recovery plan required around USD 84 million. Malawi has contributed less than 0.01% of global carbon dioxide emissions since the Industrial Revolution.   

Malawi is one of the poorest countries in the world, with an economy that is heavily reliant on agriculture, which employs up to 80% of the population. This makes it particularly vulnerable to climate shocks. Around 90% of people live in rural areas and are mostly engaged in rain-fed subsistence and smallholder farming. Around 2.3 million people face food insecurity and require assistance. Armed conflict in Northern Mozambique has also impacted more than one million Malawians.

How were affected communities supported following this event? 

  • By the four-month recovery plan of Malawi’s department of disaster management, which received funding and technical support from humanitarian partners  
  • A ‘flash appeal’ launched by humanitarian partners of the Malawian government, including the Malawi Red Cross, seven national NGOs, 26 international NGOs and 10 UN agencies, all of which aimed to provide assistance for those affected in the immediate aftermath of the event 
  • By Oxfam and its humanitarian partners, who provided immediate relief in the form of cash, food, clean water and sanitation 
  • Provision of health and nutrition kits by UNICEF
  • By other humanitarian organisations, such as Partners for Reproductive Justice, which provided health kits and mobile clinics for girls and women, and Christian organisations such as the Catholic Development Commission. which provided cash and non-food items, such as blankets and soap.  

What are some of the major challenges in responding to, and preparing for, extreme weather events in Malawi? 

  • Because of its high poverty and low level of economic development, Malawi is not resilient to climate disasters 
  • As emphasised by the response to Ana, Malawi is highly reliant on humanitarian aid. The National Resilience Strategy of the Malawian government recognises the need for policy and new approaches to shift away from humanitarian aid and towards response plans and  programmes that strengthen resilience to shocks
  • Though Malawi’s Department of Climate Change and Meteorological Services started issuing weather warnings on radio and television three days before the cyclone, many living in rural areas do not have access to radios or other telecommunications. The Department of Climate Change and Meteorological Services also cites issues including relaying weather information to those who are less educated, difficulties translating technical weather language into understandable formats, and a limited capacity for authorities to take action.   

How could the response be improved through a dedicated loss and damage facility? 

  • An analysis by the Loss and Damage Collaboration on a national loss and damage mechanism for Malawi found that:
    • Key aspects missing in the loss and damage agenda at the government level include slow-onset events, which have been given no policy priority, and non-economic loss and damage. It suggested these impacts should be monitored and assessed in order to understand them better
    • A loss and damage mechanism wouldn’t require the invention of completely new tools and approaches but should  build upon existing institutions and frameworks 
    • The mechanism should include a financing facility that could track and prioritise which aspects of loss and damage need funding with a focus on the most vulnerable  
  • Given the challenges faced by the disaster warning system currently in place, the facility could focus on improving resilience and responses by:
    • Developing a comprehensive risk database and a sophisticated early-warning system that can reach rural communities. This could be both national and community-based to reach various sectors of society 
    • Investing in programmes that help improve the understanding of climate disasters and impacts in communities so that they are better equipped to respond to these events  
    • Developing multi-level contingency plans in order to improve disaster-response systems
    • Strengthening coordination between various sectors of society to manage early response systems 
  • To improve resilience against tropical cyclones, the facility could focus on:
    • Developing and improving existing infrastructure to protect against floods and other climate impacts
    • Providing facilities in anticipation of events, such as health facilities and shelters  
    • Relocating at-risk communities to suitable land above the flood line
    • Uplifting local communities through resilience measures, such as national social protection schemes
  • Malawi is the ninth country to join the Africa Disaster Risk Financing Programme (ADRiFi), which, together with African Development Bank and African Risk Capacity (a specialised insurance company established by the African Union), aims to enhance government responses to climate shocks and strengthen the resilience of rural communities 
  • This year, the African Development Bank approved a grant of USD 9.25 million for the financing of the ADRiFi in Malawi. The first part of the grant will come from the African Development Fund, while the ADRiFi multi-donor trust fund will provide the second part of the grant.
Compensation for, and recognition of, unavoidable loss and damage

These are various measures for compensating for and recognising loss and damage impacts that are unavoidable:

Recognition of impacts

  • Active remembrance of losses, such as through school curricula, museums and exhibitions
    • If people are relocated, efforts should be made to maintain a sense of cultural identity 
  • Encourage restorative dialogue
    • Official apologies 
    • Truth and reconciliation conferences
  • Trauma counselling
  • Enabling access to abandoned sites.

Compensation for impacts

  • Support for rebuilding livelihoods and infrastructure 
  • Support for developing alternative livelihoods
    • For example, educating  people on an alternative skill due to livelihood being lost, such as fishers who can no longer fish due to sea-level rise
  • Facilitating safe migration and resettlement.

These could be financed through curative finance mechanisms.

Case study 4: The Cape Town water crisis, South Africa 

The Western Cape province of South Africa, where Cape Town is situated, experienced three years of consecutive drought from 2015 to 2017, leading to a major water shortage that almost saw the taps run dry for the four million residents of Cape Town. Unlike the tropical storms and floods mentioned in the previous case studies, this is an example of a slow-onset event that, despite having disastrous consequences, is often less likely to be on the political and policy agenda. However, scientists have found that climate change tripled the likelihood of this event and will increase the likelihood of it occurring again in the future. While the current water system in place in Cape Town was designed to provide sufficient water to mitigate drought once every 50 years, climate change has significantly increased drought frequency. This means the system is more vulnerable to drought than previously thought.  

The water crisis had severe economic impacts for the region. Industries that were hit particularly hard include agriculture and tourism. The region produces 60% of the country’s agricultural exports and contributes 20% of domestic agricultural production. The estimated loss to agriculture alone during the water crisis was USD 0.4 billion and included the loss of 30,000 jobs. Cape Town is one of the most visited cities in the country and is a tourism hub of Africa, and the water crisis saw major declines in the numbers of overseas tourists visiting the region.  

How might a comprehensive loss and damage facility improve the resilience of this system? 

Investment in technologies and schemes

  • The system is entirely dependent on rainfall, making it highly vulnerable
  • Investment could focus on alternative technologies such as water de-salinisation plants, groundwater extraction and updated integrated urban water management, as well as the updating of existing infrastructure. This could be supported by:
    • Technology and information sharing by international experts to help devise an integrated urban water management programme, funded by research grants 
    • Green bonds and impact investment funds to finance these technologies
    • Investment in national social protection schemes, such as South Africa’s Working for Water project, which has already contributed significantly to improving drought resilience through removing alien vegetation from key water catchment areas 

Support for farmers and other industries at risk

  • Investment in preventative measures, such as retrofitting or upgrading farms with improved capacity to store water 
  • Investment in water-saving management approaches and tools
  • Empowering local governments and other entities to educate communities on water management  

Emergency support in the event of another water crisis

  • Catastrophe-linked bonds
  • Disaster risk insurance
  • Contingency finance.

Loss and Damage in the Sundarbans

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Key points:

  • The Sundarban region, home to 7.2 million of the world’s most vulnerable people and the largest single mangrove forest in the world, is increasingly at threat from catastrophic impacts of climate change
  • Climate change is contributing to the absence of employment opportunities, the destruction of property from extreme weather events and the loss of vital mangroves and land from sea level rise. With homes and livelihoods under threat, many are left with no choice but to migrate elsewhere
  • The increasing scale and frequency of climate impacts mean the limits of adaptation have already been reached in many cases. The most affected argue that the extensive loss and damage needs to be addressed by those responsible with the financial means to do so.

What are the Sundarbans?

The Sundarbans are a cluster of low-lying islands in the Bay of Bengal, spread across India and Bangladesh. The region is recognised internationally for its unique biodiversity and ecological importance – including the single largest mangrove forest in the world, encompassing a total area of 10,200 km2.  

The Sundarbans ecosystem offers a wide range of vital ecological services, including cyclone protection for millions of people, wildlife habitat, food and natural resource provision, and carbon sequestration. It is also home to about 7.2 million people (4.5 million in India and 2.7 million in Bangladesh), including some of South Asia’s poorest and most vulnerable communities. Around half the population lives below the poverty line.

Due to a lack of employment opportunities, most are dependent on the land and natural resources that are increasingly being depleted by climate change. Most rely on subsistence agriculture, supplemented with fishing, crab and honey collection. Millions are unable to meet their basic nutritional requirements, leading to health issues such as anaemia, malnutrition and childhood stunting. At the same time, climate impacts are exacerbated by other factors, such as poverty, lack of livelihood options, reliance on land, uneven land ownership and limited government support.

The Sundarbans were declared a reserve forest before the partition of India in 1875, and UNESCO declared the Indian and Bangladesh portions of the Sundarbans World Heritage Sites in 1987 and 1997, respectively. The region is also recognised under the Ramsar Convention on Wetlands. Despite this recognition, including conservation obligations under international conventions and treaties, the Sundarbans are under threat from climate change, along with a combination of natural factors and human impacts.

Climate impacts in the Sundarbans

Land mass is declining year by year

In 2015-16, the total area of the Sundarbans had shrunk  by 210 km2 since 1967, and by 451 km2 since 1904. This declining trend holds true whether the Indian and Bangladesh portions of the Sundarbans are considered separately or grouped together. The main reason is the surrounding sea level, which is rising more than twice as fast as the global average. Satellite imagery shows the sea level has risen in the Sundarbans by an average of three centimetres a year over the past twenty years, and the area has lost almost 12% of its shoreline in the last forty. In addition to sea level rise, a gradual reduction in sediment flow from rivers to the Sundarban region has resulted in loss of land mass. 

Due to these factors, the rate of retreat of coastlines is as high as 40m a year for some of the islands, which will disappear completely within the next 50–100 years at the current rate. Already some islands have been submerged and it is predicted that many more will vanish if sea level rise maintains its current pace.

Salinisation is threatening agriculture and health

Where land is not yet lost, frequent flooding with salty water from rising sea levels and extreme weather events renders affected land unproductive. Increasing water and soil salinity are also caused by climate-induced changes in temperature and rainfall, along with reduced freshwater flows from the Himalayas in the dry season. In the last 40 years, approximately 25% of glacial ice has been lost in the mountain range, posing a significant risk to stable and reliable freshwater supplies to major rivers, such as the Ganges and Brahmaputra, that flow into the Sundarbans. 

In the Sundarban region, water and soil salinity has increased dramatically, with projections that many parts of the region will reach near ocean-level salinity by 2050. In Bangladesh, soil salinity increased six times, and up to fifteen times in certain areas, from 1984 to 2014. The salinisation of soil ruins crops and devastates farmer livelihoods. Research estimates a one metre increase in sea level would cause losses as high as USD 597 million in agriculture from salinity-induced land degradation. Some villages no longer support agriculture due to recurrent salt water inundation. When households are no longer able to grow crops on land due to lack of access or salty soil, they are unable to engage in subsistence farming and are exposed to the cash economy, increasing their risk of food insecurity.

Progressive salinisation of rivers and groundwater has also resulted in the decline of available fresh drinking water, with numerous adverse effects on mother-child health, including dehydration, hypertension, prenatal complications and increased infant mortality. Collection of data from drinking wells in the Indian Sundarbans found that 17 out of 50 wells sampled contained salinity levels unsuitable for drinking. Increased saline water levels also cause high blood pressure and fever, as well as respiratory and skin diseases. A vulnerability assessment of Mousuni Island in the Sundarban region found that 80% of the villagers experienced skin disease caused by salty water. Additionally, 42% of households suffered infectious diseases, such as malaria and dengue fever, during flooding. Under high emissions scenarios, climate change is expected to make the prevalence of disease, particularly water-borne illnesses, even higher.

Mangroves and biodiversity are being depleted

Mangrove forests are a crucial natural blockade against cyclones, storm surges and tides, and sustain the high levels of biodiversity in the region. One study estimates that between 2000 and 2020, 110 km2 of mangroves disappeared from the reserve forest of the Indian Sundarbans due to erosion. While 81km2 of mangroves were gained through plantation and regeneration, the gains were all outside the existing mangrove forest. Another study looking at the coverage of mangrove forests between 1975 and 2020 found that mangrove forests have been decreasing in density by an estimated annual rate of 1.3%.

Researchers also observed a deterioration in the health of mangrove forests over the last twenty years due to increased salinity, temperature rise and rainfall reduction in pre and post-monsoon periods. While mangroves are known for their resilience, they are sensitive to changes in the salinity of water and soils, which is already resulting in shifts away from high-value timber species towards more salt-tolerant mangrove species. This is reducing the quality and overall availability of timber stocks, with implications for those relying on the forest for their livelihoods. Researchers estimate that there has been a loss of USD 3.3 billion in ecosystem services of the Sundarban Biosphere Reserve during the last 30 years, over 80% of which is provided by mangroves.

In a changing climate, it is expected that the Sundarbans landscape will undergo significant fragmentation, causing habitat loss for many endangered species, including tigers and venomous snakes, and this is increasing the risk of human-wildlife conflicts in the region. Sea level rise is resulting in habitat loss for many terrestrial and amphibian species. Habitats for freshwater fish are also shrinking as water becomes more salty, threatening many small, indigenous freshwater species. This has adverse impacts on the livelihoods of fishermen, as well as on human health as fish is a critical source of protein and nutrients in the Sundarbans. For example, in regions with high levels of fish species loss, chronic and acute malnutrition among mothers and children is higher than the thresholds set by the World Health Organization for public health emergencies.

Extreme weather events are more frequent and severe

While the Sundarban region has always been affected by cyclones and extreme weather events, the rate and intensity of these events are increasing. In the last 23 years, the area has witnessed 13 supercyclones. In the Bay of Bengal along the Sundarbans, the occurrences of cyclones increased by 26% between 1881 and 2001. Additionally, research has shown there has been a significant rise in the frequency of very severe cyclones in the post-monsoon season from 2000 to 2018. Scientists project an increase of about 50% in the frequency of post-monsoon cyclones by 2041-2060. 

The rise in cyclone frequency and severity is in part attributed to the increase in sea surface temperature, which rose in the Indian Sundarbans at 0.5°C per decade from 1980 through to 2007 – around eight times higher than the globally-observed warming rate of 0.06°C per decade. Land surface temperature in Sundarban region has already increased about 1°C over the past century and is projected to warm by up to 3.7°C by 2100.

Due to the low elevation of the Sundarbans and reduced protection from mangroves, cyclones can cause catastrophic damage. Four major cyclones have hit the Sunderbans in the last three years, killing nearly 250 people and causing losses of nearly USD 20 billion. Cyclone Amphan in 2020 was estimated to have destroyed 28% of the Indian Sundarban region and caused USD 12 billion of damage. The Cyclone displaced 2.4 million people in India and 2.5 million people in Bangladesh. While many returned soon afterwards, damage to more than 2.8 million homes and lack of evacuation centres resulted in homelessness and prolonged displacement for many thousands.

Following Amphan, the government estimates over 100,000 farmers experienced heavy losses as salt water in fields and ponds killed off fish and rendered fields uncultivable. With hundreds and thousands of extra mouths to feed, conflicts between humans and tigers spiked as islanders began venturing deep into the forests in search of fish, crab, honey and firewood.

Livelihoods are being hit hard

About five million people are dependent on the Sundarbans for their livelihoods. According to the World Bank, almost 80% of households in the Sundarbans pursue livelihoods that involve inefficient agriculture, fishing and aquaculture production methods. Dependence on the land and natural resources paired with a lack of alternative employment opportunities means livelihoods are extremely vulnerable to changing climatic conditions.

Salinisation is threatening agriculture. Fishermen are impacted by the decline in fish populations. Forest-based livelihoods are adversely impacted by changes in the composition of mangrove species, which is reducing the value of standing timber and honey production. A study of three villages in the Indian Sundarbans found that 62% of the workforce has lost their original livelihoods and have been forced to rely on much more uncertain incomes. 

Even though the impacts of climate change put their livelihoods at greater risk, some households continue to live in vulnerable locations due to high land prices and a lack of employment opportunities elsewhere. Due to a lack of job opportunities, others need to migrate to seek out employment, temporarily or sometimes permanently. 

Young men and women have had to leave for nearby cities, or even states over 1,000 kilometres away. There they face a precarious existence as daily wage labourers and contract workers at construction sites and factories. Some estimates suggest that roughly 60% of the male workforce in the Indian Sundarbans has migrated. Migration has also increased the poverty of the population left behind since it takes considerable time for low-skilled migrant family members to save sufficient funds to send back home.

Migration as a last resort

An estimated 1.5 million people will have to be permanently relocated outside the Sundarbans because sea level rise will make it impossible for them to live there or earn a livelihood. As climate change is responsible for their forced migration, these people are climate refugees – however, the term is not formally recognised internationally.  Additionally, extreme poverty both arises from and contributes to their vulnerability to environmental hazards. 

Over the past 25 years, four islands in the Indian Sundarbans – Bedford, Lohachara, Kabasgadi and Suparibhanga – have already disappeared, causing 6,000 families to become displaced. Lohachara became well-known as the first inhabited island in the world to disappear. Neighbouring Ghoramara is already half underwater. Once home to 40,000 people, the 2011 census counted only 5,000 people still struggling on the island. 

Many of those displaced relocated to nearby Sagar island with the aid of government programmes in the 1980s and 1990s. However, with a population of 200,000 and growing, and with the island having shrunk by a sixth of its original size, land and resources are being severely depleted. One case study calculated the total value of damage to 31 households forced to move from inundated areas of the Sundarbans to the island of Sagar at Rs 6,0742,225 crore (USD 700,000), 98% of which was due to loss of land assets. 

Back in 2002, it was estimated that climate change would displace over 69,000 people from the Sundarbans by 2020. In 2018, about 60,000 people had already migrated from the region.

Why adaptation is not enough

Climate adaptation is the process of adjusting to current or expected effects of climate change. However, it is clear that adapting to some impacts of climate change will not be possible and, in some cases, the limits of adaptation have already been reached. 

A key adaptation measure is the construction of storm surge walls and embankments. However, even with these measures, the loss and damage inflicted by a few hours’ battering by waves, winds, and storm surges during a cyclone can undo the gains from many years of measures to prevent flooding. After Cyclone Aila in 2009 destroyed 778 km of embankments in the Sundarbans, it cost Rs 5,032 crore (USD 670 million) to rebuild them, only for them to be breached again ten years later by Cyclone Amphan. One Sundarban village, after embankments to hold back the rising sea collapsed during Cyclone Aila, attempted three times to build sea walls, all of which collapsed against the power of the sea. 

Another adaptation approach is the introduction of salt-resistant crops. This has been met with some success, but may prove to be a temporary fix, with hurdles such as the availability of seeds, knowledge of farming and relatively low yields. 

Adaptation practices can also exacerbate and accelerate the ecological damage caused. For example, increasing salinity levels prevent the cultivation of rice or other crops, causing some to shift towards shrimp farming, which requires salt water and can be more profitable. However, the conversion of land to shrimp farms further accelerates the salinisation of water while profits often only benefit private investors. Workers – primarily women – receive little income and suffer health issues, such as infections, problems with eyesight and skin disease.

For the people of the Sundarbans, lives depend upon the land on which they live, produce food and sustain their livelihoods. Some inhabitants have already had to relocate multiple times. In the words of one resident: “People are resilient, but how much resilience can they have?” The outlook is bleak for the Sundarbans, with proposals that ‘managed retreat’ – the planned migration away from vulnerable regions over time – may be the only viable option.

Why financing for Loss and Damage is needed

Loss and damage is a term used to describe how climate change is already causing serious and, in many cases, irrevocable impacts around the world – particularly in vulnerable communities. According to the most recent assessment of climate impacts from the Intergovernmental Panel on Climate Change (IPCC), loss and damage can broadly be split into two categories – economic losses involving “income and physical assets”, and non-economic losses, including “mortality, mobility and mental wellbeing losses”. 

For the people of the Sundarbans, the economic and non-economic losses, such as loss of land, livelihood, mortality, health, culture, are beyond what the region can afford. According to a 2009 study, the annual costs of the environmental damage and health issues caused by climate change are estimated at Rs 1290 crore annually (USD 250 million) – equivalent to 10% of the Sundarbans GDP in 2009. 

The Sundarbans bear little responsibility for global emissions (for example, the whole country of Bangladesh is accountable only for only 0.56% of global emissions), but are forced to suffer the consequences. Alongside many other developing nations and vulnerable communities, the region argues strongly that it should not be forced to pay for the excessive loss and damage already incurred, and anticipated in the future.

Key takeaways from the three working group reports of the IPCC sixth assessment

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Key points

  • Climate change is unequivocally caused by human activities as a result of burning fossil fuels, industrial processes and land use change and it is a threat to human well-being and planetary health.
  • Losses and damages from climate change will increase rapidly with further warming, in many cases creating risks that people and nature will be unable to adapt to. If emissions are cut at the rate currently planned, the resulting temperature rise will threaten food production, water supplies, human health, coastal settlements, national economies and the survival of much of the natural world.
  • To prevent further warming, urgent emission reductions across all sectors and rapid scale up of electrification are needed to reduce emissions and keep warming to 1.5°C by the end of the century. However, even the most ambitious scenarios indicate global temperatures will temporarily overshoot 1.5°C.
  • Models from the Working Group 1 and 3 report both indicate that deep reductions in other greenhouse gases, particularly in methane emissions, will help lower peak warming. 
  • Any further delay in concerted global action on adaptation and mitigation will miss a brief and rapidly-closing window of opportunity to secure a liveable and sustainable future for everyone.

IPCC’s sixth assessment cycle 

Between 2020 and 2022, the Intergovernmental Panel on Climate Change (IPCC) released three reports from its sixth assessment cycle covering the latest science on the physical state of the global climate (Working Group 1, WGI), the impact of climate change (Working Group 2, WGII) and mitigation of climate change (Working Group 3, WGIII). 

The sixth assessment cycle (AR6)  included 782 scientists, who worked on a voluntary basis, with 67 countries contributing to create the most authoritative assessment of climate change to date. 

This briefing summarises key themes that run through these three reports: 

  • The human-driven impact of climate change
  • The cause and current trajectory of our climate crisis
  • The speed and scale of the transformation required to achieve a safe(r) climate

Climate change is happening all around us 

The term “unequivocal” was used in both WG1 and WG2 to describe the scientific consensus that the climate is changing as a result of human activity, representing a threat to human well-being, societies and the natural world.1WG1, SPM A.1, WG2, SPM D.5.3. Human actions have warmed the climate at a rate that is unprecedented in at least the last 2,000 years, increasing the frequency and intensity of extreme weather events across the world. 2WG1, SPM1.WG2,SPM B.1.1 The physical impact of climate change is causing substantial damages and, in some cases, irreversible losses.3WG2,SPM B.1.1 

The WG2 report emphasised that we have a brief and rapidly-closing window of opportunity to secure a liveable future. Additionally, WG3 stressed that without urgent, effective and equitable mitigation, climate change increasingly threatens the health and livelihoods of people around the globe, ecosystem health and biodiversity.4WG2, SPM D.5.3 and WG3, SPM D.1.1

National commitments made by governments prior to COP26 are not enough to limit warming to 1.5°C and are likely to lead to global warming of 2.8°C by 2100. 5WG3, SPM B.6.WG3, SPM C.1.1. Both WG1 and WG3 reports agreed that even in the most ambitious emissions reduction scenario, it is more likely than not that global warming will reach 1.5°C by 2030 and overshoot to 1.6°C, before dropping back down.6WG1 Table SPM1, WG3, SPM Table SPM 2

The WG2 report described the devastating impacts of our current emissions pathway:

  • Food production and food security will be threatened by even a small amount of additional warming, which will cause increases in the severity and frequency of heatwaves, droughts and floods, along with sea-level rise7WG2, SPM B.4.3.
  • If warming reaches 2°C, there will be significant increases in ill-health and premature death as a result of more extreme weather and heatwaves, and disease spread8WG2, SPM B.4.4.
  • The extinction risk for unique and threatened species will be at least 10 times higher if temperature rise continues to 3°C, compared with if it is limited to 1.5°C.9WG2, SPM B.6.4.

Reliance on fossil fuels is the root cause of climate change 

Human activities around fossil fuel combustion, industrial processes, land use change and forestry have caused greenhouse gas (GHG) emissions to increase dramatically since pre-industrial times, and emissions were higher between 2010-2019 than in any previous decade.10WG3, SPM B.1, Footnote 6WG3, SPM B.1. Of the GHGs, CO2 has contributed the most to recorded warming to date, followed by methane.11WG1, Figure SPM2.WG1 D.1.7, Figure SPM2
In 2019, coal contributed to 33% of all human-related CO2 emissions, followed by oil (29%) and gas (18%).12WG3, Technical Summary, Figure TS.3. Public and private finance continue to flow into fossil fuels and, as a result, GHG emissions continue to rise across all sectors and subsectors, and most rapidly in transport and industry. 13WG3, Technical Summary, page 23.WG3, SPM B.5.4. Between 2019-2020, investment in fossil fuels was greater than that for climate adaptation and mitigation.14WG3, SPM B.5.4. In the power sector, fossil fuel-related investment was, on average, USD 120 billion a year. An average of USD 650 billion were invested in the oil supply and USD 100 billion in coal supply.15WG3, Chapter 15, 15.3.3. In comparison, actual global public finance flow for adaptation was USD 46 billion.16WG3, Chapter 15, 15.1.1.

Delayed climate action in reducing our reliance on fossil fuels is partly the result of a concerted effort to generate rhetoric and misinformation that undermines climate science and disregards risk and urgency.17WG2, Chapter 14, 14.3.1. This is particularly true in the US, where despite scientific certainty of the anthropogenic influence on climate change, misinformation and politicisation of climate change science has created polarisation in public and policy domains.18WG2, Chapter 14, 14.3.1.

People who have contributed the least to the existing climate crisis are likely to be the most vulnerable and least able to adapt. The richest 10% of households contribute about 36%-45% of global GHG emissions. About two thirds of the top 10% richest households live in developed countries.19WG3, Technical Summary, page 21. But increased heavy rain, tropical cyclones and drought will force more people from their homes, particularly in places that are more vulnerable and have less ability to adapt.20WG2 SPM B.4.7. 

Urgent, transformative change is needed to limit global warming

To limit warming to 1.5°C, we need to drastically reduce our reliance on fossil fuels for energy production and switch to widespread electrification using renewable energy generation. 21WG3, SPM C.3.2.WG3, SPM C.3.2. Changing how electricity is generated is especially important in transitioning our energy system, and in scenarios limiting warming to 1.5°C (with no or limited overshoot), the electricity sector reaches net-zero CO2 emissions globally between 2045 and 2055.22WG3, Chapter 6, Executive summary. In these scenarios, electricity supply rises to 48%-58% of final energy use by 2050 (in comparison to 20% in 2019).23WG3, Chapter 6, Executive summary. A combination of widespread electrification of all energy demand and a shift to renewable electricity systems that emit no CO2 will create co-benefits such as better health and cleaner air.24WG3, SPM C.4.1, SPM E.2.2.

We also need to have strong, rapid and sustained reductions in methane emissions. Models show that reducing methane emissions by a third by 2030 is needed to create a net cooling effect. 25WG3, SPM C.1.2.WG2, SPM D.1.7. Deep GHG emission reductions by 2030 and 2040 – particularly reductions of methane emissions – lower peak warming, reduce the likelihood of overshooting warming limits and lead to less reliance on net negative CO2 emissions that reverse warming in the latter half of the century.26WG2, SPM C.2.

Global use of coal, oil and gas (without CCS) is reduced by 100%, 60% and 70% respectively by 2050 in pathways that successfully limit warming to 1.5°C with no or limited overshoot.27WG3, SPM C.3.2. If not phased out, existing and planned fossil fuel infrastructure (without CCS) will make limiting warming to 1.5°C impossible.28WG3, SPM B.7

Rapid and deeper near-term GHG emissions reduction through to 2030 will lead to less reliance on carbon dioxide removal (CDR) in the longer term, but it is likely that we will need some CDR to counterbalance residual GHG emissions from hard-to-abate sectors.29WG3, SPM C.2.2, SPM C.3

CDR is not a ‘get out of jail free card’, especially at higher levels of warming because the ability of land and ocean sinks to sequester carbon will be greatly reduced at higher temperatures.30WG1, Figure 7 CDR also has limited ability to preserve existing ecosystems. If temperature rise passes 1.5°C, entire ecosystems will be irreversibly lost (including polar, mountain and coastal ecosystems, and regions that would be affected by ice-sheet and glacier melting),  even if temperatures are later reduced with measures to remove CO2 from the atmosphere.31WG2, SPM B.6.1

Some progress is being made

The WG3 report made it clear that there are mitigation options available in all sectors that could together halve global GHG emissions by 2030.32WG3, SPM C.12.1 Growing numbers of countries have seen the advent of cheap renewables that will power electric vehicles, heat pumps and other smart, emissions-free technologies. 

From 2010–2019, there were sustained decreases in the unit costs of solar energy (85%), wind energy (55%) and lithium-ion batteries (85%), and large increases in their deployment – for example >10x for solar and >100x for electric vehicles (EVs).33WG3, SPM Figure SPM 3 PV, onshore and offshore wind can now compete with fossil fuels on the levelised cost of energy in many places and electricity systems in some countries and regions are already predominantly powered by renewables.34WG3, Figure SPM 3, C.4.3 Large scale battery storage on electricity grids is increasingly viable.35WG3, Chapter 6, Executive summary

Electric vehicles are increasingly competitive against internal combustion engines, and it is the fastest growing segment of the automobile industry, having achieved double-digit market share by 2020 in many countries.36WG3, SPM Table TS.1  Electrification of public transport has been demonstrated as a feasible, scalable and affordable option to decarbonise mass transportation. 

There is also some green shoots evidence of climate policy beginning to have a positive real-world impact on emissions reductions that can be built on, for example:

  • At least 18 countries have now sustained production-based GHG and consumption-based CO2 emissions reductions for longer than 10 years.37WG3, SPM B.3.5
  • By 2020, over 20% of global GHG emissions were covered by carbon taxes or emissions trading systems, although coverage and prices have been insufficient to drive deep reductions.38WG3, SPM B.5.2
  • There are now ‘direct’ climate laws focused on GHG reduction in 56 countries covering 53% of global emission in 2020, and climate litigation is on the rise.39WG3, SPM B.5.2, E3.3
  • 1
    WG1, SPM A.1, WG2, SPM D.5.3.
  • 2
    WG1, SPM1.WG2,SPM B.1.1
  • 3
    WG2,SPM B.1.1
  • 4
    WG2, SPM D.5.3 and WG3, SPM D.1.1
  • 5
    WG3, SPM B.6.WG3, SPM C.1.1.
  • 6
    WG1 Table SPM1, WG3, SPM Table SPM 2
  • 7
    WG2, SPM B.4.3.
  • 8
    WG2, SPM B.4.4.
  • 9
    WG2, SPM B.6.4.
  • 10
    WG3, SPM B.1, Footnote 6WG3, SPM B.1.
  • 11
    WG1, Figure SPM2.WG1 D.1.7, Figure SPM2
  • 12
    WG3, Technical Summary, Figure TS.3.
  • 13
    WG3, Technical Summary, page 23.WG3, SPM B.5.4.
  • 14
    WG3, SPM B.5.4.
  • 15
    WG3, Chapter 15, 15.3.3.
  • 16
    WG3, Chapter 15, 15.1.1.
  • 17
    WG2, Chapter 14, 14.3.1.
  • 18
    WG2, Chapter 14, 14.3.1.
  • 19
    WG3, Technical Summary, page 21.
  • 20
    WG2 SPM B.4.7.
  • 21
    WG3, SPM C.3.2.WG3, SPM C.3.2.
  • 22
    WG3, Chapter 6, Executive summary.
  • 23
    WG3, Chapter 6, Executive summary.
  • 24
    WG3, SPM C.4.1, SPM E.2.2.
  • 25
    WG3, SPM C.1.2.WG2, SPM D.1.7.
  • 26
    WG2, SPM C.2.
  • 27
    WG3, SPM C.3.2.
  • 28
    WG3, SPM B.7
  • 29
    WG3, SPM C.2.2, SPM C.3
  • 30
    WG1, Figure 7
  • 31
    WG2, SPM B.6.1
  • 32
    WG3, SPM C.12.1
  • 33
    WG3, SPM Figure SPM 3
  • 34
    WG3, Figure SPM 3, C.4.3
  • 35
    WG3, Chapter 6, Executive summary
  • 36
    WG3, SPM Table TS.1
  • 37
    WG3, SPM B.3.5
  • 38
    WG3, SPM B.5.2
  • 39
    WG3, SPM B.5.2, E3.3

IPCC Sixth Assessment Report: Impacts, adaptation and vulnerability

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The Intergovernmental Panel on Climate Change (IPCC) has released the second part of its four-part, Sixth Assessment Report (AR6) in February 2022. The Working Group II (WGII) report is the most comprehensive review of climate impacts – and how much we can adapt to them – since its 2014 5th Assessment (AR5).1WGIII in March will be the last of three separate Working Group reports published in the AR6 cycle and then a Synthesis Report will be published later in 2022. ‘The Physical Science Basis’ which detailed the current state of the climate was published on 9 August 2021 and the second report ‘impacts, adaptation and vulnerability’ is due February 2022. Line-by-line approval by governments as well as acceptance of the underlying scientific report ensures high credibility in both science and policy communities and ownership by governments. 

The report summarises the current understanding of how climate change impacts humans and ecosystems. Compared to previous IPCC reports, WGII integrates more from economics and the social sciences and highlights more clearly the important role of social justice in adapting to climate change.

Based on publicly-available literature, this briefing covers some of the major developments in our knowledge of climate change impacts and adaptation since AR5. 

1. Climate change is severely impacting people and the ecosystems we depend on 

In August 2021, the IPCC published the first part of its 6th assessment report (WGI – Physical Science). WGI found that greenhouse gases from human activities had caused approximately 1.1°C of global warming by 2010-19 compared to 1850-1900, and that global temperature is expected to reach or exceed 1.5°C of warming over the next 20 years. Dubbed a “code red” for humanity by the UN’s António Guterres, the report left no space for doubt – climate change is unequivocally the result of human activities and at the current 1.1°C of global warming we are already seeing increasing impacts, including from extreme weather events such as heatwaves, droughts and flooding across the world. It also warned of abrupt responses and tipping points in the climate system (such as increased glacial melting of approximately 600 Gt of ice annually). 

A Special Report on 1.5°C (SR1.5) emphasised that the world will face severe climate impacts even with 1.5°C of warming, and the effects get significantly worse with 2°C and worse still at higher levels of warming. The expectation is that WGII will pick up on explaining and outlining these risks, as recent research has shown that exceeding the 1.5°C temperature limit could lead to irreversible impacts, like the loss of species and biomes, with serious consequences, not least for food security, for humans.

Compared to the last IPCC Assessment in 2014, AR6 sees an increased focus on regional impacts, benefiting from improved models and knowledge of how global impacts manifest regionally. WGI already presented the main physical climate impacts projected for the world’s regions. For example, the African continent is already experiencing higher warming and sea level rise than the world average. In the next decade, Africa will see more frequent and intense heatwaves (up to five times more common in 2050 than today) as well as heavier precipitation, more frequent and intense droughts, and more common and severe coastal flooding. In Europe, the frequency and intensity of hot extremes is increasing, and will continue to do so, while glaciers and snow cover will continue to disappear. In North and Central America, for example, the IPCC states that tropical cyclones and heavy rainfall will become ever more frequent as the world continues to warm.2For a detailed breakdown of the IPCC’s regional findings please take a look at their individual factsheets, published August 2021.

Since AR5, more research has been done to connect the physical impacts of climate change to socio-economic and justice implications. Building on findings in the WGI report, WGII will go much further by describing the damaging impacts of climate change on humans, ecosystems and the economy, charting how climate change is disrupting livelihoods and the systems we depend on. 

2. Extreme weather is causing unprecedented damage

Since the AR5 WGII report, extreme weather events that are caused or exacerbated by climate change have caused widespread and severe damage. One of the main developments in climate science since the last IPCC report has been the expansion of ‘attribution literature’. Attribution studies can tell us if, and how, climate change made a particular extreme weather event more likely or more intense. The expanded attribution literature shows that heatwaves, droughts, tropical cyclones and even locust swarms are directly linked to climate change caused by human activities. 

Many of the extreme weather phenomena that the world experienced in 2021 have been attributed to human-induced climate change. The Pacific Coast heatwave in June 2021 was found to be ‘virtually impossible’ without climate change. Climate change made the massive wildfires that ripped through California and Oregon, extreme heat across the Mediterranean, and the severe flooding that Western Europe experienced much more likely. In September, the National Oceanic and Atmospheric Administration (NOAA) linked the most severe southwest USA drought in history to climate change. Meanwhile in Siberia, wildfires released about as much CO2 as Germany produces in a year. By November, the intense rain and flooding in British Columbia, ‘made worse because of climate change’, forced 17,000 from their homes.

It is also clear that the world’s poorest and most vulnerable are at greater risk, including from mortality and other health consequences of extreme weather. Over the last decade, the mortality from floods, drought and storms has been up to 15 times higher in the most affected countries, including most of Africa and large parts of Central America, compared to less affected countries (like those located in western and northern Europe). Between 1970 and 2019, more than 91% of the deaths from weather, climate and water hazards across the world have been in developing nations. Emerging research has also found an increasing mental health burden of extreme weather. Post-traumatic stress disorders, anxiety, grief and survivor guilt are among some of the mental health challenges observed in people after extreme weather events.

Large scale human migration and displacement could be driven by more frequent resource scarcity, damage to infrastructure from extreme weather events, and increases in the frequency and severity of disease outbreaks. Human populations are concentrated in narrow climate bands, with most people living in places where the average annual temperature is about 11°C-15°C and a smaller number of people living where the average temperature is about 20°C-25°C. The climate hazard of rising temperatures alone is predicted to force 3.5 billion people to live outside the climatic zones  where humans have thrived for 6,000 years. Higher temperature is projected to increase asylum applications in the EU by 28%. In 2018, the World Bank estimated that three regions (Latin America, sub-Saharan Africa, and Southeast Asia) will generate 143 million more climate migrants by 2050. The most foreseeable case of migration as a response to climate impacts will likely be the Pacific Islands. The sea level rise (at a rate of 12 millimetres per year) has already submerged eight islands in the western Pacific. Two more are on the brink of disappearing, prompting a wave of migration to larger countries. Despite this, no international agreements exist on how to protect those who are displaced and forcibly moved as a result of climate change. In 2015, a family from Kiribati applied for refugee status in New Zealand, citing climate change as the reason for the forced migration. Their application was originally denied by the New Zealand Immigration and Protection Tribunal, the Court of Appeal and the Supreme Court.

3. Impacts are getting worse, hitting marginalised people the hardest 

Climate risks that negatively impact ecosystems will further limit the services these systems provide to society, and could reduce access to energy, healthcare, water and international trade. Building climate resilience is, therefore, an essential component of sustainable development, and WGII is expected to discuss the core principles of climate resilience development such as the trade-offs and synergies of sustainable development, adaptation and mitigation, and the social effects of greenhouse gas emissions. Research has shown that human-induced climate change could occur across 80% of the world’s land area, where 85% of the population reside. These impacts will propagate across national boundaries through global supply chains, which are increasingly compromised by climate impacts. In the US, the annual costs to supply chains from natural disasters rose to a record high of USD 95 billion in 2020. These costs will continue to grow. For example, McKinsey predicts that a collapse in the global supply of semiconductors (critical to the global tech industry) from a hurricane will grow up to four times by 2040 due to climate change. 

Food production systems are also under increasing pressure. Human activities have already changed 75% of the Earth’s land, and nearly 75% of freshwater resources are now devoted to crop or livestock production. Today, 25% of the total land area of the world is degraded. Land degradation has reduced the productivity of 23% of the global land surface, with global agriculture crop production increasing by 300% since the 1970s. The IPCC’s Special Report on Land (SRCCL) estimated that soil erosion from agricultural fields is 10 to 20 times (no tillage) to more than 100 times (conventional tillage) higher than the soil formation rate. Scientists have warned 24 billion tons of fertile soil are lost each year, largely due to unsustainable agriculture practices. If this trend continues, 95% of the Earth’s land areas could become degraded by 2050. Studies that separate out the effects of climate change alone have shown that yields of some crops (like maize and wheat) in many lower-latitude regions have declined. Increasing temperatures will continue to impact food production, estimating up to a 29% increase in the cost of cereals by 2050, depending on the amount of warming. These price increases will impact consumers globally, with low-income consumers at particular risk of malnutrition.

As a result of climate change and land degradation, one million animal and plant species are now threatened with extinction, many within decades – more than at any time in human history, according to the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES). Today, only 15% of land and just under 8% of the ocean are under some form of ecosystem protection. IPBES concludes that the loss of ecosystems has made human communities more vulnerable to climate impacts. Continued overlapping climate change with non-climatic pressures like land-use change, deforestation, infrastructure development, resource extraction, overfishing and pollution will continue to threaten ecosystems and people’s livelihoods. Climate change currently affects at least 10,967 species on the International Union for Conservation of Nature (IUCN)’s Red List of Threatened Species. The Bramble Cay melomys (a genus of rodents) is the first mammal reported to have gone extinct as a direct result of climate change. 

Since AR5, more research has shown that the most marginalised, both economically and socially, are hit first and hardest by climate impacts, both in the global south and north. Climate change could cause GDP losses of 64% in the world’s most vulnerable countries, and the impacts of climate change may further exacerbate marginalisation and injustices. On a global scale, new research shows the vulnerabilities of the urban poor. According to one study, if greenhouse gases continue on their current trajectory, 215 million urban poor around the world will be exposed to average summer temperatures of over 35°C – an eightfold rise from today – which will increase the risks of heat mortality. 

Worryingly, scientists say that ‘compound extremes’ will become more common in a warming world, and that these events are likely to cause more suffering than we would see from individual events alone. Compound extremes arise when multiple climate hazards (such as extreme temperature and precipitation) occur simultaneously in the same place, affect multiple regions at the same time, or occur in a sequence (commonly referred to as cascading events). Climate hazards can be also compounded by other human impacts, such as pollution, habitat fragmentation and environmental degradation. For example, the rise in concurrent drought and heatwave events was especially observed in southern and central Africa over the last decade, and the impact of these compound events can last longer as a result of climate change.3The researchers model the difference between the period 1983-1999 and 200-2016. An initial rise in temperature can trigger a cascade of climate impacts. For example, sustained higher temperatures that decrease in soil moisture will suppress plant growth, which in turn suppresses rainfall, leading to more drought in what is known as an escalating ‘feedback loop’. In recent years in California, a combination of droughts and heatwaves have led to wildfires and in some cases, been followed by heavy rain and landslides.

Academic literature exploring the complex connections between climate change, extreme weather, migration and conflict has also expanded. The civil war in the Darfur region of Sudan is an example of a conflict researchers think was made worse, or even triggered, by a changing climate. In 1983-84, a drought fuelled a famine that killed over 100,000 people and led to mass ecological migration, mainly towards southern Darfur. As people migrated into different regions, ethnic polarisation disrupted regional harmony and triggered conflict. Migration is a complex topic, which cannot be simply attributed to one cause. However, researchers have focused on the increased risks of migration that small island states and coastal cities will face due to climate change. One estimate suggests that between 17 million and 72 million people may have to relocate from coastal settlements if sea levels rise somewhere between 0.3 and 1.7 metres.

4. Adaptation is vital, but far more is needed

Since AR5, there has been an increase in adaptation activities, including by governments, businesses and civil society, with most in response to extreme weather events. For example, an EU Commission-funded project by the WHO and the London School of Tropical Medicine charts the need to shift from disaster response to risk management for flooding in Europe, including better warning systems and health protection measures. However, though adaptation options are available across all sectors and can reduce the risks of climate change, adaptation has so far been dominated by small changes to current systems, rather than the transformative changes that experts say we needed. 

Adaptation and biodiversity are closely linked and implementing nature-based solutions (NbS) can create co-benefits for adaptation to climate change, for nature and its contribution to people. However, trade-offs can arise if climate mitigation policy encourages NbS with low biodiversity value, such as afforestation with non-native monocultures. In 2021, the IPBES and IPCC found that the “mutual reinforcing of climate change and biodiversity loss means that satisfactorily resolving either issue requires consideration of the other.” One of the best documented co-benefits of adaptation is the positive impact on population health, both physical and mental, when investing in nature-based and green infrastructure in cities. Similarly, scientists found that global mangroves are responsible for storing a stock of 6 billion tonnes of carbon, and that restoring mangroves protects against flooding and is two-to five-times cheaper than conventional engineered sea level rise protection. As a result, several nations, including Indonesia, India, Bangladesh and Sri Lanka, are investing in mangrove restoration for adaptation. 

Scientists have made significant progress in estimating the costs of climate change impacts, finding that adaptation can be cost effective if it is done in a timely manner. The upcoming IPCC report is likely to reflect that, although numbers still vary widely, the costs of impacts are now thought to be much higher than AR5 suggested. Yet despite the benefits to adaptation (and the threat of tipping points), currently most climate finance is directed to mitigation and there remains a large finance gap (public and private) between the amount of money flowing to developing countries and the amount needed. Estimated adaptation costs in developing countries are five to 10 times greater than current public adaptation finance, and the adaptation finance deficit grows at higher levels of warming. It is expected that the WGII report will discuss some of the fundamental barriers to access private finance for adaptation, such as the fact that private investment tends to gravitate to opportunities where revenues are highest and risks are lowest, meaning it is unlikely to target the most vulnerable developing nations or non-market sectors, where adaptation is needed the most. 

Although adaptation is a necessary solution to the climate impacts we are already experiencing, previous IPCC reports have also emphasised the limitations of adaptation. The Paris Agreement refers to impacts of climate change that have not been, or cannot be, avoided through mitigation and adaptation and that are considered the third pillar of climate action. The AR5 WGII report discussed the losses and damages associated with ‘hard’ (biophysical, institutional, financial, social and cultural) and ‘soft’ (technological and socioeconomic) limits to adaptation. For example, there are hard physical limits to how much Small Island Developing States (SIDS) can adapt to rising sea levels, and their vulnerability to climate change is likely to lead to forced migration from these countries. For species and ecosystems, there may be hard limits to the physiological capacity of individual organisms to adapt to changes in the climate. Often, socioeconomic barriers stop the poorest and most vulnerable people from being able to adapt. The SR1.5 built upon these definitions and assessed the soft and hard adaptation barriers for impacts under a 1.5°C and 2°C  of global warming, and we expect the issue of equity and justice in responding L&D to be the focus of the upcoming AR6 report. 

5. The costs of inaction far exceed those of mitigation and adaptation

The need for, and success of, adaptation is closely linked to the level of mitigation we achieve. The AR5 WGII report highlighted that the overall risks of impacts can be reduced by limiting the rate and magnitude of climate change, which will in turn reduce the scale of adaptation required. Studies have found per capita GDP would be 5% higher by 2100 if temperatures are stabilised at 1.5°C above pre-industrial temperatures rather than 2°C and limiting global warming to 2°C instead of 4°C could save USD 17.5 trillion a year globally by 2100. Conversely, the cost of failing to limit warming to 1.5°C rises dramatically – from USD 1.3 trillion a year of inaction in 2010 to over USD 5 trillion a year in 2020.

Adaptation is already necessary and will be harder or impossible with greater warming. The economic damage that climate change and extreme weather events cause is already significant: The cost of climate impacts in Central America in 2010 ranged from 2.9% of GDP for Guatemala to 7.7% for Belize; Tropical Cyclone Pam caused loss and damage to Vanuatu’s agricultural sector estimated at 64.1% of GDP in 2015; while Hurricane Maria caused loss and damage totalling 224% of Dominica’s GDP in 2016. Nearly half the global population is already living in potential water-scarce areas at least one month a year and this could increase to some 4.8 billion – 5.7 billion by 2050. 

The WGII report discusses how a delay in mitigation and adaptation actions will threaten sustainable development, as climate change impacts and responses are closely linked to social well-being, economic prosperity and environmental protection. Human-induced climate change may lead to a decline in agricultural yields, water scarcity, food insecurities, reduced livelihoods and displacement of communities, and the impacts will not be felt equally by all. Climate change is projected to increase the number of people experiencing extreme poverty from 32 million to 132 million by 2030. The gap between the economic output of the world’s richest and poorest countries is 25% larger today than it would have been without global warming. If climate change is not addressed through global reduction in emissions, global income inequality is predicted to widen as a result of decreases in global incomes. 

6. Further reading: Explainers and scientific papers 

The list below summarises some important commentaries and scientific papers, focusing on those published in the last two years. It is not a comprehensive review of the scientific literature. To explore the specific topics further, please refer to the reference lists within these publications. 

1. Climate change is severely impacting people and the ecosystems we depend on

Explainers and reports 

Selected academic research studies and reviews  

2. Extreme weather is causing unprecedented damage – and it will get worse. 

Explainers and reports 

Selected academic research studies and reviews  

3. Impacts are getting worse, hitting marginalised people the hardest

Explainers and reports 

Selected academic research studies and reviews  

4. Adaptation is vital, but far more is needed

Explainers and reports 

Selected academic research studies and reviews 

5. The costs of inaction far exceed those of mitigation and adaptation

Explainers and reports 

Selected academic research studies and reviews 

  • 1
    WGIII in March will be the last of three separate Working Group reports published in the AR6 cycle and then a Synthesis Report will be published later in 2022. ‘The Physical Science Basis’ which detailed the current state of the climate was published on 9 August 2021 and the second report ‘impacts, adaptation and vulnerability’ is due February 2022.
  • 2
    For a detailed breakdown of the IPCC’s regional findings please take a look at their individual factsheets, published August 2021.
  • 3
    The researchers model the difference between the period 1983-1999 and 200-2016.

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