Private sector engagement to unlock climate finance


Climate change is a reality and it is mainly caused by man. Despite contributing less than 0.47% to global greenhouse gas emissions, Bangladesh is one of the most climate-vulnerable countries, with millions of people and livelihoods at risk.

Bangladesh has developed a Climate Change Strategy and Action Plan for 2009, comprising 44 programs under six thematic areas to address the adverse effects of climate change and support low-carbon economic growth. The government has demonstrated its commitment to undertake both adaptation and mitigation efforts by allocating funds from its annual budgets.

Bangladesh established “The Bangladesh Climate Change Trust Fund” in 2009 for adaptation, mitigation and research. Till 2020-21, the government has allocated Tk 3,900 crore to this fund from its own resources.

According to the Climate Budget Report 2021-2022, Bangladesh’s climate-related budget involving 25 ministries and divisions is $2.96 billion, or 0.73% of the country’s GDP.

Between 2015-16 and 2021-2022, Bangladesh doubled its climate budget. Yet financing the public sector through budget provisions appears grossly insufficient given the large investments needed for climate change adaptation and resilience building.

The World Bank estimates that the country would need $5.7 billion per year to finance adaptation by 2050. This amount is more than five times greater than current spending on adaptation to climate change.

In order to help climate victims and support their livelihoods (livelihoods are at stake due to rising sea levels and salinity, floods, droughts, storms, etc. ) and shelter, adaptation projects are essential. As Bangladesh is the least responsible for carbon emissions, adaptation is Bangladesh’s priority to combat the impacts of climate change.

The draft National Adaptation Plan (NAP) has identified 15 priority climate programs (activities, program deliverables and interventions identified), for which an approximate amount of Tk 7,30,600 will be required. Despite commitments from developed country Parties, Multilateral Development Banks (MDBs) and other development partners to increase investment in adaptation, private sector financing would be essential as public expenditure alone cannot meet the challenge. demand for climate change investment.

It should be noted that Bangladesh raises climate funds from financial institutions linked to the United Nations Framework Convention on Climate Change (UNFCCC), such as the Green Climate Fund (GCF), the Adaptation and the LDC Fund to meet its mitigation and adaptation commitments. , including the formulation of the NAP, within the framework of the Paris agreement.

With financial support from the GCF, Bangladesh is implementing a $33 million adaptation project to build the adaptive capacity of coastal communities, especially women, to cope with the impacts of climate-induced salinity. climate on their livelihoods and water security.

Developed country Parties channel climate finance through bilateral, regional and multilateral channels. Funds not linked to the UNFCCC, such as those created by multilateral development banks or United Nations programmes, bilateral donor governments and other grant providers, also provide climate funds to contribute to climate change mitigation and climate change. adaptation. However, accessing these funds often takes two to three years and involves complex application and approval procedures.

In 2009, developed countries committed (as part of the Copenhagen Accord) to jointly mobilize $100 billion a year by 2020 from a wide variety of sources: public and private, bilateral and multilateral, and alternatives to meet the needs of developing countries.

According to the Climate Policy Initiative, the engagement of the private sector in adaptation and climate resilience is not yet sufficient at present. Their commitments relate mainly to mitigation measures. Some notable successes can be seen in the area of ​​mitigation, particularly the large-scale deployment of solar systems in rural areas of Bangladesh.

As Bangladesh experiences the adverse effects of climate change, there is a growing sense that the private sector needs to engage more in adaptation activities. But since adaptation projects are often not cost effective, attracting private sector finance for adaptation projects is a challenge. Lack of country-level climate risk and vulnerability data needed for investment decision-making also inhibits the private sector from investing in climate change.

Now the question that may arise is: how to encourage the private sector to finance adaptation projects? A number of policy options can be considered to address the problem. Policy makers can deploy a range of public policies and public financing mechanisms to motivate private sector investments in adaptation.

The public sector and NGOs can undertake programs to sensitize the private sector to the fact that they are not immune to the adverse effects of climate change. Climatic events (flood, super cyclone, drought and storm surge) negatively affect private sector infrastructure, production and supply chain, which in turn affects their investments and economic returns.

The public sector can take steps to increase demand for adaptation products and services. Necessary rules and regulations related to climate risk assessment, disclosure and management can be defined.

Market studies describing climate risks specific to local areas to help the private sector better understand the risks affecting different businesses can be funded or undertaken. Viable business models can also be exposed for the private sector.

Potential private sector-led adaptation options may include supply of inputs for climate-resilient agriculture, cold storage at high temperatures for potatoes and tomatoes, development of irrigation and mechanization of agriculture.

In addition, the private sector can benefit from research and development support and concessional financing to acquire capital assets such as the manufacture of weather-resistant fiberglass boats (instead of fiberglass boats). wood). From a climate change adaptation perspective, fiberglass fishing boats are much more stable in turbulent weather and more resilient in flooding.

Concessional loans or financing can also encourage private sector engagement. Exemption from customs duties, VAT and other border charges on the importation of equipment to deal with climate change, such as early warning equipment, rainwater harvesting equipment and desalination plants, can also stimulate private investment. Tax exemptions for operating cold stores can also provide a tax incentive for the private sector.

Policy makers can also unlock and increase private sector investment in adaptation activities by de-risking their investments through the use of policies. De-risking involves activities such as investing directly in adaptation initiatives, providing seed funding for emerging adaptation technologies to bring them to market, and provisioning soft loans. liberal.

Last but not least, private sector financing must be promoted and motivated by different political support in order to generate sufficient funds for the climate cause. Increased private sector awareness of the importance of investing in climate change for the continuation of their business activities is of paramount importance.

The author is a climate change analyst and senior lecturer at the Faculty of Business Studies, University of Dhaka. He can be contacted at [email protected]


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