Project : Climate risk financing for Africa

Project : Climate risk financing for Africa

Share this:
Project detail:
Status: Completed
Tags: climate finance, finance

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.

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 assisted 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 were undertaken by others to develop the XCF.

This project:

  • Conducted country case studies to assess current adaptation planning best practices and capacity to absorb XCF funding. The countries studied were Burkina Faso, Ethiopia, Kenya, Malawi, Rwanda, Senegal and Zambia.
  • Determined the evaluation criteria and standards that investment plans should meet to qualify for XCF funding, specifically; produced an XCF investment plan template, recommendations on plan approval, implementation and monitoring standards and criteria to ensure quality of adaptation plans.

This project, supported by Kulima and the Frankfurt School - UNEP Collaborating Centre for Climate and Sustainable Energy Finance, aimed to help 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.

Read the project brief:

Briefing paper: Risk Financing for Climate Adaptation and Resilience

Read the ARC brochure

Budget: £289,946

Timeframe: January 2015 - December 2016