Not a panacea: private sector engagement in adaptation and adaptation finance in developing countries

Abstract

The role of the private sector in climate finance is increasingly emphasized in international political debates. Knowledge of private engagement in mitigating climate change and in more advanced economies is growing, but the evidence base for private-sector engagement in climate change adaptation in developing countries remains weak. Starting from the premise that the private sector's role in adaptation is often inevitable and potentially significant, this article first analyses the potential of private-sector engagement in adaptation and adaptation financing in developing countries by conceptualizing the private sector's roles and motivation therein. For further inquiry, and for a discussion based on a developing-country context, interviews were conducted with key stakeholders for adaptation of Zambia's agricultural sector, including on ways in which the government can incentivize private-sector engagement in adaptation. How much private-sector adaptation and adaptation finance can be identified depends on the interpretation of the concept of adaptation. Under a broad interpretation, the domestic private sector in particular can contribute substantially to adaptation, both directly and indirectly, through its investments and activities. However, the international private sector's role in financing adaptation should be analysed under a strict interpretation of adaptation and appears limited. Policy relevance International political debates increasingly stress the importance of private climate finance, yet are constrained by vagueness around the private sector's role in adaptation finance. This article conceptualizes and scrutinizes private-sector engagement in adaptation and adaptation finance in developing countries. It concludes that the domestic private sector in particular can contribute substantially to adaptation in direct and indirect ways, and that domestic policies incentivize such contributions. However, international private financing of adaptation is more limited and its analysis requires a stricter interpretation of adaptation. Private-sector engagement in adaptation and adaptation finance can supplement, but not substitute for, public investments in adaptation. These limitations are particularly important when discussing private adaptation finance as part of the developed countries' pledge to mobilize US$100 billion of climate finance per annum from 2020 onwards.