TranslatingClimateRisksintoInvestmentsforResilience

‘RisktoResilience(R2R)’ConceptNotefortheNDCSupportClusterThematicWorkingGroup:Financing

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ThisdocumenthasbeenpreparedintheframeworkoftheNDCSupportClusteroftheInternationalClimateInitiative(IKI)fundedbytheGermanFederalMinistryfortheEnvironment,NatureConservationandNuclearSafety(BMU).Itrepresentstheauthors’personalopinionsanddoesnotnecessarilyreflectthepositionsofallimplementingpartnersoftheNDCCluster.Authors:CarlWesselink,MelanieStarkandJohnThorne(SouthSouthNorth),withcontributionsfromAnika Terton (IISD), Gloria Namazzi (GIZ Uganda), Malte Maas (GIZ), Kamleshan Pillay (SSN) andAmandaDinan(SSN)andfacilitationbyTobiasHausotter(Adelphi).

This isaconceptualdevelopmentofanideaconceivedataninnovationlabinJune2018convenedunder the auspices of theThematicWorkingGroup: Financeof the IKI-fundedNDC Cluster. Initialframing for the concept was taken further by SouthSouthNorth (SSN), who produced Version 1.0informed bymerging a Development Facilitation approach (championed by the National BusinessInitiative (NBI), DBSA’s Sustainable Communities Unit and others), and the long-term ScenarioPlanningApproach(developedbytheMAPSproject,runbySSNinLatinAmericafrom2012−2016).

SSN led the process of subsequent iterations, informed by inputs from a range of developmenteconomists and experts through a desktop review, and action research via a stakeholderengagementthattestedtheproposedconceptandmethodologywitharangeofprivatesectorandgovernmentactors(Appendix1).ThiswasmadepossiblewithfinancialsupportfromGIZ.

Thiscurrentdraft,V5.0,isthefinalproductofthisphase.SSN(workingwithitspartners)aimsnowto raise resources for implementation and has engaged with entities such as the Department ofEnvironmental Affairs to actively market and find fertile testing ground in line with governmentpriorities. SSNwill useanaction learningmethodologyapplied to thebiomasseconomic sector topilotandfurtherevolvetheapproach,beforetargetingothersectorsorgeographies.

05/2019

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Table of Contents TableofContents............................................................................................................................3

1 ExecutiveSummary.........................................................................................................................5

2 TheChallenge..................................................................................................................................7

3 AddressingtheChallenge:IntroducingClimate-AlignedIntermediaries........................................7

4 RationalefortheApproach.............................................................................................................9

4.1 MoreaboutClimate-AlignedIntermediaries........................................................................10

4.2 KeyStakeholderGroups........................................................................................................11

4.3 ChallengesandBarriersAddressedbytheApproach...........................................................12

4.4 ProcessOutputs....................................................................................................................13

5 SummaryoftheApproach............................................................................................................14

5.1 Step1:IdentifyOpportunityandDocumentBaseline..........................................................14

5.2 Step2:ExplorationwithCommunityofActors.....................................................................14

5.3 Step3:DiscoveryandAlignment..........................................................................................14

5.4 Step4:InvestmentApproaches............................................................................................14

5.5 InnovativeCharacteristics.....................................................................................................16

5.6 SuccessFactorsandReplicability..........................................................................................17

6 ExamplesofExistingGoodPractices.............................................................................................17

6.1 ExamplesofFrameworksforGoodPractices........................................................................176.1.1 Mitigation Actions Planning Scenarios (MAPS) ............................................................................ 17

6.1.2 National Roundtable on Economy and the Environment (Canada) .............................................. 17

6.1.3 Development Bank of South Africa (DBSA) ................................................................................. 18

6.2 Examplesofexistingclimateresiliencealignedcollaborations............................................186.2.1 The Upper Breede Collaborative Extension Group (UBCEG): Integrated landscape management

solutions 18

6.2.2 The Greater Cape Town Water Fund: Collaboration in Catchment Management ....................... 20

7 CaseStudy–PostFireRehabilitation............................................................................................22

7.1 Introduction..........................................................................................................................22

7.2 Baseline.................................................................................................................................22

7.3 ExplorationwithCommunityofActors.................................................................................22

8 InSummary...................................................................................................................................23

Appendix1............................................................................................................................................24

OverviewofStakeholderEngagement,22November2018.........................................................24

1.Propositionhasmerit,anintermediaryisneeded................................................................25

2.CAIsmustcreateandmanagetheiridentity.........................................................................25

3.Thereisnoonewayofdoingthis.........................................................................................25

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4.Developingapipeline............................................................................................................25

5. CAI work presents opportunities for monitoring impacts, and developing a new

industry ........................................................................................................................... 25

6. Textured nature of the sectors .................................................................................... 26

7. Timing and ownership ................................................................................................. 26

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1 Executive Summary Thereisanurgentneedforclimateactioninsub-SaharanAfricathatwillbuildresilienceandsupportsustainabledevelopmentalignedwithcountries’NationallyDeterminedContributions(NDCs)undertheParisAgreement.ThreeyearsposttheParisAgreementtheflowofclimatefinanceisontherise;but, as the Climate Policy Initiative1 confirms, recent increases are largely due to private capitalfundinglargerenewableenergyprojects.

AccordingtoSirNicholasStern,“Adaptationistheonlymeanstoreducethenow-unavoidablecostsof climate changeover thenext fewdecades" and “Adaptation can efficiently reduce the costs ofclimatechangewhileatmosphericconcentrationsofgreenhousegasesarebeingstabilised”2.

Despite this, and despite the increased focus on resilience for agriculture and rural householdsamongstclimatepractitioners,adaptationfinanceintheregionisstrugglingtoachievetherequiredscaletomeetthechallenge.3Recentclimateeventsduring2018haveaddedfurtherurgencytotherequiredlow-carbontransition,andthe1.5ºCpositionreceivedscientificsupportintheformofTheIntergovernmental Panel on Climate Change (IPCC) Special Report onGlobalWarming4whichwasreleasedinOctober2018.

Adaptationprojectsareoften,by theirnature,high riskandcomplex.Theability to secureprivatesectorfundinganddeliver impactrequirestheperspectivesofmultipleactorsandahighdegreeofcollaboration,inallphasesoftheprojectlifecycle.Thescaleandqualityofstakeholderinvolvementwilldeterminethefeasibilityoffinancingandtheeffectivenessofprojectimplementation.

The methodology described in this document responds to the pressing need for implementationaction; for achieving the active participation of the private sector in adaptation investments byproposingamulti-stakeholder,evidence-basedapproachtoco-producingadaptationandresilienceprojects that could result in private sector investment. It targets geographically localisedcommunities experiencing (or anticipating) a climate-induced risk. It draws fromexisting literatureandpractice,andproposesareplicablemethodologyandknowledgemanagementprocessthatcansupportimpactatscale.

Such an initiative requires a facilitation agent also capable of implementing or managing theoutcomes of the process. This document terms this agent (typically a team, or organisation, withextensiveexperienceintheclimatespace)a“climate-alignedintermediary”(CAI),whoseverynameishighlypropositionalintermsofthedesiredoutcomes.

CAIswould initiateorworkwithpublicofficials,businesses,communitiesand individualcitizens inresponse to local climate risks being experienced to co-create a long-term programme of climate

1 Climate Policy Initiative.Global Climate Finance: AnUpdatedView2018,November 2018. RetrievedMarch 2019 fromhttps://climatepolicyinitiative.org/wp-content/uploads/2018/11/Global-Climate-Finance-An-Updated-View-2018.pdf2AsquotedinWhatarepeoplesayingaboutadaptation?ClimateChangeAdaptationCommunityofPractice(CCACoP).RetrievedJanuary16,2018fromhttps://www.ccadaptation.ca/en/landing3S.Barnard,C.WatsonandL.Schalatek.Climatefinanceregionalbriefing:sub-SaharanAfrica,November2016.RetrievedMarch2019fromhttps://www.odi.org/publications/10612-climate-finance-regional-briefing-sub-saharan-africa4IPCC.(2018b).IPCCspecialreportontheimpactsofglobalwarmingof1.5°C-Summaryforpolicymakers,October2018.RetrievedNovember4,2018fromhttp://www.ipcc.ch/report/sr15/

Whatisneededisafacilitationprocessconvenedaroundlocalisedclimateimpacts,toidentifyinnovative(privatesector-led)solutionsthatwillincludetargetingkey(NDC-aligned)sectors,andthe

policyandfinancemechanismsnecessarytorealisethem.

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actiontogetherwithbusinesscasesthatwouldblendpublicandprivatefinancetoresult infundedresilienceactions.CAIsoperateon thebasis that “blendedoutcomesareanecessary first step forattractingblendedfinance”andreachingbothblendedoutcomesandtherequisite financing is theresultofagoaldirectedfacilitatedprocess.

Insummarytheapproachwouldprovide:

1. Amethodologyofconveningto identify theadaptationbusinessopportunities inherent in therisksituation,whichresultsinconsensusbuildingandjointplanning.

• Documentedprocessandcasestudiesfromimplementations.

• Explanationsofmethodologyforaudit/surveyofcurrentclimaterisksandopportunities.

• Aprocessforeffectiveandefficientprocurementandexpenditureincludingvalue-for-moneyassurance.

2. ApipelineofadaptationinvestmentcasesalignedwithcountryNDCs.

• Professional,resourced,targetedconveningofkeyactorsalignedtoprivateandpublicsectorprioritiesinanareawherespecificclimate-inducedrisksarealreadyapparentorthreatening.

• Deliveryoftechnicalandresearchdataindigestibleform.

• Arangeof investablebusinesscasestoattractbelendedfinancetoadaptationandresilienceinvestments.

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2 The Challenge Private climate-change investment is based on specific investment cases, and thus has largelydisregardeddevelopingcountries’mostpressingadaptationneedsandrarelymettheneedsofthemost vulnerable and poor communities. This should come as no surprise. Private companies, bynature, tend to approach any issue from the standpoint of their vested interest—and withoutconsidering the full spectrumof interventions (including those thatmightbe leveragedbyapublicsectoraction)thatcouldachievesocialandeconomicbenefitsessentialtobuildingresilientsocieties.As legendary investor Jeremy Grantham has stated "A corporation's responsibility is to maximizeprofit,nottospendmoneyandfigureouthowtosavetheplanet".Yetontheother,ashehasalsostated,“Wedeforesttheland,wedegradeoursoils,wepolluteandoveruseourwaterandwetreatair like an open sewer, and we do it all off the balance sheet," and "Capitalism andmainstreamfinancesimplycannotdealwiththeseproblemsandlargelyignore[them]".5

Although private investment is generally assumed essential for delivering on national adaptationtargets,littleattentionisgiventohowthiswillbeachieved,andlittleisknownabouttheefficacyofspecific instruments inuse—orproposed—thatmay increasethecontributionof theprivatesectortomeetingtheadaptationneedsofdevelopingcountries.Privatecompaniesandpotentialinvestorsareoftenexcludedfromthepublicpolicyconversationsabouttheneedforadaptation(andhowtofund it) and rarely, if ever, is climate information localised or immediate enough to translate intoimpactontheirvestedinterests.

For themost part, financial literacy is lacking in climate focal points, climate literacy is lacking infinancial focal points, and vision-alignment is lacking in both. Added to this is the capacity gap toengage with the enormous technical, process and system complexity; as well as the problems ofinstitutional mandate and diverging interests within a development context (and all the political,resource,povertyandinequalitychallengesthatpresents).Itisthereforenotsurprisingthatinspiteof growing awareness,we have largely failed to define (let along act on) the growing and urgentneedtoaddressclimateresilienceaspartofmainstreameconomicactivity.

Therehavebeenelementsofsuccessandsomeon-goinginitiativesthatarerelevantandwhilethereisno(andprobablyneverwillbe)singlecomprehensiveapproach,agrowingevidencebaseprovideslearning–andfuturecollaborationpossibilities–totacklethechallenge.ThisisaddressedbrieflyinSection6.

3 Addressing the Challenge: Introducing Cl imate-Aligned Intermediaries

Thispropositiondescribesanapproachforachievingtheactiveparticipationoftheprivatesectorinadaptation investments. It targets geographically localised communities experiencing (oranticipating) a climate-induced risk. For our purposes “the community” will include the “unusualsuspects” (i.e. notonly government and consultants involved in a tenderprocess) as it specificallyseeks to bring together actors who don’t usually sit at the same table. Nevertheless, all havesomething in common: they have some “skin in the game” i.e. some form of vested interest,essentialserviceorinvestmentthatisatrisk.Thiscommunitynotonlysharescommoninterestsbutcollectively it canunlockopportunities for adaptation action (and investment) that arenot readily

5 Imbert,F.2108.Capitalismiskillingtheplanetandneedstochange,saysinvestorJeremyGrantham.CNBCInvesting,13June2018.Online,availableathttps://www.cnbc.com/2018/06/13/gmos-grantham-capitalists-need-to-wake-up-to-climate-change-reality.html(Accessed11September,2018).

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apparent from the perspective of single stakeholders. The response is localised, relevant, andfocussedonacentral thememostrelevanttothegeography;that is,a logicalboundarythatbindsstakeholders to a common challenge, for example,water users or a central local economic driverunder threat. (Having said that, eventual solutions could include areas outside the immediategeography,e.g. anupstreamcatchmentarea.)Collaboration isbuilt through skilled facilitationandthe best available scientific evidence and technical support and will aim to develop and scale apipeline of investable projects across a spectrum of intervention areas. The approach will beinitiatedandledbyclimate-alignedintermediaries(CAI)6.

As a first step, CAIs will convene and facilitate the ‘community’ conversations (including privatesector investors, local and national authorities, affected residents, landowners, insurers, financeinstitutions, researchers and practitioners). Working in a team to manage the process and itsoutcomes, the CAIs will base their approach on collaboration, supported by their proven climateexpertise, systems thinking, change management experience, and ability to convene appropriateskillsordelivery.Duringtheseconversations(or“multi-stakeholderengagements”)theCAIwill(overtimeandwith researchand technicalorexpert inputasneeded)help thecommunitydefine—andbuildthebusinesscasefor—asuiteofintegratedadaptation/climateresponsesthatarealignedwiththe country’s NDCs and National Adaptation Plan, and are informed by other regional andinternationaladaptationinitiativesorbestpractice.

The CAIs will identify both “climate-proofing” opportunities for existing investments, bringing aclimate practitioner lens to existing landscape-based collaborative approaches, as well as newadaptationprioritiesthatcanattractpublicandprivateinvestments.ACAIisalsowellplacedtoplayanenablingroleforprivatesectorcommercialopportunitiesthatarealignedtoclimateproofingandsupportive of ecological infrastructure, for example biomass-to-energy initiatives, where this iscatalytictoalienclearing.ThustheCAIperformsan“alignmentassurance”functionbetweenclimateandfinancialfocalpointsandtheaffectedcommunityarounddevelopinganadaptationinitiativestobeputtothemarket.Famously,theSternReportarguedthatclimateisthe"greatestmarketfailureeverseen”.7InSouthAfrica—asinmanyotherpartsoftheworld—ahugecontributingfactortothismarketfailureistheinabilitytoenforcethelaw.Forexample,waterpermitsareeithernotinplaceor in breach for a substantial number of mining operations, meaning that certain costs areexternalised8.TheCAIconceptwould,overtime,alsostrengthenacultureamongststakeholdersoflegalcompliancewithrespecttoenvironmentalmanagement.

Ourvisionistoseetheemergenceofwhatwouldultimatelybecomeafully-fledgedCAIindustryanddevelopmentofrelatedexpertiseandexperience.Weproposethatresourcestobroughttosupportexistingclimatealignedcollaborations(examplesofwhicharedescribedinSection6)aswellasforfurtherpiloting, refininganddocumentingof theapproachdescribedherein.Critically, thispilotingwillshowtangibleresultsintheformofdetailedinvestmentplansforresourcingasuiteofresilienceinnovations. Eventually, through attracting finance for this pipeline of innovative technology,businessandfundingmodalities,weenvisagetheestablishmentofafacilitytotackletheoriginationand(inpartnershipwithothers)toarrangethe(blended)financingnecessaryforimplementation.

6 CAIs (as per their name) are propositional from the outset about the need to mobilise from a climate resilienceperspective.PartoftheCAIpropositionisthecommitmenttovalues(inparticular,respectforthecommunitiesinwhichweengage;transparency;andaccountability),andclimate-smartsustainabilitybasedonaholisticassessmentoftheproblem,collectivelydesignedsolutions,andcollectivedecision-making.7Stern,N.H.2007.TheEconomicsofClimateChange:TheSternReview.Cambridge,UK,CambridgeUniversityPress.8Forexample,FederationforaSustainableEnvironment,7November2017,“DamningreportrevealsDWSincrisis and water security under threat” https://www.fse.org.za/index.php/news/sa-news/item/579-damning-new-report-reveals-dws-in-crisis-sa-water-security-under-threat,retrievedMay272019

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4 Rationale for the Approach There is a growing awareness that transformative approaches will be necessary to achieveadaptation impacts at scale.Our central thesis is that transformative adaptation requires amulti-stakeholder approach with public and private sector actors co-designing and co-funding theresponse, each playing to their strengths. We believe that this is more likely to be achieved iffacilitatedbyaclimate-alignedintermediary.

Theopeningpremiseofthisapproachisthatsafeguarding,re-shapingorexpandingexistingprivatesector investment (asopposed to focusingonattractingnewcapital) is the right startingpoint forincreasing investment inadaptationby theprivate sector in linewith long-termresilienceand lowcarbondevelopmentstrategies.Theseexistinginvestmentswillincreasinglybeatriskduetoclimate-related effects that arise from increasing temperatures, variability in rainfall patterns, increasedfrequencyofextremeweatherevents,wildfiresandotherrelatedexternalities.

Theopportunitycentresonthecommoninterestsofacollectionofknownactors:privateandpublicsectoroperatorsthatfaceuncertaintyassociatedwiththenatureandtimingofclimatechange,andthe need to innovate to stay in business and remain relevant. This includes an audience offinanciers/investorswhoalreadyhave‘skin inthegame’andwillwanttosecuretheir investments;insurers who might face increased future claims; local authorities whose revenue and economicdevelopmentanddelivery targetsare threatened;andbroader society,whosesocio-economicandpoliticalcapitalisatrisk.Addedtothisisthepotentialforrenewedinvestmentandprofitsthroughsustainable business practices; the potential of capital to attract capital; the potential to engagevarious actors—who don’t normally problem-solve together but do share common interests—todevelop a shared language around the complex climate ramifications of a problem, sharedresponses,andasharedknowledgebase.

The CAI is central to helping translating complex but common interests into ‘blended outcomes’whicharesuitablypresentedandpackagedforattractingorenabling‘blendedfinance’.Anexampleof where such an approach was taken is the Water Fund concept,9 championed by the NatureConservancy, which extend impact by incorporating a climate resilience lens, and accessing theleveragingpotentialofclimatefinancewheredirectinvestmentsarerequired.

Adaptation projects are often, by their nature, high risk and complex. Unfortunately, typically thecostofcapital isweightedbyriskandtheriskier(realorperceived)theinterventionortechnology,the higher the cost of capital.10 On the other hand, taking on risks is necessary to pursueopportunities for development and inaction may well present the biggest risk if all.11 Securingprivate sector investment into adaptation is challenging, for at least two more reasons: marketfailuresand investmenthurdlerates.12Thesecanbeseenas“barriers” toprivatesector funding intheadaptationspace.

• Marketfailuresareimperfectionsinmarketmechanisms.Intheadaptationcontext,amarketfailureexistswhenmarketpricesdonot leadtoanefficient levelofadaptation.Thereareanumberof reasonswhy these failuresarise.Marketshavedifficulty supplyingandallocatingcertain types of products and services called ‘public goods’. Examples of public goods foradaptationincludelarge-scaleflooddefences,resilientcriticalinfrastructure,cleanwaterfrom

9Seehttps://www.nature.org/en-us/about-us/where-we-work/africa/stories-in-africa/water-funds-in-africa/10Nicholls,S.,Vermaak,M.andMoolla,Z.2015.NBIGreenEconomyFinanceProject.ResearchReport–ProjectOverview:Thepowerofcollectiveactioningreeneconomyplanning.Pretoria:NationalBusinessInstituteandKPMG,p.29.11Paraphrasedfrom:WorldBank.2013.WorldDevelopmentReport2014:RiskandOpportunity—ManagingRiskforDevelopment.Washington,DC:WorldBank.doi:10.1596/978-0-8213-9903–3,p.4.12Fromideascontainedinhttp://www.futureclimateafrica.org/wp-content/uploads/2015/02/Rwanda-technical-report.pdf

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a wetland and information about climate change. Blended finance structures can addressmarketfailuresbyallocatingpublicfinancetocoverthecostsofthepublicgoodscomponentofaprojectandprivatefinancetocovertheprivategoodswhichbenefitshareholders.

• Project developers in both the public and private sectors undertake project economicappraisal to assess the justification for investments and assess alternative options. Theappraisalusesdiscountingtoadjustfuturebenefits(andcosts)toexpresstheminequivalentpresentvalueterms,recognisingthevaluesocietyattachestopresent,asopposedtofuture,consumption.Anadaptationproject that generates futurebenefitswill beoverlookedwhencompared to an alternative that gives faster or more certain returns. Indeed, typically thepayback period that a private investorwill expect in a developing country is short. Climateadaptation,bynaturenotashortterminvestment,isthereforedevaluedandwillrarelymeetprivatesectorinvestmentreturncriteria,especiallyifoneisconsideringmedium-tolong-termclimatechangeontimeframesfrom5‒40years.

Essentially,amultifacetedproblemrequiresamultifacetedmind-andskills-set.Andtime.Centraltotheunderstandingof theapproach is that itbeginswitha localisedclimate riskandconversationsabout itssustainableresponsefacilitatedbytheCAI. Itends—monthsorpossiblyyears later—withthe following indicators of success: adaptation interventions that reflect "blended outcomes”incorporated into adaptation solutions capable of attracting “blended finance" investments. Twoconstantsunderpintheprocess:

1. The CAI would be involved as climate champion throughout this process, in a variety ofpossibleroles;and

2. Stakeholderswouldco-createtheoutcomes,underthefacilitationoftheCAI.

4.1 More about Cl imate-Aligned Intermediaries

“Alignedintermediaries”operatewithinachosenecosystem,andinhabitaspecificnichewithinthatecosystem. For CAIs the chosen ecosystem is climate change impacts, and the specific niche isconveneraroundadaptationsolutionsforclimate-stressedcommunities,includingmobilisingprivatesector investment. They have credibility through their neutrality, expertise and networks whichallows them to envision a resilient future and access adaptation global best practice to improveoutcomes.

The CAI will convene a bespoke range of actors with the right skills sets to address the climateinducedrisktolivelihoods,sustainabilityandinvestments.Thetargetgroupthemselvesareaffectedparties(directlyorindirectly)andareinvolvedinco-producingsolutions,supportedbytheCAIteamwho provide facilitation, information and where necessary research data, modelling and evenbespoke expertise. CAI’s would specialise in introducing and calling upon catalytic partners. Thisprocess of engagement is designed to result in adaptation investments that both secure currentassets(orattheveryleast,limitlosses)andpromotefutureresilience.

This community not only shares common interests but collectively it can unlock opportunities foradaptation action (and investment) that are not apparent or available on a standalone basis. Theresponse will be localised, relevant, and built through skilled facilitation and the best availablescientificevidenceand technical support. Itwill thusbeclimate-smart, sustainable,andcapableofattractingclimate funding,which in turn,andamongstother factors,will incentiviseprivate sectorfunding.

Insummary,theroleoftheCAIisto:

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• Conveneandstimulateasharedpublic-privateawarenessandunderstandingofadaptation,viableadaptationresponses,andsustainableinvestmentpossibilities.

• Improveenablingenvironmentsforprivatesectoradaptationinterventions/partnerships/investmentsbybrokeringrelationshipsbetweenkeystakeholdersaroundclimateandadaptationissues.

• Providefacilitation,informationandwherenecessaryresearchdata,modellingandotherexpertisewhichishighlightedduringtheengagement.

• Generateansuiteofinvestmentcasescapableofmobilisingmoreprivateinvestmentsforadaptation.

• ImprovethetrackingofadaptationinvestmentsandlinkingtheseintoNDCreportingframeworks.

• Educatelong-terminvestorsandthepublicwithinvestormaterials,lessonslearned,andsuccessesbasedonthealignedintermediaries’model.

• Contribute over time to a compendium of fundable adaptation responses that areindividuallyorseverallyreplicablee.g.provenfundingmechanismsandpackages;context-orclimate-specificappropriateresponses.

4.2 Key Stakeholder Groups

Forthepurposesofthisapproach,stakeholders(thosewith‘skininthegame’)areviewedasactiveparticipantsin

• Mandatingtheparametersoftheanalysisthathelpdefinetheproblem;

• Co-developingapproachesthataddresstheproblem;

• Facilitatingtheenablingenvironment;

• Resourcing;and

• Therealisationofinvestmentsandactionstoimplementtosolutions.

The most immediate stakeholders are those affected: a community experiencing climate stress,including community members (e.g. land owners and community residents, labour groupings,interestgroups,civilsocietyorganisations,NGOs,businessandindustryassociations),theregulatorsandpubicauthorities (national,sub-nationaland localgovernmentagencies), theriskmanagementcohort (insurers, riskmanagement practitioners, disastermanagement personnel), the knowledgebrokers (academics, researchers and research institutions, statisticians), the service providers(engineers, planners), private sector companies or individuals within the geography/sector whichhold existing investments that are at risk, financial institutions including commercial banks, DFIs,Donorsandfundingagencies.Eachofthesecohortsisinitselfhighlytexturedandnothomogenousintermsoftheunderstandings,expectations,commitments,skills,etc.ofitsmembers(whomaybemembers by classification rather than choice). This fact makes messaging13 to and, ultimately,achievingblendedoutcomeswithin,acohortandacrosscohortsdifficult.Thisinturnindicatesthatthelevelandqualityofthefacilitationhastobeveryhigh.

13Thiswasoneofthekeylearningsfromthestakeholderengagementthatformedpartoftheproofofconceptactivities.SeeAppendix1.

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Giventhecommitmenttoaconsensus-drivenintegratedsolution(i.e.investable,sustainablebothinfinancialandclimateterms,SMART,climate-appropriate)theoutcomeoftheprocessshouldensurethattheneedsofallaffectedpartiesarerecognisedandaddressedtothebestpossibleextent.

4.3 Challenges and Barriers Addressed by the Approach

Theapproachhelpsovercomethebarriersinthefollowingways.It:

• Targets climate-stressed communities, where there are already significant levels ofinvestmentsthatareatriskfromclimate-inducedphenomena.

• Tackles the challenges and barriers to design climate-smart solutions to safeguard existinginvestments and/or simultaneously offer an opportunity for new, de-risked sustainableinvestment.Thesesolutionswillbe,defacto,adaptationsolutions.

Even though the challenges and barriers will differ between the concrete cases, there are somecommon underlying challenges that this approach seeks to tackle. Typically, they include lack ofcollaborationamongecosystemactors;lackofaccesstorelevantinformationandskills;mismatchesin investment size, supply and demand; poor access to markets, excessive cost of physicalinfrastructure;andlimitedaccesstofinance,especiallyclimatefinance.

Understandingthechallengesandopportunitiesfromthepointsofviewofeachstakeholdergroupiscritical.Giventheircentralimportance,firstunderstandingtheprivatesectorviewpointisessential.While the approach is based on the firmly held belief that “current and future climate changeimpacts are now part and parcel of [any] system management”,14 this understanding is notnecessarilysharedbytheprivatesector,whichtraditionallyhasperceivedorexperiencedrisksacrossfivedomains: strategic,operational, financial,political andphysical.15Businesses’understandingofclimateissues16willinformtheirapproachto(climate-smart)investment.Thiscontributestothefactthattheprivatesectorisnon-homogenousand(often)highlytexturedwithinasingleenvironment.For instance,themandatedrequirementsofabankmanagerforapprovinga loanrequestmaynotactually support a head office climate agenda. Hence messaging, communications and proposedsolutionsneedtobeequallytexturedandvaried.

Inanimplementationscenario,thedifferingunderstandingsandexpectationsofaffectedbusinesseswouldbeunpackedfurtherastheCAIteamengagedwiththisstakeholdergroup;together,theCAIandstakeholderswouldexploretheclimateriskareasandtheirramificationscollectively identifiedduring the process; finally the CAI and the group would seek to transform the risk scenario into

14Kelly,A.2018.Electricityaccessmustbeclimateresilient.Online,availableathttps://www.powerforall.org/insights/energy-policy/electricity-access-must-be-climate-resilient(Accessed31August2018)15Kaminskaite-Salters,G.2009.MeetingtheClimateChallenge:UsingPublicFundstoLeveragePrivateInvestmentinDevelopingCountriesSection4–Spendingpublicfinancetoleverageprivateinvestment:specificinstrumentsforspecificchallenges.DFID.Online,availableatwww.lse.ac.uk/GranthamInstitute/wp-content/uploads/2014/02/sectionfour.pdf(Accessed26August2018).16IDRC.2016.ThePrivateFinanceGap:ChallengesandOpportunitiesinFundingAdaptation.PaneldiscussionpresentedatCOP 21, Paris, 3 December 2015. Online, available at http://enb.iisd.org/climate/cop21/enbots/3dec.html#event-2(Accessed 26 August 2018). Issues include climate change as a risk management issue, rather than one of resilience,pointingtotheneedtotranslatescienceforbusinessactors;thedistinctionsbetweenadaptationandmitigation,theneedtoaddressbarrierstoaccessingfinance,andto“slicedown”adaptation;thekeyroleoftheprivatesectorintakingresearchto fruition, pointing to the disconnect between the innovation community and research users; the need to look atadaptation fromanactor-basedperspectiveandthatbusinesses“want to takerisksandtogetpaid for it”; theneedfor“thinkingbig”aboutadaptation,foracoalitionofbusinessesacrosssectorsandgeographiestoinfluencegovernmentsforclimateresilientdevelopment;theneedforbrokersto“pushtheprojecttothemoneyandthemoneytotheproject”;theroleofcapacitybuildingandawarenessraising,sothatbusinessesunderstandtheaddedvalueofwhattheydo;andtheneedtoharnesswomen’spotentialforeconomicdevelopment.

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climate-aligned investment opportunities: or, in CAI speak “blended outcomes that can attractblendedfinance”.

Allactionswould takeplaceunder theultimate jurisdictionof the localauthority (oragroupingoflocalauthorities)probablywithsupportfromagenciessuchasaCatchmentManagementAgencyoragovernmentdepartment suchasDepartmentofEnvironmentalAffairs.Henceunderstanding therole–andlimitsofthisrole–ofthepublicsectorisalsonecessary.Theroleofthepublicsectorcouldbemorethan“simply”fundingthepublicgoodscomponentoftheintervention;forinstance,itcouldremove regulatory barriers, build the enabling environment, and act as a conduit for fundingapplications.Whileplayingacentralandoftendefiningrole,localauthorityparticipationisalsooftenconstrainedbyalackcapacityatall levels,andinspiteofitsmandate,thelackoflegalflexibilitytoact proactively. This includes the limits on government actions imposed by stringent procurementrequirementsandtimeframes,andtheentrylevelstocertainsourcesofgovernmentfunding.17

4.4 Process Outputs

Theprocess,supportedbytheclimate-,adaptation-andfinance-expertiseprovidedthroughtheCAI,usinginnovativemethodologiesandinformedbybestpractices,wouldproducethefollowingresults:

• Help to unlock further public and private sector investment (either re-investment or newinvestments).

• Identifiesappropriatesourcesoffinance(climate,privateandpublic)thatwillbereceptivetofundingproposals.

• Establishesthebaselinefortheimpactmonitoringandevaluationoftheintervention.

• Identifiesanddevelopsadaptation investmentcases identifiedbyaffectedstakeholders thathavethepotentialtosecureprivatefinancebecausetheymeetinvestmenthurdlerates.

• Identifies data gaps that need further research and analysis in order to complete projectpreparationforinvestment.

• Contributestobuildingasustainablelocalclimateadaptationecosystem

• Contributes to building adaptation implementation skills at the local level, through tailoredcapacitybuildingforspecifictargetgroups,includingofficialsinlocalgovernment.18

• Documents lessons and case studies to build the adaptation knowledge-base and furtherrefine theprocess. Thegranularityof theapproach lends itself to the creationofa rangeofknowledge products that are grounded (literally) in specific geographies, likely to berepresentative of a climate “hotspot” (e.g. watersheds, wetlands, river basins), and/oreconomic sectors, and/or population nodes. This will support the compilation of data- andevidence-basedinterventiontypesthatare,effectively,proveninvestmenttemplates.

Over time, the range of climate-smart adaptation responses in a range of communities andgeographies, acrossa rangeof sectors, affectinga rangeofpopulations,will collectively supporttheimplementationofa-NDCsandambition.

17 These comments frompublic sector actors at theR2Rworkshop,highlighted theboundariesof local authorities rolesirrespectiveoftheircapacity(bytheirownadmission,frequentlylimitedlargelyduetostaffingconstraints)tofulfilthem.18CapacitybuildingacrosstheboardisahugerequirementinSouthAfrica,frequentlystartingataverybasiclevel.FromaCAI perspective, it offers a rangeof opportunities for local upskilling across a rangeof knowledgeand skills areas, fromsmallbusinesses to community sectors (youth,women) to levelsofgovernment.Theseopportunities couldbebuilt intoresiliencebusinesscases.

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5 Summary of the Approach

5.1 Step 1: Identify Opportunity and Document Baseline

Identifyandmakecontactwithacommunityofstakeholdersexperiencingcommongeographic-andsector-specificclimate-relatedchallenges,whichwillhavedegreeofcertaintyaboutpotentialclimateoutcomesifthereisnonewintervention,andwhichprovideabaselineofinformationtoworkwith.The data need to be detailed enough to convince key actors to become involved in an initialengagementprocess.

5.2 Step 2: Exploration with Community of Actors

Theimplicationsforexistingbusiness-as-usualoperationsneedtobeexploredwiththestakeholdersandcommunityofactors.Atthisstage,even if their interest isalreadyapparent, it is importanttoreiterate the implications of the current and future climate risks to establish the motivationnecessaryforalltheactorsinvolvedtocommittothecollectiveprocessofidentifyinginterventions,whichwillbeunpackedindetailaspartoftheprocess.

5.3 Step 3: Discovery and Alignment

Throughacreativeprocessofdesktopresearch,meetingswithkeyplayersandworkshopsorfocusgroupstopresentfindings,andfortheactors involvedworktobuildconsensusaroundsustainablesolutions that address the challenge and simultaneously represent new investment opportunities.CAIswouldalwaysbeconsciousof,andwouldseekout,affectedpartieswhohavethepotentialtoactincatalyticways.

5.4 Step 4: Investment Approaches

TheCAIsworkingalongsideexpertswoulddevelopinvestmentcasesfortheopportunitiesidentifiedearlierintheprocess.Theinvestmentcaseswillbepresentedtostakeholdersforapproval,selectionand prioritisation. Then, with this community mandate, to the investment community and willbecome part of an adaptation pipeline. If required, feasibility studies will be undertaken incollaborationwithpotentialinvestors.

Insummarytheapproachwouldprovide:

1. Amethodology of convening to identify the adaptation business opportunities inherent in therisksituation,whichresultsinconsensusbuildingandjointplanning.

• Documentedprocessandcasestudiesfromimplementations.

• Explanationsofmethodologyforaudit/surveyofcurrentclimaterisksandopportunities.

• Aprocessforeffectiveandefficientprocurementandexpenditureincludingvalue-for-moneyassurance.

2. Apipelineofadaptationinvestmentcasesalignedwithcountrya-NDCs.

• Professional,resourced,targetedconveningofkeyactorsalignedtoprivateandpublicsectorprioritiesinanareawherespecificclimate-inducedrisksarealreadyapparentorthreatening

• Deliveryoftechnicalandresearchdataindigestibleform.

Thesestepsareshowninthegraphicbelow:

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Thediagrambelowprovidesaschematicversionofwhatthisprocesswouldlooklikeinthebiomasseconomy.

Clarify risk implications

Build consensusObtain mandate for what’s required

Few compliance with laws

and regulations (water,

waste, land rights, etc.)

Low Capacity at local

government level

Natural Resource

constraints

Social Issues

Impacts triggered by

climate (water, fire…)

Fragmented economic

ecosystem

Catalytic large scale biomass demand

A range of solutions at different scales

for different sectors;

Energy

Thermal – Industrial

-- Domestic

Electron, refinery,

Decentralized modular

Soil

biochar

Refinery

specialized, high value

Wood based

Furniture

Water Infrastructure

Activated carbon

Identify Climate

challenges

Risks and

opportunities

Climate aligned intermediary

Investment and de-risking

opportunities

ChallengesFragmented DEA efforts

Ad hoc uncoordinated stop go

Private landowner resistance

Low incentive (costly and

limited opportunity for

biomass market)

OpportunitiesAlien Vegetation;

Ø Common theme

Ø Both as an unlocker and

as a key risk

Ø “common glue” that can

bind stakeholders

together and unlock

solutions

What’s required

Technology feasibility

assessment

Market offtakes

Functional value chain

Blended finance sources and

transaction support

Business Support

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5.5 Innovative Characterist ics

Thisapproachisdifferentfromconventionalapproachesinthefollowingrespects:

1. Withinaframeworkthatisgearedtowardsrealisinginvestment-drivenclimaterisksolutions,newmarkets,andpublicsectorlevers(incentives,enablingpolicy/regulations),theintentionistoensurecollaborationandconsensus-drivensolutionsfromtheoutset,fromdefiningthefullscopeoftheidentifiedproblemthroughtosolutionimplementation19,

2. It is simultaneously highly (ethically and transparently) propositional and deliberatelydisruptivetoaddressthechallenges—thatmightotherwisecontinuetobeignoredif lefttoconventionalapproaches.

3. Bringingtogetherdifferentactorswillencouragecommonunderstandingandownershipofthe NDC commitments and development benefits across a region, industry or sector at alevel of granularity, where vested interests drive action beyond the normal reach ofministriesofenvironmentorplanning.

4. Itaimsat interpretingthe languageofall theactors involvedtowardspracticalsolutionstosharedchallenges.Languagewillberelevantandcontextualinsteadoffocussingonindustry-speak, e.g. “NDC implementation” or “internal rates of return”, or conversations in siloesamongst “the converted”. It does not seek to “own” or “sell” intellectual property, but tocollaboratetoputthecollectiveintellectualpropertytouseinarrivingatacollectivesolutionand/oracollectionofinterventionsthatmightbedrivenindependently.

5. Havingpublic andprivate sectoractors collaborating in arrivingat a solution increases thepossibility of blended finance solutions that address both the public and private goodsdeliveredbytheintervention.

6. Theclimatechallengeisglobalandcomplex;therefore,evenwhentheidentifiedproblemisbeing tackled locally the climate solutions must involve a comprehensive and integratedapproach.Consequently,thisapproachaims,withinreason,toinvolveaffectedpartiesacrossthe board, and may include adjacent areas, for example catchment areas upstream. Allaffected partiesmay not be present during all phases of the engagement and somemayprovide discrete or bespoke input based on their specific area of expertise. In addition, abalancewillneedtobestruckbetweenacomprehensiverepresentationandprocesscosts.

7. It tackles the need to reduce complexity by focusing on geographic- or sector-specificprojectswhichhavedisproportionateimpacts(financial,social,developmental).Anexampleofsuchalocalproblemwithsubstantialimpactpotentialistheclimate-induceddroughtandwild fire problem effecting the Southern Cape. Fires and drought have caused substantiallossesforlandownersandcommercialagriculture.Alieninvasivevegetationhasexacerbatedboth problems and its removal not only improves water run off and catchment but alsoreduces fire risk, while improving biodiversity. Alien clearing creates job opportunities,improveslandvalues,andprovidespotentialforabiomasseconomytosupplyenergyneedsin agri-industry that currently relies on coal or electricity; all this is likely to support localsmall enterprise development as well. The clear climate risk, foreseeable losses (andbenefits) for vested interests, future revenuemodels and cross public/private interests ingeographicallydefinedzones,providesanidealtestinggroundforthisapproach20.

19Notingthatwewilldrawonlearningsfromexistingmodelsofmulti-stakeholdercollaborations,suchastheGreaterCapeTownWaterFund,UpperBreedeRiverCatchment.20ThecollaborativeworkofthecommunityandbroaderstakeholdersintheUpperBreedeRiverCatchment,asreferencedinsection6inthisdocumentprovidesagoodcaseforlearning.

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5.6 Success Factors and Replicabil ity

Theapproachacknowledges—asastartingpoint—theinterestsofthedifferentactorsinvolvedinalocalisedproblem. Itdoesnotseekto ‘market’NDC implementationora ‘climateresponsetoNDCambition’ or similar vaunted concepts. In point of fact, NDCs are aggregated to policy, notinvestment, interventions. The approach “simply” seeks to support the implementation of climateresilience and the development of a host of investable business cases that, collectively, address acurrentorperceivedfutureriskandwillaggregatetowardsNDCimplementation.

Thesuccessfactorsoftheapproachanditsreplicablefeaturesinclude:

1. Aproblemfocusthatcomeswithalready-galvanisedpassions;properlyfacilitated,thesecanbeharnessedintocommitmentandaction.

2. Despitecontextspecificity,theprocessitself,includingitsmethodsofunpackingtheclimateramifications and investment potential inherent in the initially identified problem, isreplicable. Over time, the role-players will themselves become more “literate” (eitherclimate-orfinance-literate),thusimprovingtheirabilitytoengagewithandco-createfutureclimate-smart investment solutions. Also over time, a library of context-specific solutions(geographical and climate risks being experienced) will be developed, that will supportsimilarinterventionsinsimilargeographies.

3. Use of appropriate and available technologies and local competencies as essentialcomponentsinaquestforbestpracticesandareplicableapproach(suchanapproachiswellillustratedinsection6.2.2below,withreferencetotheUpperBergRiverCatchment.)

4. Potential for rapid solutions development (as opposed to solutions implementation), byconveningthe“rightpeople”(connectors,champions,innovators,decision-makersandthoseaffected, including the investors whose investments are at risk) in one room to solve aproblem.

5. Feedsintonationalprioritiesbutfocusisonaspecificlocalgeographyorsector.

6. Evidenceofresults,includingthelevelsofprivatesectorinvestments(eitherrenewedornewinvestment).Asnotedabove, these investments shouldbequantifiedand tiedback to therealisationofcommitmentsundernationalpoliciesframedundertheover-archingguidanceoftheNDCsandSustainableDevelopmentGoals.

6 Examples of Exist ing Good Practices

6.1 Examples of Frameworks for Good Practices

6.1.1 Mitigation Actions Planning Scenarios (MAPS) MAPSwas ledbySSN in LatinAmerica; itwasa followon froma similarproject, the LongTermMitigationScenarios(LTMS),inSouthAfrica.Theseprogrammesconvenedmulti-year,national, politically-mandated processes at themost senior levels, supported by universityresearchersandeconomicmodellerstoenablelong-termdecision-makingandprioritisationofactionaroundclimatemitigation.

6.1.2 National Roundtable on Economy and the Environment (Canada) TheNationalRoundTableontheEnvironmentandtheEconomywasanindependentpolicyadvisory agency to the federalGovernment of Canada. TheRound Table brought togetherleaders and experts from diversity areas, including businesses, industry, universities,environmental activism, labour, public policy, and community life from across Canada. Its

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mainobjectivewastoofferadvicetothegovernmentonhowbesttoreconcileandintegratetheoftendivergentchallengesofeconomicprosperityandenvironmentalconservation.

6.1.3 Development Bank of South Africa (DBSA) Intheearly2000stheDevelopmentBankofSouthernAfrica(DBSA),throughitsSustainableCommunitiesUnit,adoptedaDevelopmentFacilitationapproach,toassistlocalauthoritiesinconveningandmanagingcollaborativeandconsensus-drivendecision-makingforums(theso-calledJointDevelopmentForums),wherediversestakeholderscouldparticipateindesigningtheeconomicfuturesoftheircommunitiesinincreasinglyuncertaincontexts.

The notion of a Development Charter was used successfully in the FranschhoekEmpowerment andDevelopment Initiative in the late 1990s to bring a divided communitytogetheraroundadevelopmentagenda.TheessenceofaCharter lies intheunderstandingof a community and its development sponsors that they need to plan and implementtogether, pursuing the same objectives, to maximize the impact for all stakeholders.Development Facilitation (creating Development Charters) became the foundation of theSustainableCommunitiesapproachandphilosophyof theDBSA,since itgaveownershipofthedevelopmentprocesstothecommunityandtheresponsibleauthorities.

6.2 Examples of existing cl imate resi l ience al igned col laborations

InordertotackletheproblemofalieninvasivespeciesinSouthAfrica,theDepartmentofWaterAffairsandForestry,andnowtheDepartmentofEnvironmentalAffairs(DEA)havedrivenresponsiveprogrammesandstrategiestoeradicatetheplantsformorethanthreedecades.ThecoreinitiativebeingtheDEA’sExtendedPublicWorks(EPWP)WorkingforWaterProgramme.Thefocusisonremovalofplants,primarilyasasocioeconomic&environmentalintervention,enablingworkopportunitiesforsomeofthemostmarginalisedcommunities.DEAhasbeenremarkablysuccessfulindrivingtheprogrammes,giventhatgovernmentministriesarenotideallystructuredforthislevelofimplementationontheground.ToaddresstheneedforsystematicandcontinuousclearingwithoutcontinuousinvestmentDEAhasinvestigatedvariousvaluechaindrivenapproaches,butchallengeswiththisapproachpersist.Interventionstendtobefragmentedandadhoc,andseldommanagetoresolveasustainablesolutiononalandscapelevel.Werefertotwoexamplesbelow,ofexistingcollaborativeinitiativesfunctioninginSouthAfrica,wherelandscaperesponsesholdalienclearingasacentraltheme.

6.2.1 The Upper Breede Collaborative Extension Group (UBCEG): Integrated landscape management solutions

TheUpperBreedeRiverCatchmentissituatedintheCapeWinelandsDistrictanditisakeyagriculturalareaaswellasawatersourceforthelargerpartoftheWesternCapeprovince.

Thecatalyticchallenge:Landusemanagementchallengesintheregionweretranslatingintobroaderconcernsaroundlong-termsocioeconomicsustainability.Climaticshiftsoccurringinthe region21 were contributing to constrained catchment water production, alsocompoundedby infestationsof alienvegetation in riparian zonesand the catchmentmorebroadly. Tourism and nature conservation activities , which deliver significant local socio-economicopportunity,wereunderthreatasaresultofpoorlandusemanagementsuchas

21Increasedincidenceofextremetemperatures,decliningrainfallandchangesintheintensityanddurationofrainevents.

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unchecked agricultural expansion into virgin land, rapid urban and informal settlementgrowth, un-permitted mining and sand winning operations and poorly managed wastedisposal.

Land use management challenges were further entrenched through poor coordinationbetween different government departments, resulting in illegal and haphazarddevelopments.Fragmentedalienvegetationclearingprogrammesgainednosupportorbuy-in from landowners or contractors, who bore frustrations with the inconsistent incomegenerationopportunities22.

Solution:TheUpperBreedeCollaborativeExtensionGroup(UBCEG)wasinitiatedintheearly2000s,bringingpartners inagricultureandconservationtogethertoaddressthechallengesdescribed above. The initial goal was to relatively simple: to improve relations andcoordination between government departments, rural communities and landowners. Ageographical strategywasdeveloped toguideanddevelopactivities– in thiswayagenciessuchasDEA,CapeNature,non-profitorganisationsandlandusergroupscouldidentifyareaswheretheirworkoverlapped.

Success: UBCEG illustrates numerous successes in terms of the socio-economicimprovements and improved climate resilience delivered in the Upper Breede RiverCatchment

• Visibleclearanceofinvasivespecies.Theprovedtobe,notonlyacommonchallengefor all affected parties in the area, but also a great unlocker of local economicpotential. Landscape benefits include rehabilitated of the heavily eroded BreedeRiver riparian zone (over75km)and the650haPapenkuilsWetlandhasnowbeenrestoredandrehabilitated.Outreachandawareness raisingalsoprovidesaconduitforgreeningandamarketforlocalindigenousnurseries.

• Fire resilience is evident: In January 2015, a fire spread rapidly aroundWolseleythroughthemountainranges.Oncetheblazehadbeenextinguished,itbecameclearthat farms where invasive plants had been removed were impacted far less thanothers.

• Anecosystemofsmall localbusinesses in thealienbiomassclearinghaveemergedandWorcester-basedcompaniessuchasABCChippersarecommoditisingmorethanhalfamilliontonnesworthofbiomassperannumasmulchandcompostingsolutionstotheagriculturesector,providingemploymentformorethan150people.

Organisationalsuccesseskeytosuccessfuldeliveryarenotedbelow:

• High degree of buy-in: By 2018 the organisation brings 21 departments,municipalities,NGOsandprivatecompaniestogether(comprising64entities)

• Ability to attract multiple funding sources: While anchor funding was initiallysecuredfromLandCare,alsoensuringacoordinationpointthroughtheDepartmentof Agriculture, the initiative now operates independently of LandCare. Stronggovernance and delivery of results as provided an attractive platform for privatesector funding with support gained from WWF, Woolworth and Nedbank GreenTrust.Mechanismsarealsoinplaceforfundingleviesfromprivatelandthroughthe

22https://www.sanbi.org/cape/creating-a-common-vision-for-the-upper-breede-valley/

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WolseleyWaterUsersAssociation (WWUA),whichsponsorsa full-timecoordinatoraswellasdirectlandscaperehabilitation.

• Action orientated: This voluntary initiative implements 2 rules: viz. compulsoryattendance at the quarterly meetings and the minutes must be driven by actionpoints.Thisframeworkensuresthatmembersareactiveparticipants.

Challenges: Challenges that are relevant for similar initiatives are highlighted and theseinclude

• Longleadtimesarerequiredtofostersuchinitiatives.AlthoughUBCEGisnowactionorientated,aninitialleadtimewasrequiredtobuildrelationship,andgaincommonunderstanding about roles and responsibilities of diverse groups of stakeholders.The process of identifying and supporting small businesses within the community,active in thebiomasssupplychain,hasalsobeentime intensive,andmanyun-metbusinesssupportneedsremain.

• There remains a specific role for commercial value chain enabling entity: Smallbusinesssupport,accesstofinanceandpartnershipstoaccesswiderinitiativesinthebiomasstoenergyandbiorefinerysectorwouldplayabeneficialrole.

6.2.2 The Greater Cape Town Water Fund: Collaboration in Catchment Management

Thecatalyticchallenge: Watersecurity intheCityofCapeTownhasbeenheightenedbyathree-yeardroughtintheregion.Therealityandriskofongoingwatershortageisdrivenbyexponentialurbangrowthandaprojectedlong-termclimaticshiftofreducedrainfall.Waterdemand is expected to outstrip current supply by 2021. While over R8 billion in publicfunding isbeingconsideredforaugmentingwaterthroughdesalination,aquiferdrillingandwaterreuseschemes23greeninfrastructuresolutionsalsohaveacriticalroletoplay.

Envisioned solution: In 2018, under the impetus and umbrella ofWater Funds for Africa,stakeholdersaimtocollaboratetorestoreecologicalinfrastructureinthecatchmentsservingCapeTown.TheNatureConservancydefinesWaterFundsas“organizationsthatdesignandenhance financial and governancemechanismswhich unite public, private and civil societystakeholders around a common goal to contribute towater security through nature-basedsolutionsandsustainablewatershedmanagement”24.

The Greater Cape TownWater Fund is framed by a business case, of achieving expectedannualwatergainsof50billionlitres(50Mm3)withinfiveyears,equivalenttoone-sixthofthecity’scurrentsupplyneeds25.Theseannualgainsdoubleto100billionlitres(100Mm3)

23TheNatureConservancy(2018).TheGreaterCapeTownWaterFund-Assessingthereturnoninvestmentforecologicalinfrastructurerestoration,November2018.Retrieved24May,2019fromhttps://www.nature.org/content/dam/tnc/nature/en/documents/GCTWF-Business-Case_2018-11-14_Web.pdf

24AsquotedfromTheNatureConservancy:WaterFundsToolbox.Retrieved24May,2019fromhttps://waterfundstoolbox.org/getting-started/what-is-a-water-fund25 Over two-thirds of the sub-catchments supplying the Western Cape Water Supply System (WCWSS) areaffectedbyalienplantinvasions,reducingtheamountofwaterthatreachestheriversanddamsthatfeedtheregionby55billionlitres(55Mm3)peryear.

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within 30 years, supplying water at one-tenth the unit cost of build infrastructure supplyoptions26.

Partners & Collaboration: The Fund aims to enhance existing government initiatives;strengthen capacity and increase the monitoring and evaluation of ecological restorationprogrammes. A steeringcommitteeprovidescollaborativeoversightand includes roles forgovernance and coordination, implementation and funding including: The NatureConservancy, National Department of Water and Sanitation, National Department ofEnvironmentalAffairs(EnvironmentalProgrammes),ProvincialDepartmentofEnvironmentalAffairs and Development Planning, City of Cape Town, SANBI, CapeNature, Coca-ColaPeninsulaBeverages,Nedbank,RemgroLtd,andWWF27.

Successes:GreaterCapeTownWaterFundisbuiltonthefoundationandexperienceofover30WaterFundsinitiatedacross12differentcountries.Privatesectorfundingandsupportisattractedtotheinitiativeduetothefollowingfactors:

• Transparent and accountable structures, inclusive of monitoring and reporting onoutcomes

• Internationaltrackrecord

• Avehicletoco-investincomplexsolutionsalignedtolongtermresilience:jobcreation,biodiversityconservation,andclimatechangeresilienceforcommunities.

Challenges: The Fund has yet to gain operational traction, but some of the anticipatedchallengesarelikelytoincludethefollowing:

• HighdegreeofcollaborationisrequiredoveralargegeographyoftheWesternCapeWater Supply System (WCWSS) (multiple stakeholders at different levels andsectors)

• Coordinatedandwellexecutedclearingofalienvegetationisacentraltothesuccessof the initiative. However,despitenumerousprogrammes initiatedbygovernmentover the past 2 decades to drive a value chain market driven approach, thecommercialcaseforclearingremainsunmet. Alienbiomasstoenergyrepresentsacatalytic market offtake opportunity, but several supporting factors will need tocomeintoplaytoenablethis.Currently,manygovernment-ledclearinginitiativesarehaltingandsporadic.

• The feasibility study for the Water Fund was released during the height of thedrought,whenconsumersandgovernmentswerepersonallyexposedtotheriskofwatershortage,thusmakingthemmorereceptivetothecause.TheFundcouldlosepoliticaltractionwithoutthecontinuedmomentumfromthedroughtresponse.

26 The Nature Conservancy & Anchor Consultants (2018) The Greater Cape Water Fund Business Case:Summaryoffindings,retrieved23May,2019fromhttps://www.nature.org/content/dam/tnc/nature/en/documents/GCTWF-summary-11.14.18.pdf27https://www.nature.org/content/dam/tnc/nature/en/documents/GCTWF-summary-11.14.18.pdf

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7 Case Study – Post Fire Rehabil itation

7.1 Introduction

SouthSouthNorthhasinitiatedamulti-stakeholderdialoguewithacommunityinthesouthernCapedistrictofSouthAfrica.InOctober2018wildfiresburnt3500haofprivately-ownedlandcausingtensofmillionsofrandsworthofdamagetopropertyandlandscapes.Thefireoccurredduringaheatwaveanomalywithtemperatures6–8OCabovethelong-termaverage.AccordingtoanIPCCclimatescientistfromSouthAfrica’sCouncilofScientificandIndustrialResearch(CSIR),thisheatwaveanomalywouldrepresentthenewnormalina2OCworldandalikelyincreaseinthefrequencyandintensityofwildfiresintheregion.

7.2 Baseline

ExtensivealienplantinfestationbyAcaciaCyclopsresultedinanincreasedfireheatintensity28whichhasdamagedtheburntarea’ssoilstructurecausinglossoftopsoil.Atarecentfollow-upthreemonthsfollowingthefire,itwasnotedthatthousandsofA.cyclopsseedlingshavestartedtoregrowindensepatches.Ifleftunattended,thisrepresentsasignificantincreaseinthefirerisk,riskingaviciouscycleoflanddegradation.Therehabilitationprojectrequiresconsiderableresourcesandaco-ordinatedapproachtoremovealiens,preventfurtherlossoftopsoilandre-seedindigenousvegetation.

7.3 Exploration with Community of Actors

TheSSNteamhasengagedwithawidevarietyofpublicandprivatesectorstakeholderstoaddresstheproblem.Asisoftenthecase,alikelyfundingchallengewillneedaninnovativeresponse.Currentkeystakeholdersare:

28A.Cyclops(alsoknownasred-eyewattleand“rooikrans”)“hastheabilitytoincreasetheseverityoffire”.Seehttp://www.invasives.org.za/legislation/item/194-red-eye-wattle(Accessed1March2019).

CaseStudysite

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• Theprivatesector isprimarilyrepresentedbylandownersandeco-tourismoperators,manyofwhom have suffered losses. They are concerned about future fire risk and the costs of therehabilitationproject.TheDuivenhoksConservancyrepresentsmanyofthelandowners.

• National government, through theDepartment of Environmental Affairs, has offered to assistwithplanning, technical assistanceandenforcementof regulationsgoverningalienvegetationonprivateland.

• Local and provincial government, represented by the Hessequa Municipality, are concernedaboutjoblossesandfuturecostsrelatedtowildfireresponse.

• TheSouthernCapeFireProtectionAgencyisaregionalNGOthatprovidesarapidresponsetowildfiresinalargeareaoftheprovince.

• The local communityhasbeen impactedby the fire through job losses.Theagriculture sectoraccounts for significant employment in the region and the destruction of landscapes hasresultedinalossofpermanentandcasualemployment.

Discussions with stakeholders are continuing. There is an element of urgency due to the limitedwindow of time available to clear the alien regrowth before this becomes impossible withoutmachinery. The parties have agreed to formulate a response plan to be presented at a futureworkshopinQ2,2019.

8 In Summary Therearemismatchesbetweenandlackofunderstandingamongststakeholdersthatimpedeprivatesectorfunding intoprojectstoenhancecommunityresilience inthefaceofclimate-inducedriskorcalamity: the self-same communities inwhich the private sector actors already have a substantialpresence.

Intheshort-term,theapproachwouldbepilotedandhonedinSouthAfrica.OverthemediumtermCAIteamscouldbeidentifiedforconveningonacountry-by-country,sector,orgeographicbasis.Forexample, a “cities” CAI teamwould have specific skills sets around urban governance, funding ofinfrastructure,sustainablecityplanningetc.

Frequently, there is no lack of money, willingness, or incentives to engage, or of a sharedcommitmenttoabetterfuture.Addressingtheclimatechallengefromtheperspectivesofthosewithmuchtolosefromtheirinvestments,andfacilitatinginformedcollaborationbetweennon-traditionalpartners,isaninnovativedeparturepointforattractingfinancetoNDCimplementation.

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Appendix 1 Overview of Stakeholder Engagement, 22 November 2018 29

In November 2018 SSN convened an action research stakeholder engagement “to participate in a‘dry-run’pilotofaninnovationprocessitisdeveloping.TheinnovationprocessisdescribedinaDraftConcept Note”.30 Using the wild fires in the Southern Cape in 2016, 2017 and 2018 as a definedclimaterisk,theactionresearchwasdesignedtoassesstheproposedmethodologythat“crowdsinprivateandpublicsectoractorstoidentifyclimateresilienceandadaptationinterventionsthatmakegoodbusinesssenseandwhichcanbemadefundablethroughblendedfinance”.31

SSN,actingasaCAI,initiallyintendedconveningapproximately15participants,eachrepresentingastakeholder group in a locality experiencing (or anticipating) a climate-related risk. All thestakeholderswould therefore have “skin in the game” i.e. some formof vested interest, essentialserviceor investmentat risk.However, inpreparatoryplanning itbecameapparent that runningafull(mock)processwouldnotbefeasible,largelybecauseoftimeitwouldtaketounpacktherangeof challenges and opportunities, and the logistical challenge of getting all the right people in theroom. Therefore, it was decided to focus on stakeholders representing the critical axes of theintervention(theregulators(government),thefinancesector,andtheadaptationsector)andassesstheirresponsetotheapproachthroughafacilitatedworkshop.

The21attendeesweredrawn fromseven sectors: sub-nationalgovernment (at theprovincial (2.),district (2)andmetro levels(2));privatesector investment(1);banking(1); insurance(1);academia(2);NGOs(2)andadaptation(2).Sevenattendeeswerestaff,representingadaptationpractitioners,business development, knowledge management and programme leads, essentially the core of a“ClimateAlignedIntermediary”team.

Objectivesoftheprocesswereto

1. Gaugetheperceptions[oftheselectedstakeholders]totheapproach.2. Obtaintheirinputtorefinethelanguageoftheproposition.3. Determinetheapproachtobestmeettheirneeds.4. Helptodeterminewhether,andhow,toprogresstheroll-outoftheapproach.32

Theresponsewasunanimous:

• All participants agreedon themerits of theproposition, effectivelyproviding a “mandate”acrossmultiplesectors.

• Allparticipantsconcurredthatthepropositionisnecessary,timeous,andwouldfillacriticalgapthatnoneofthesectorsrepresentedcanorwouldwanttooperateinontheirown.

• Allparticipants indicated theirwillingness to formpartofanascentcommunityofpracticearoundthistypeofworkandtheirdesiretobeincludedinanyfutureroll-outplans.

Inshort,theengagementmettheobjectivesofhelpingtoassesshowfit-for-purposetheapproachis,andwhatadditionalskills, informationorsupportfutureroll-outmayneed.Thiscontributedtothe

29SSNgratefullyacknowledgesfundingforthisworkshopwhichwasprovidedbyGIZ(SouthAfrica),intermsofContractnumber83302693.30As detailed in the iteration of this concept at the time, available here: https://www.ndc-cluster.net/system/files?file=document/Concept%20Note_Finance_Translating%20Climate%20Risk%20to%20Investment_final_0.pdf 31 Wording taken from the invitation to prospective participants. 32PertheproposaltoGIZ,asultimatelyapproved.

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productionofathecurrentdocument,detailingapartiallypre-testedconceptthatcanbelaunchedinto the climate finance space for further piloting and on-going implementation, evaluation andenhancement.

Thefollowinglearningoutcomeswereidentified:

1. Proposition has merit, an intermediary is needed

Theworkshopwasunanimous:Nopartycandothisnecessary,usefuland importantwork iton itsown. All participants supported the proposition, effectively providing a “mandate” acrossmultiplesectors.

Nevertheless, while an intermediary is necessary—because someone on the outside needs tounderstandandtacklethecomplexityandthebroaderlandscape—theCAIinterventiononitsownisthemeans to an end, not an end in itself. The sustainability of the endeavour rests on ability todevelopbusinessmodelsthatcanattractprivateinvestmentandinsupportingthosemodelstowardsclosure.

2. CAIs must create and manage their identity

The term “ClimateAligned Intermediary” (CAI) is somewhatmisleading, because typically itwouldrefer toahighly flexible, agile,multi-disciplinary team ofexpertswhocontribute specific inputsatparticular times within the process. An essential skills set on the team is that of the projectmanager+facilitator+convenor+administrator+accountant, which typically will be housed within anorganisation,suchasSSN.Suchanorganisationprovidesconsistency,theprojectmemory,andisthedriverof theprocess,being involved in theconvening, facilitationand resourcingof theprocess—whichislikelytotakemonthstocometofruition—fromIdeatoRealisation.

3. There is no one way of doing this

Foundational to the concept is the principle of multi-stakeholder dialogue; this will always be arequirementinaCAI-ledprocess.However,theprocesscan(andmust)takemultipleforms.Speed,intensityandtimingofinterventionswillneedtodifferentiatebetweenstakeholdersandtargeteachgroupattheirmostreceptivepoint,respectingthenotionof“Pickinguppeoplewheretheyare…”

4. Developing a pipeline

Understanding the funding landscapes (both public and private sector) is critical to direct thepipeline.CAIsneedtodevelopthisunderstandingandpartnerships inthisarea;thusanimmediatefunctionistocollectanddisseminatedataoninvestment,funds,andbecomethe“goto”placeforinformation on climate investments relating to resilience. Participants recognised that multipleprojects within the target area will be necessary. This acknowledges the collective complexity ofsustainable solutions as opposed to symptom relief. Individual projects will have to beaggregated/bundled/combined as part of the business case, to reach theminimum thresholds ofinvestmentandscalerequiredbyinstitutionalinvestors.

5. CAI work presents opportunities for monitoring impacts, and developing a new industry

We are developing new processes and approaches throughwhich the private sector can becomeengaged in development of climate resilience. As each locality is unique the monitoring andevaluation of each individual process is an essential learning activity that will contribute toestablishing this work. Over time, we anticipate that the CAIs’ function will contribute to theformationofanew“industry”withitsownnormsandstandards.

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6. Textured nature of the sectors

Acentrallearningwastheneedtorecognise,understandandfactorinthehighlytexturednatureofeachof thesectors (public,privatesector investors,andcommunity) thatwouldberepresented infutureengagements.Specifically,withregardto

• the private sector: the lack of homogeneity and the reality of competing interests in thissector,requireshighlytargetedapproachesaddressingbankability,framingofprojects,andthe need to build local project pipelines collaboratively with local businesses, communitygroupsandpublicsectorstakeholders;

• thepublicsector:thelackofgovernmentcapacityatalllevels,anditslackoflegalflexibilitytoproactivelypreventthenegativeeffectsofclimatechange,despiteitsmandate;and

• community stakeholders:33 without community support and buy-in, there is no realsustainability. Secondly, despite a rangeof community groups and concerns (employment,security, ownership, convenience, investments etc.), all share at least one commonvestedinterest:theneedtomaintain(atleast)orimprovethelocalecosystem.

7. Timing and ownership

The rate of climate change (i.e. the scale and severity of the problem, or, put another way, theurgency of the need to mobilise investment for adaptation) automatically means time is animportantvariable in finding solutions.However, theworkshopnoted thedisconnectbetween thelong timeframes of measuring climate change, building resilience and adaptation interventions,building capacity and skills, and short-scale investment and procurement horizons as defined byinvestormandates or regulations.Nevertheless, as one participant said, “Climate change iswheretherubbermeetstheroad.”

Theengagementresultedinthefollowingoutputs:

1. RisktoResiliencedraftStakeholderMethodology

2. Apartially-testedmethodologythatmetwithunanimousapproval,support,excitement,andwillingnesstoengageinfurtheractivities,withrepresentativesfromsevensectorswithinthepublic,financial,academicandpractitionerarenas.

3. Networkofinformedandengagedthinkersandparticipantswillingtotakethisworkfurtherin their own spheres of influence, and as an emerging Community of Practice around CAIinterventions,driven(initially)bySSN.

4. Clearindicatorsfornextstepsfordevelopingandrollingoutthisconcept.

5. Inputsforincorporationintonextiterationoftheconceptnote

Theprogrammeforthedayandparticipantlistfollow:

33 Community stakeholder groups were not represented in the workshop which targeted investors and government. Hence this section only represents perceptions of these two groups of “the community” and their requirements.

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RisktoResilienceStakeholderEngagement

1. WelcomeandIntroductionsWorkshopopening,individualintroductions,groundrulesandagenda

2. BackgroundOverviewonthebackgroundtotheinitiativeandworkshop,followedbyinitialdiscussion

3. UnderstandingtheProblemInputontheVermaaklikheidfires,followedbydiscussiontodevelopacommonunderstandingofthenatureoftheproblem

Break

4. UnderstandingInterestsDiscussiontoclarifytheinterestsofthevarioussectorsintheissuesassociatedwiththeVermaaklikheidfires

5. ResilienceResponse:ActionsBrainstormanddiscussionofactionsthatcancontributetoaresilienceresponsetotheissues

Lunch

6. ResilienceResponse:ResponsibilitiesandResourcesIdentifyingwhoshouldtakeactionandwhatresourcescanbeappliedinaresilienceresponse

7. DebriefonMethodologyReviewoftheprecedingdiscussionstoassesstheproposedapproachandmethodology

8. ClosureOverviewandClosingRemarks

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