“Bridging the Finance Gap: Attracting Non-Public Finance to Coastal Adaptation” Stakeholder Workshop

20 December 2017 | Dr. Alexander (Sandy) Bisaro

On November 30 and December 1, 2017, Deltares and the Global Climate Forum hosted a workshop in Delft, Netherlands, titled “Bridging the Finance Gap: Attracting Non-Public Finance to Coastal Adaptation”. The workshop brought together 22 people with diverse roles from the financial sector, coastal engineering, policy-making and research to discuss the current finance gap for coastal adaptation, and present solutions to overcome this gap. As a GREEN-WIN project event, at the core of the discussion was the idea that there are “win-win solutions” in coastal adaptation, that is, solutions which are both economically attractive and reduce overall flood risk. The workshop aimed to explore such win-win strategies for overcoming the finance gap though their economic attractiveness, bringing in new actors, e.g., private investors, project developers,  and thus new sources of finance into the coastal adaptation space.

Day 1 kicked-off with an overview presentation from GREEN-WIN project coordinator, Jochen Hinkel (GCF), on the GREEN-WIN project and a typology of mechanisms for generating revenues or reducing public expenditures in coastal adaptation projects. This was followed by a keynote from Manfred Konukiewicz on the Adaptation Finance Landscape, which highlighted key funders and financial instruments used to finance adaptation.

The introductory stage-setting session was followed by a plenary in which several examples of potential win-win strategies for coastal adaptation were presented, along three basic types: nature-based solutions (NBS) for flood defence (Mark de Bel, Deltares), solutions involving land reclamation (Sandy Bisaro, GCF) and contracting solutions to implement adaptation more efficiently (Daniel Ware, Griffith University). Further, Edmund Penning-Rowsell (FHRC) presented the UK Partnership programme for funding flood risk reduction. The aim of the session was to present real-world examples in order to kick-off in-depth discussion of strengths and weaknesses of each win-win solution for attracting non-public finance, and overcoming the coastal financing gap.  Participants then went into 3 working groups centred around each type of win-win solution.

In the Nature-Based Solutions working group, the participants identified several barriers to investment. First, while there are examples of NBS around the world, and many participants themselves shared experiences, NBS are not generally well-known outside a specific community. Engineers tend not to include NBS in initial implementation plans because they don’t understand them well, and the evidence base on NBS effectiveness is sparse. As a result, NBS tend to need money from public funders, NGOs, or otherwise project developers who anticipate a growing market. Thus, blended finance is a must to grow both the evidence base and subsequently the demand for NBS solutions and investment therein. Relatedly, a barrier to access the public portion of blended finance is the requirement of some funders, e.g. climate funds, to demonstrate that a project addresses climate risk - separating between adaptation and development. Often too much time is spent labelling the projects and money going into the communities; the focus should rather be on financing working solutions.

In the Land Reclamation working group, it was noted that private money already flows to such projects thus presenting an opportunity to channel flows toward adaptation, yet a number of concerns arose. Namely, new buildings even in protected areas may increase flood risk in that area by increasing the value at risk. In order to truly channel land reclamation investments towards adaptation, planners must consider whether a project is re-allocating people locally or attracting more people to the area, and as a result, whether more people will be more at risk. Other concerns included the equitable access to new land in such projects.

In the Contracting Solutions working group, participants felt that contracting is not a general purpose solution, and only applies to certain kinds of adaptation measure. Generally, soft measures, such as beach nourishment are better suited, because their lower fixed costs and higher variable costs offer opportunities for private sector efficiency gains. Further, contracts such as public-private partnerships (PPP) are better suited where there is revenue to pay off the private side. Ideally, PPP contracts can be done where the tax base can pay off the private sector over time, e.g. in a project finance arrangement, and then government debt could finance projects where there is little direct revenue generated. The group felt it would be useful to have a typology of contracts to better analyse which contract type fits local circumstances best.

Day 2 kicked-off with presentations from:

  • Lisa Danielson (OECD) on the OECD’s work analysing national policy contexts’ influence on coastal adaptation investment;
  • Erik van Eekelen (Ecoshape) presenting experiences in project development and (co-)investment in NBS for flood defence;
  • Nick Haigh (Defra) on UK experience with innovative approaches to (financing of) shoreline retreat.

Lively discussions revolved around mechanisms for increasing further private sector involvement. In particular, reputational risk was seen as potential driver of private investment, as companies might be incentivised to invest in adaptation to manage risks to their business operations. Housing companies, for example, need to ensure flood safety for their tenants, while insurers may invest in coastal adaptation both to reduces their liabilities, and to improve their image through “sustainable” investments. Finally, participants noted a clear distinction in financing challenges in developed compared to developing countries. Country risk is a major driver of financing costs, again pointing to the need for blended finance approaches to overcome the coastal adaptation finance gap.

Finally, after the stimulating discussions over the two days, a concluding session led by Jochen Hinkel, synthesised these discussions and identified several next steps. These were:

1.     To collect and publish a set of real-world examples of coastal adaptation win-wins, structured along different mechanisms for creating revenue streams, and country contexts.
2.     To plan a follow-up workshop building on these first results for Summer 2018.

We, the workshop organisers at Deltares and Global Climate Forum, would be very happy to have further individuals or organisations contribute to our ongoing work on bridging the coastal adaptation finance gap. If you are interested, and, for example, would like to join our future meetings, please get in touch! (email: sandy.bisaro@globalclimateforum.orgMark.deBel@deltares.nl)