Developing countries are being short-changed of money to prepare for wilder weather and rising seas, according to critics, who say numbers are being miscounted or artificially inflated by donors.
The Asian Development Bank (ADB) has “hugely overstated” the amount of climate adaptation finance it provided to vulnerable countries, according to a report by charity Oxfam this month.
But ADB stood by its reported figures, saying Oxfam had used a different methodology to reach its results.
Critical reports have also said irrelevant international investments are sometimes being labelled as climate finance in order to boost figures, while too much is being provided as loans instead of grants.
Here’s the background on the “funding gap” for climate adaptation measures and why the figures are contentious:
What is the adaptation finance gap?
Rich countries pledged to provide US$100 billion in climate finance a year by 2020, but “it has still remained as elusive as a golden deer,” said Mizan Khan, deputy director of Dhaka-based climate think tank International Centre for Climate Change and Development (ICCCAD).
Adaptation finance allows vulnerable countries to take a range of measures such as making better preparations for floods or storms, introducing salt-tolerant crops and vegetables, or improving drainage systems for excessive rainfall.
The United Nations Environment Programme said in a report last year that projected annual adaptation costs and needs were US$215 billion to US$387 billion a year up to 2030, 10 to 18 times more than the actual finance of just US$21.3 billion in 2021.
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We are now in a situation when climate finance is almost not separate from the development assistance provided by rich countries - with more and more such finance being labelled as climate finance.
Colin McQuistan, head of climate and resilience, Practical Action
Are adaptation finance figures being inflated?
Globally, climate finance experts have cautioned against inflating figures and mislabelling projects as climate finance.
Oxfam’s analysis into ADB - which assessed the relevance and impact of financed activities - concluded the bank may have overstated its adaptation finance assistance by as much as 44 per cent in the projects it examined.
Only a very small share of adaptation cash was given as grants, Oxfam added in its report, which looked at financing in 2021-22. More than 90 per cent was in the form of loans, it said.
ADB stood by its data as well as its approach to financing climate action.
An ADB spokesperson said its numbers were calculated based on the joint-multilateral development bank methodology, which is different from the way Oxfam calculated its figures.
“As Asia and the Pacific’s climate bank, ADB is determined to deliver on our ambition to provide US$100 billion in climate financing — including US$34 billion for adaptation — from our own resources from 2019 to 2030,” the spokesperson said.
A Reuters investigation last year found that some international climate finance was going to “strange places” like building a coal plant, a hotel, chocolate stores, making a movie and an airport expansion.
The Green Climate Fund - the world’s largest such fund - recently came under criticism from non-profit Transparency International’s Bangladesh chapter for offering its scarce adaptation finance mostly as loans rather than grants for developing countries on the climate frontline.
Critics have highlighted a lack of agreed guidelines on what can be reported as climate finance, though multilateral development banks like ADB have rigorous guidelines for assessing and reporting it.
“We are now in a situation when climate finance is almost not separate from the development assistance provided by rich countries - with more and more such finance being labelled as climate finance”, said Colin McQuistan, head of climate and resilience at Practical Action, an international development charity.
What kind of adaptation finance works best for developing countries?
Developing countries have called for adaptation finance to be provided in the form of grants, or at least ‘soft’ loans with lower interest rates and longer repayment period compared to commercial funding.
Overall developing countries get 80 per cent of their adaptation finance as loans and only 20 per cent as grants, said Khan from ICCCAD.
“This is where least developed countries lose out,” he said.
With more loans, countries have to spend a lot of money in loan servicing instead of channelling funds to health care or social protection, said Sunil Acharya, Oxfam’s Asia regional policy and campaigns coordinator.
“Using loans as a key instrument for adaptation financing is a big injustice to countries dealing with climate impacts.”
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