Climate risk financing for Africa
Project Reference: AAAF-0017
The African continent is widely regarded as the most vulnerable to weather and climate risks, which stand to undermine life, livelihoods and could undermine record levels of economic growth in many countries. In response to this, the African Risk Capacity (ARC), a specialised agency of the African Union, is mandated to provide services to its member states to enable them to improve their ability to manage their climate and weather-related risks.
CDKN is supporting their latest venture. ARC is currently in the early design phase of a new facility, which would look to provide financial coverage for African governments on a longer time horizon, focusing on the prospective increased incidence of extreme weather events over the coming decades, rather than only on sudden onset events and inter-annual rainfall variation. The Extreme Climate Facility (XCF) would provide additional funds to countries already managing their weather risks with ARC, and located in regions that experience a detectable increase in the frequency and severity of extreme events. Such funds would allow countries to implement or scale-up their climate adaptation and/or disaster risk reduction (DRR) plans, in the regions where such investments are most needed.
There will also be an emerging need for an objective, data-driven allocation mechanism to ensure that funds are deployed in the regions where they are most needed. Recognising this need, the AU Ministers of Finance mandated the ARC Agency to explore the feasibility of developing a facility like XCF at their Seventh Joint Annual Meetings in 2014.
This CDKN project will assist ARC to inform better understanding of the feasibility of developing a model XCF adaptation criteria and investment plan template that could be used as the basis for several funding tranches to a country, should evidence of increasing severe and frequent extreme weather events emerge. There are three other pillars of work that will be undertaken by others to develop the XCF.
The project will:
- Conduct country case studies to assess current adaptation planning best practices and capacity to absorb XCF funding. The countries studied will be Burkina Faso, Ethiopia, Kenya, Malawi, Rwanda, Senegal and Zambia.
- Determine the evaluation criteria and standards that investment plans should meet to qualify for XCF funding, specifically; producing an XCF investment plan template, recommendations on plan approval, implementation and monitoring standards and criteria to ensure quality of adaptation plans.
If successful, this project, supported by Kulima and the Frankfurt School – UNEP Collaborating Centre for Climate and Sustainable Energy Finance, will shape the structure of the XCF’s criteria for adaptation plans and fiduciary compliance for African members states of ARC wishing to access the facility.
Timeframe: January 2015 – September 2016
Project Manager: Dr Suzanne Carter