giz2013 0012en private sector climate adaptation

8/13/2019 Giz2013 0012en Private Sector Climate Adaptation

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Contents

Index of Abbreviations iii

PART I: Baseline Study 1

Introduction 1

1 Identication of Business Opportunities Resulting from Climate Change Adaptation 3

2 Fields of Opportunity 72.1 FIELD OF OPPORTUNITY: Raising Agriculture productivity 7

2.2 FIELD OF OPPORTUNITY: Information and communication technologies (ICT) 15

2.3 FIELD OF OPPORTUNITY: Index Insurance and Financial Tools 20

2.4 FIELD OF OPPORTUNITY: Decentralized Services for Water and Energy 242.5 FIELD OF OPPORTUNITY: Built environment 26

3 Barriers and Preconditions for the Private Sector 273.1 A business case to invest in climate resilience 27

3.2 Barriers hindering the private sector to capitalize on opportunities 29

3.3 Framework conditions and promotion of private sector engagement in climate change adaptation 34

4 Instruments for International Cooperation 364.1 Target: Innovation and business friendly regulatory environment 36

4.2 Target: Fostering innovation and partnerships 40

4.3 Target: Climate Expertise and instruments for SMEs and Business associations 44

5 Conclusions and Key Themes 46

6 References 47

PART II: Country Studies 51

1 Mozambique 511.1 Introduction 52

1.2 FIELDS OF OPPORTUNITY 55

1.3 Barriers, Enabling Framework Conditions & Incentive Schemes 58

1.4 Proposed Instruments for Internation Cooperation 61

1.5 Recommendations 641.6 References 64

2 Bangladesh 662.1 Introduction 67

2.2 FIELDS OF OPPORTUNITY 69

2.3 Barriers, Enabling Framework Conditions & Incentive Schemes 72

2.4 Proposed Instruments for International Cooperation 75

2.5 Recommendations 78

2.6 References 78

List of Interviewees 80



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Table of Tables

Table 1: Roles in Climate Change Adaptation 4

Table 2: Relative strengths and weaknesses of public versus private sector approaches to adaptation 4

Table 3: Win/Win/Win through cooperation 5

Table 4: Business Opportunities in Crop Production 8

Table 5: Advantages of micro-irrigation and water conservation technologies 11

Table 6: Summary of the Roles of the Public and Private Sector in Promoting CCA in Agriculture 14

Table 7: Summary of the Roles of the Public and Private Sector in Promoting CCA in the ICT Sector 19

Table 8: Summary of Business Opportunities Promoting CCA in Agriculture 21

Table 9: Summary of the Roles of the Public and Private Sector in Promoting CCA in the Financial Sector 23

Table 10: Summary of the Roles of the Public and Private Sector in Promoting CCA in the Water Sector 25

Table 11: Summary of the Roles of the Public and Private Sector in Promoting CCA in the Infrastructure Sector 26

Table 12: Motivation for Business Engagement in Adaptation 28

Table 13: Tipping points for Business as Usual 28

Table 12: Examples of constraints in particular business sectors 33

Table 14: A response to enable private sector engagement in CCA 35

Table 15: Mozambique, Climate Change Impacts on the Private Sector 53

Table 16: Bangladesh, Climate Change Impacts on the Private Sector 69

Table of Maps and Figures

Map 1: Projected Changes in Agriculture Productivity 2080 7

Map 2: Predicted Water Stress in 2050s 11

Figure 1: Cost of Large Natural Catastrophies 1950 – 2005. Economic and Insured Losses 20



iv



1

Introduction

“The private sector has much to contribute tothe development and implementation of climatechange adaptation solutions, including sectorspecic expertise, technology, signicant levels of

nancing, efciency and an entrepreneurial spirit.The key is to nd the nexus of shared interest wherebusiness incentives align with communities’ adap-tation needs ”. 1

A new focus: private sector opportunities in climate changeadaptation

Efforts to understand the opportunities of climate changeadaptation for the private sector are urgently needed, butrelatively new. In many developing countries local smalland medium-sized enterprises (SME), microenterprises

as well as the supply chains of multinational companies(MNC) face multiple climate change impacts. Risingtemperatures and sea water levels, extreme weatherevents, and changing crop productivity directly threatentheir economic activities. Moreover, resulting price spikesfor water, electricity or transportation pose challengesto production and supply chain management. Increasedhealth stress factors of the local workforce further in-crease volatility. Changing local demand patterns requirenew products and services. There is without doubt anurgent need for governments and international develop-

ment cooperation organisations to foster awareness andpromote solutions to increase the resilience of vulnerableentrepreneurs, businesses and communities. While theserisk factors are threats to many, they also open opportuni-ties for new business solutions for others. For example,new climate change mitigation solutions of many MNCs,designed to spur green growth, have fostered innovationprocesses to develop new products and business models,and enter new markets with green technologies. Withoutnegating climate risks, this report maps the business op-portunities arising from climate change adaptation andseeks to nd a nexus between strengthening resilienceof communities and creating economic opportunities indeveloping countries.

1 World Resources Institute (WRI) 2011.

Business opportunities in climate change adaptation canonly be fully realized if there is a policy environment con-ducive to investment which fosters the development ofcooperation and innovation processes. To date, the publicsector and non-governmental organisations (NGOs) have been the primary actors engaged in climate change adap-tation. Keeping this dynamic in mind, this report focuseson the role of and opportunities for the private sector to become more active in the climate adaptation eld. Thisreport takes a particular focus on the innovation potentialof SMEs as well as the possible technological solutionsavailable, many of which are identied and discussed inthe following pages.

Purpose, methodology and structure of the report

This study provides a conceptual baseline analysis and twocountry case studies from Bangladesh and Mozambiqueon the opportunities to develop international coopera-tion projects with the private sector in the area of climatechange adaptation. Therefore, the report specically analy-ses the supply-side for adaptation products and services,identies business opportunities resulting from climatechange adaptation and pinpoints elds for future action.Furthermore, the report identies effective instrumentsfor international cooperation, which can be developed tofoster private sector engagement in climate adaptation.

This report differentiates the various actors within theprivate sector by examining SMEs on the local level indeveloping countries and multinational and Germancompanies on the international level across the followingdimensions:

(i) Adaptation to climate change in companies in devel-oping countries, i.e. measures that local companiesimplement in order to reduce risk factors and seizeadvantages resulting from climate change;

(ii) Contribution of German/multinational companiesto the provision of products and services that enable

companies/consumers/the public sector in develop-ing countries to adapt to climate change;

PART I: Baseline Study



2 Baseline study: Introduction

(iii) Contribution of local companies to the provision ofproducts and services that enable companies/con-sumers/the public sector in developing countries toadapt to climate change; and

(iv) Contributions of local companies to national adapta-tion policies (e.g. participation of the private sector inthe formulation of strategies for climate change adap-tation in developing countries).

The report is based on desk research of the relevantliterature, economic and climate data, project reports andinternational business research and news. Furthermorea total of 13 interviews were conducted with representa-tives of GIZ, businesses and business associations, researchinstitutes and NGOs. Research was moreover enriched by

ongoing consultations with relevant stakeholders and atconferences.

This report is structured into four sections. The rst sec-tion provides a conceptional baseline for the role of theprivate sector in climate adaptation and explores veelds of opportunity for business engagement: agriculture,information and communication technologies, indexinsurance and nancial tools, decentralized services andinfrastructure. The second section analyses major barriersto private sector engagement and outlines preconditionsfor businesses to seize opportunities identied in the rst

section. In the third section, the report provides a set ofinstruments for international development cooperationto foster private sector engagement in the eld of climatechange adaptation. The nal section includes recommen-dations on how to approach the issue of private sectorengagement in climate adaptation.



4 Baseline study: Identication of business opportunities

Based on SIDA Asia Report8

The relationship between autonomous (private sector) andplanned (public sector) adaptation has been described aseither complementary or substitutive. If planned adapta-tion increases the activities and benet of autonomousadaptation, the two are considered complements. Thisis often the case in CCA projects in the agricultural andwater sectors. However, if intervention of one actor inadaptation means that the strength of CCA activities

8 Swedish International Development Cooperation Agency(SIDA) 2009, 18.

of other actors is diminished, or is not needed, we speakof a substitutive relationship. 9 In both cases of adaptationefforts, communication is crucial to create synergies andcooperation in specic areas. In the following table therelative strengths and weaknesses of public and privatesector’s involvement in climate change adaptation is pro-vided, based on existing project evidence and reports. 10

9 Fankhauser, S. et al. 1999.10 WRI, 2011. Williams G et al. 2010. PricewaterCoopers (PwC)

2010. Asian Tiger Capital Partners (ATCP) 2010. RockefellerFoundation 2010 .

Table 1: Roles in Climate Change Adaptation

GovernmentNational adaptation planningPolicies that create incentives for and reduce barriers to adaptation

Capacity building

Business + governmentInfrastructure projects nanced by governments and completed by businessesPublic private partnerships

BusinessAdapting own operations (supporting employees and supply chain actors)Providing businesses and services for adaptation needed by others

Business + Civil Society Business/civil society partnerships (including corporate philanthropy)

Civil Society Aiding community based adaptation and adaptation projects and capacity building

Table 2: Relative strengths and weaknesses of public versus private sector approaches to adaptation

Dimensionof Approach Public Sector (Planned Adaptation) Private Sector (Autonomous Adaptation)

EfciencyLong-term approach, high level of bureau-cracy and low incentives to deliver on timemay decrease efciency.

Evidence of improvement in operational efciency wasnoted where private sector was involved.

Financingadaptation

Low motivation to provide public goods maydecrease the nancial viability of many projects.Public funds are not sufcient to address thechallenge of CCA so the nancial viability ofCCA projects needs to be enhanced.

A strict cost-benet analysis and general prot motiva-tion, coupled with a short-term approach, fosters thefocus on nancial returns.

Innovation

Large-scale, top-down administered projects

are often not as innovative. There is a needfor new context-specic solutions.

Quality-improving innovation and exibility is higher inthe case of SME involvement in CCA activities.

Consideringadaptationexternalities

A top-down, public sector approach al-lows for a wider perspective that recognizesinterdependencies of sectors. Integrativeand holistic measures are preferred by manypublic interventions.

The private sector often treats their operations in isola-tion from the external environment. Action in partnershipwith the surrounding communities is crucial to the opera-tions of the companies in developing countries.There is a need to develop awareness of climate risks andadaptation opportunities.



5Baseline study: Identication of business opportunities

Climate change adaptation in developing countries is nota stand-alone policy issue, but is deeply interconnectedwith other policy areas such as economic developmentand investment promotion. Thus, CCA needs to be man-aged under a broader policy framework, which includespoverty alleviation, natural resource management, dis-aster preparedness as well as fostering a vibrant business

climate. Such an approach requires cooperation acrossdepartments, ministries and in public private partnerships(PPPs). In the eld of technological innovation policy (e.g.eco-system based technologies to increasing agriculturalproductivity), cooperation of experts in different 11 12

Table 3: Win/Win/Win through cooperation

Autonomous efforts (local private) Planned efforts (public) Win/win/win

Farmers respond to temperaturerises by planting new varieties ofcrops.

Government research in-stitutes support research innew heat resistant seeds andprovide geographical informa-tion on the regions.

SMEs introduce new products, propose new region-specic solutions, recruit local workforce etc.Farmers implement new heat-resistant crops.Research institutes are provided with data, localknowledge, and yearlong experience in grow-ing plants. Private actors enter new markets andstrengthen innovation.

Farmers conserve water; by us-ing rain harvesting techniques/businesses promote water savingsolutions, lters.

Governments introduceinfrastructure projects buildingwater reservoirs, wells

A synergy of decentralized and centrally governedsolutions to water conservation. SMEs feature as alink between the two, e.g. manufacturing and imple-menting smaller-scale ltering systems.

Taking advantage of publiclyavailable schemes, such as subsi-dized drip irrigation, crop insur-

ance (when available)

Designing, together withnancial institutions, viableoptions for future insurance,

provision of public services etc.

The adaptive capacity as well as vulnerability ofpopulations highly depend on availability of enablinginstitutions. 12 Private micro insurers and micro-nance rms can be the link between internationalfunds and farmers.

11 Economics of Climate Adaptation (ECA) 2009.12 O’Brien et al. 2004.

thematic elds is also crucial to allow for a cross-section ofdevelopmental, environmental and social (poverty allevia-tion) issues to dene a CCA agenda. The role of the privatesector in CCA can be distinguished between adaptation by and in the private sector. The former refers to privatesector providing products and services to support CCA,while the latter focuses on risk reduction management.

For example, in the context of agriculture, a broader andmore holistic approach to new crop development as wellas a comprehensive strategy for climate-resilient develop-ment is crucial for the success of climate change adapta-tion measure. 11

Dimensionof Approach

Public Sector (Planned Adaptation) Private Sector (Autonomous Adaptation)

Strategicadaptationplanning

Long-term strategic approach in plannedadaptation allows the integration of climatechange predictions and adaptation in projectsin developing countries.

The planning horizon varies between small and largecompanies, but on the whole many private sector institu-tions do not plan beyond their scal quarter; integratingCCA analysis could extend their planning horizon becausesuch investments are of a long-term nature.

Focus onresearch andinformationon climatedata

Public sector has generally been held respon-sible for reducing information asymmetries byinvesting in training of local populations.Research has also been the task of the privatesector to produce an environment conduciveto CCA predictions and activities.

When private actors rely on publically available govern-ment data to make business decisions, they have littleincentive to invest in their own research. High costs andunclear competitive advantage benets keep some rmsfrom investing in climate research. For others (e.g. insur-ance or weather solutions), the investments are worth-while because it enables them to develop products andinnovate within the companies’ operations.

IFOK Analysis 2011

Bringing climate change and business development policies together



6 Baseline study: Identication of business opportunities

Platform technologies: In the area of climate adaptation,local solutions, indigenous technologies and tailoredapplications are in demand. Unlike climate mitigationtechnologies, which can be applied in different regionsand thus lend themselves to a top-down public sectorapproach, innovative climate adaptation technologies aremost often local, regional and context-specic. 13 They thusfavour bottom-up, individual and spontaneous responses.This report underlines the so-called concept of “platformtechnologies” 14 and the idea of promoting enabling condi-tions for innovation, local applications and business devel-opment rather than supporting specic products or solu-tions to climate adaptation. Platform technologies suchas nanotechnologies, biotechnologies, information andcommunication technologies (ICT) and geographical space

systems create further opportunities for local innovationand applications and the creation of the local knowledge base. Alternatively, they are also called “enabling tech-nologies” or “enabling infrastructure”, which represent“a foundational base for applying technical knowledge insustainable development”. 15

“The way I think about technology – and this is basedon observing trends over the last two decades – is todistinguish between platform technologies and indi-vidual applications and devices. If you look at, say, ad-

vances in information and communication technologies,you can divide them into two very clear sections – thosethat relate to devices, mobile phones for example. But ifwe look at the underlying base, which is the knowledgebase, which is information and communication as aplatform technology it has a huge impact on a very widerange of sectors. It affects the way we provide medicalcare, the way we monitor changes in the environment. Itaffects every aspect of our lives, but much of the focushas been on the devices, and then it gets reduced tokind of singular applications.”

Calestous Juma 16

Bottom-up innovations: The creation of a local knowl-edge base is benecial to international private companiesif they decide to manufacture their products locally andthen expand outwards to other markets. Traditionally,large companies have developed high-end products and

13 Overseas Development Institute (ODI) 2011.14 Juma, C. 2011. “Advances in Science, Technology, and Engi-

neering.” Chap. 2 in The New Harvest: Agricultural Innova-tion in Africa. New York: Oxford University Press (later re-ferred to as Juma C. 2011).

15 Juma, C. 2011. “Enabling Infrastructure.” Chap. 4 in The New

Harvest: Agricultural Innovation in Africa. New York: OxfordUniversity Press.16 Juma, C. , Interview for Harvard Kennedy School, available at

http://www.hks.harvard.edu/news-events/publications/in-sight/markets/juma.

subsequently adapted them to be lower in cost for emerg-ing markets. Increasingly, this model has been reversed,where large and small companies alike create a low-budg-et product tailored for a developing country or region andthen scale it up for wealthier markets. This model, oftencalled reverse innovation, allows companies like GeneralElectric (GE) to participate in the market directly, with-out being constrained exclusively to the often saturatedmarkets in developed countries. Moreover, supplyinglower-income markets forces businesses to develop costconscious designs that can create spill over effects whennew products are brought to developed country econo-mies. In this way, developing new products locally benetscompanies with cost savings as well as creates newcontext-specic products. It also benets local populations

with products designed for their local context. 17

Process architecture for innovations: It is important to viewinnovation in broader terms. While this report underlinesthe potential for technological innovation and its contribution to climate change adaptation, it also stresses theneed for support of business and social innovations sincetechnologies do not exist in a vacuum. 18 A good technologyis one that brings benets after considering the distortionscreated by market failures and inefciencies. 19 These con-siderations will vary depending on the place where a giventechnology is adopted. This local and individual nature of

technology adoption and innovation demands processesfor business incubation, matchmaking and cooperation, nota sole focus on only ready-made products.

17 General Electric (GE), n.d., available at http://citizenship.geblogs.com/how-reverse-innovation-gives-ge-a-unique-view-of-human-need/.

18 Business innovations include new business models e.g. pay-per-use or leasing schemes or supply chain innovations; so-cial innovations include new methods of governance, em-ployment schemes or resource pooling. Technological inno-vations are those made in specic technologies, for example anewly designed water ltration system. The three categoriesare interlinked and the (lack of) progress in one may affect the(lack of) progress in another, as explained in the report.

19 “We dene a good technology as one that is protable in anideal world without market inefciencies or other adoptionconstraints. In that world, adoption perfectly reveals whethera technology creates benets greater than its costs. However,moving away from the ideal, the individual adoption decisionreects all of the distortions created by market failures andmarket inefciencies. Consequently, an agricultural technol-ogy that is protable to one farmer may not be protable toher neighbor because of differences in credit access or be-cause of household-specic labor constraints. Assessmentsof the protability of existing agricultural technologies oftenstop at the demonstration plot, and may not include all in-puts such as household labor. Thus, in many cases, we lack

even the information needed to determine where to bestinvest resources aimed at improving farmer welfare throughtechnology adoption.” Abdul Latif Jameel Poverty Action Lab(J-PAL), Agriculture Technology Adoption Initiative (ATAI)2011.



7Baseline study: Fields of opportunity

2 Fields of Opportunity

In this chapter the report maps ve elds of opportu-nity for business engagement in climate change adap-tation: agriculture, information and communication

technologies, index insurance and nancial tools, decen-tralized services and infrastructure, and gives examples ofactive companies and initiatives.

2.1 FIELD OF OPPORTUNITY: Raising Agriculture productivity

Threats and Opportunities for the Private Sector in the

Agriculture SectorHigher temperatures, crop water demand, more variablerainfall and extreme climate events such as oods anddroughts continue to impact agricultural production,especially in developing countries. Several impact studiespredict signicant crop yield reductions in the next dec-ades if strong adaptation measures are not implemented.Countries in Sub-Sahara Africa and South Asia are pre-dicted to become particularily affected. In these regions,rural households are highly dependent on agriculture andfarming systems are highly sensitive to a volatile climate.

Source: UNEP 201120

20 UNEP 2007.

Some estimates assess that by 2080, world agricultural

productivity will decline by 3-16% and that the loss in Africa could be 17-28%. 21 The map below illustrates thatdeveloping countries are and will continue to be the mostseverely affected by decreased agricultural productivity.

However, according to the Universal Ecological Fund(UEF), this trend can be countered, or at least slowed,through climate adaptation measures. “The benetsof adaptation vary with crops and across regions andtemperature changes; however, on average, they provideapproximately a 10% yield benet when compared withyields when no adaptation is used.“ 22

21 Cline et al. 2010.22 Universal Ecological Fund (UEF) 2011.

Map 1: Projected Changes in Agriculture Productivity 2080



8 Baseline study: Fields of opportunity

Opportunities Resulting from Improved WeatherConditions

A new eld of business opportunity in CCA is connected to

changing seasons and the possibility of growing tradition-al plants in new locations. 23 According to climate changescenarios developed by the Intergovernmental Panel onClimate Change (IPCC), climate change will have a positiveimpact on specic plants in specic regions: For example,Northern Europe will see an increase of between 3 to 4%in wheat yields by 2020. 24

Table 4: Business Opportunities in Crop Production

Crop/product

Regions with possibil-

ity of signicant increasein production – businessopportunity

Effects of Climate Change

SoybeanChina, Indonesia, Brasil,Argentina

Soybean is grown under warm conditions in the tropics, subtropics andtemperate climates –above 18°C and below 35°C and could be planted inoriginally cooler countries in future.

Coffee EthiopiaThe growing seasons of coffee may lengthen under climate change, due toa combination of increased temperature and rainfall changes.

WheatArgentina,Northern Europe

Wheat is grown as a rain fed crop in temperate climate regions, character-ized by a long rainy season. In these regions, wheat is grown as a wintercrop. Also, wheat is grown under irrigation in the tropics; and in thesubtropics with summer rainfall and under irrigation in the winter months.Wheat may be more suitable to regions that shift to these temperatezones.

Rice China, India

Rice is grown in tropical to warm-temperate climates, under two mainsystems – irrigated (lowland) or rain fed (upland or lowland). Rice isextremely sensitive to water shortage, therefore some studies predict hugelosses if adaptation measures are not adopted. This creates opportunitiesfor developing climate-tolerant rice strains.

Wine Cool growing regionsWarmer temperatures could mean that cool growing regions should ripenfruit more consistently and should experience less year-to-year wine qual-ity variability.

Olive AustraliaOlive growing is suited for more variable and lower irrigation water andcould be used more frequently in regions with more water shortage.

Bamboo PhilippinesBamboo has versatile qualities, easily grows in many climates, and can bea good building material. It has a high potential of becoming a future cashcrop in different countries of the world. 26

25 26

23 AEA Group 2007.24 Universal Ecological Fund (UEF) 2011.25 Rural Industries Research and Development Corporation, n.d.26 AgriBusiness Week, n.d.

Table 4 based on the UEF, Rural Industries Research andDevelopment Corporation 25 and AEA Group reports,provides further details on the increase in productivity ofspecic crops due to climate change.




Opportunities for increasing productivity resulting fromworsened climate conditions

Opportunity: Climate-resistant crops

Using a different variety of crop or changing a crop alto-gether are important adaptation techniques for farmersin developing countries (along with changes in plantingcycles, technical adaptation and weather insurance). 27 Onthe basis of a regression analysis of farmers’ crop choicedepending on temperature, soil and other factors, re-searchers from Yale University concluded that crop choicein Africa is very climate sensitive. However, while farmersshift between various crop varieties that they are famil-iar with, there is a need for further agronomic researchto develop new crop varieties better suited to harsher

weather conditions in order to give farmers a wider adap-tation choice, 28 contribute to the the long-term resilienceof crops and thus manage climate change risks. Globalchemical rms are already developing products in order tocounter the trend of decreasing crop yields due to climatechange. BASF’s researchers are developing stress-tolerantplants that are more resistant to extreme weather condi-tions such as drought. 29 They optimize crop plants such ascorn, soy and wheat. Also, Bayer CropScience has initiateda number of projects to make plants more stress-resistantand achieve a signicant increase in agricultural produc-tivity. 30 Developing new crops requires strong coopera-tion with local populations to leverage local knowledgeon diversication techniques and known crops as well asindividualization of technical solutions to specic loca-tions. Generating new knowledge on the basis of localknowledge of communities and farmers’ crop diversica-tion experience is crucial for the success of future researchin and the adoption of adaptation options. 31

Opportunity: Ecosystem-based approaches and climate-smart agriculture

“Ecosystem-based management offers a valuable yet

under-utilized approach for climate change adaptation,complementing traditional actions such as infrastructuredevelopment. This approach, known as “Ecosystem-based Adaptation” (EbA), uses biodiversity and ecosystem servic-es as part of an overall adaptation strategy to help peopleand communities adapt to the negative effects of climatechange at local, national, regional and global levels.” 32

27 Based on the results of a global environmental facility-fund-ed research project “Climate, Water and Agriculture: Impactson and Adaptation of Agro-ecological Systems in Africa”, Di-nar et al. 2008 and Maddison et al, 2006.

28 Maddison, 2006.29 BASF 2011.30 Bayer Sustainability Report 2010:31 United Nations Development Programme (UNDP) 2011.32 UNEP website article, available at : http://www.unep.org/

In current literature and project descriptions, terms suchas “organic agriculture” or “climate smart agriculture” 33 areused alternatively to describe a similar approach. The un-derlying principle is that improving ecosystem manage-ment and biodiversity, for example by protecting forestsand other natural ecosystems, can provide a number ofecosystem services, which can lead to more resilient, pro-ductive and sustainable systems 34.

Organic agriculture and climate change adaptation

Organic agriculture practices enhance the nutritionalcontent of the soil, reduce soil erosion and increase itswater retention capacity. Through integrated soil fertilitymanagement it is also possible to lower fertilizer costs

and increase soil carbon. These techniques increaseyields, add to the agricultural productivity, and make theyields more resilient to weather shocks. What is more,such organic systems also contribute to the biodiver-sity, which also increases the resilience against extremeweather conditions. Conservation agriculture practicesare another climate-smart technique, which under-pins the organic system by featuring zero-tillage, themaintenance of forest canopy and intercropping of foodsecurity crops. Diversication of crops and livestock pro-duction is yet another common feature of many climatesmart agricultural systems.

Adapted from Learning Events Agriculture35

and WorldBank36

A successful public private partnership active in support-ing and spreading the climate-smart practices of farm-ers in developing countries is the partnership involvingthe International Fund for Agricultural Development(IFAD) and four private sector enterprises: KAOKA Ltd,Hom&Terre and Malongo Ltd and a British fair trade com-pany, CaféDirect. This partnership has promoted organicagriculture and certication in developing countries. In

the 1990s, it identied sustainable ways to reverse thedecline of the cocoa sector in Sao Tome e Principle thatallowed for organic certication of their products and

climatechange/adaptation/EcosystemBasedAdaptation/tab-id/29583/Default.aspx

33 World Bank (WB) 2011.34 “Protecting forests, wetlands, coastal habitats, and other

natural ecosystems can provide social, economic and envi-ronmental benets, both directly through more sustainablemanagement of biological resources and indirectly throughprotection of eco-system services”, World Bank 2010. For fur-ther details on ecosystem-based adaptation see the report bythe World Bank 2010 (Index).

35 Agriculture Day Website, available at: http://www.agriculture-day.org/learning-events

36 World Bank 2011.




boosted their prices and international prestige. As a result,the country’s cocoa exports have increased tenfold since2004, from 50 tons before 2004 to 600 tons in 2010. Similartrends are expected for coffee and pepper. 37

There are a variety of techniques that fall under the cat-egory of “eco-system based approaches” whose aim is toincrease agricultural productivity in developing countries.It is crucial that attention is given to landscape approachessuch as integrated planning of land, agriculture, forests,sheries and water to ensure synergies between different so-lutions are captured and implemented in the project work. 38

Business Example in Haiti: Seed Systems as a Way toDistribute New Crops

Efcient seed production systems ensure rapid accessfor farmers to seed varieties adapted to their new agro-ecological conditions. For example, FAO has supportedthe introduction of new seed varieties in Haiti with theaim to increase food production and facilitate the transi-tion from emergency to rehabilitation. Another successstory has been the introduction of the bean variety ICTALijero from Guatemala, a very early maturing bean typeand resistant to one of the major disease problemsin Haiti, the Golden Mosaic Virus. This variety allowsfarmers in irrigated plains to have two harvests of beansbefore the start of the hot season. Since 2007, FAO has

supported community seed producer groups in theproduction of ICTA Lijero. In 2009, the FAO seed mul-tiplication programme has supported 34 seed producergroups that have produced 400T of bean seed includingICTA Lijero.

Food and Agriculture Organization 39

Business Example in Ethiopia: Agroforestry Approachesto Climate Change Adaptation

WOIRA OIL PLC produces olive oil for the local marketin Ethiopia in portion packs (10g). The target market arerestaurants, hotels and little shops. By producing in por-tion packs it will be affordable for everyone in Ethiopiato use olive oil.

Creating olive tree plantations in Ethiopia contributes tothe ght against soil erosion by reforestation. Olives willgenerate income to the farmers, and ladies for harvest-ing them.

Bid Network40

37 Project summary at Agriculture day learning events website,available at http://www.agricultureday.org/learning-events

38 Food and Agriculture Organization (FAO) 2010.39 FAO 2010,2.40 BidNetwork 2010.

For the climate-smart techniques to work, farmers needto have access to information and inputs such as fertiliz-ers, machinery, crops, seeds, breeds and others 41. In orderto increase returns and benets of agricultural productionsystems it is important to promote access of climate smartagriculture products to output markets. 42

Opportunity: Irrigation Systems and water conservationtechnologies

Climate change enhances water stress in many coun-tries. Flooding, soil and coastal erosion, salinity intrusionand drought and other climate change related weatherphenomena can and often do lead to a decrease in waterquality and water scarcity (RF 2010 43). The regions mostaffected by the projected water stress are largely develop-

ing countries.The challenge of poor availablility of water for agriculture

According to a report by International Water ManagementInstitute (IWMI 2006 44) micro-irrigation technologies areincreasingly considered as the critical means to increaseagricultural productivity and decrease the problem ofthe competition for scarce water resources in develop-ing countries. Private companies, such as Driptech andInternational Development Enterprises, have developedaffordable, highly scalable adapative solutions for ruralfarmers in developing countries. The advantages of thosetechnologies are their affordability, their ease of operationand proven increases in yields (IWMI 2006).

The main challenges associated with the wider distribu-tion of micro-irrigation technologies are connected topower shortages (when energy is used to pump water),unreliable water connectivity and lack of infrastructurein certain regions, as well as a poor capacity to pay for theinvestments (RF 2010). Table 5 illustrates the types andadvantages of some relevant technologies available on themarket.

41 FAO 2010.42 Global Scientic Conference on Climate Smart Agriculture 2011.43 RF 2010, 21.44 IWMI 2006.




Map 2: Predicted Water Stress in 2050s

Source: Centre for Environmental Systems Research, University of Kassel45

Table 5: Advantages of micro-irrigation and water conservation technologies

Type of technology Description Advantages

Sprinkler irrigation

A method of applying irrigation that issimilar to rainfall. Water is distributed

through the system of pipes and thensprayed in the air.

Efcient coverage for small and large areas, high scal-ability, suitable for use on all types of properties andalmost all types of eld crops. Saves a considerableamount of water.Example: Jain Sprinkler systems 46

Drip irrigation

Through a network of pipes, tubing andemitters water drips slowly to the rootsof plants, either onto the soil surface ordirectly onto the root zone.

Drip irrigation considerably increases crop yields(according to the Driptech website: by 20-50%) andrequires less labor and less money spent on diesel orelectricity for pumping water.Example:DripTech47

Deepwater Irrigation

The technology has two major compo-nents: installation of a deep tube-welland construction of an undergrounddistribution line.

Deepwater irrigation avoids evaporation loss duringdistribution, and helps in transportation of water inundulate terrains.Example: Barnd Integrated Area Development Project 48

Water conservationmethods, e.g.rainwater harvesting

The water is accumulated from roof-tops, land surface or rock catchmentsand stored for reuse before it reachesthe aquifer. A rainwater harvesting sys-tem comprises various stages such as:transporting rainwater through pipes ordrains, ltration, and storage in tanks.

Saving costs and water, marketing good conservationtechniques.Examples: Unilever49 Jeans Water<Less™ jeans,Kellogg’s water-reduction initiative: bringing waterefcacy to the supply chain and production process ofcompanies.

IFOK Analysis 2011 46 47 48 49

45 Maps also available at http://news.bbc.co.uk/2/hi/7821082.stm.46 Jain Irrigation Systems, available at http://www.jains.com/irrigation/popups%20and%20sprinklers/sprinklersystems.htm47 Driptech, available at http://www.driptech.com/.48 For a detailed description of the project and the technologies used: UNDP, Human Development Report 2007/2008, available at http://

hdr.undp.org/en/reports/global/hdr2007-8/papers/Rahman_Alam_Alam_Uzzaman_Rashid_Rabbani.pdf, 59-62.49 Unilever, available at http://www.unilever.co.uk/sustainability/environment/water/.




Business case: “Appropriate Technologies for EnterpriseCreation” (ApproTEC): the Money-making pressure pumpdeveloped to address the problem of water stress in Kenya

ApproTEC examined the situation of small farmers inKenya and realised that the introduction of a low costmanually operated irrigation pump could have a hugeimpact on their work. They concluded that the incomeof Kenya’s many small farmers could be increased byirrigating their land. Even though electric and petrol-driven pumps were available, few farmers had accessto electricity while the smallest petrol pump costs over$400. ApproTEC substantially redesigned a pump whichhad been successfully promoted in India and adjustedit to Kenyan conditions. The pump is suitable for use onsteeply sloping land where the water source is at the

bottom, it can also be used to pump water from hand-dug wells, rivers, streams, lakes and ponds. It is idealfor sprinkler irrigation, as well as lling overhead watertanks. The company developed a set of mass productiontooling and trained four local engineering businessesto manufacture and sell the product. With supportfrom DFID, ApproTEC went on to establish a dealershipnetwork of over 25 private sector retailers.

ApproTEC50

Opportunities for increasing productivity by focusing onareas not directly linked to CCA

Bridging the gap between existing technological solutionsand their implementation is a major challenge in CCAprojects. While private companies are the dominant play-ers and make nancial outlays in the commercializationphase, there is a big gap between research and develop-ment (R&D) and commercialization: whilst the rst isfocused on the development of a technology, the secondrequires the development of a product that can competewith other existing products, or, in the case of a new prod-uct, can offer consumers sufcient reason to use the prod-ucts.51 It is crucial to acknowledge that especially for small

farmers in developing countries, growing crops is oftennot out of choice, but rather a livelihood strategy to meetthe subsistance level, which seriously limits their adapta-tion options and the willingness to take risks by adopt-ing new crops. 52 Farmers will not grow new crops if theirprices are low and they do not recognise the potential formarket improvement. Uncertainty about the markets andclimate change risks lower the possibility of crop diversi-cation, on the part of the farmers, even more. 53

50 ApproTEC, available at www.ApproTEC.org., further infor-mation on the project available at http://pickar.caltech.edu/

me105/materials/case-studies/APPROTEC.pdf.51 Sagar et al. 2009. P. 274/284.52 Malik A. et al. 2010, 11.53 According to research conducted by Eakin and Hallie, in

Mexico only larger farmers are in the position to diversifycrops away from maize towards less climate sensitive cropssuch as oat and barley. The poorest, with very small land-

Moreover, apart from insecurity of markets, “creditinefciencies” 54 have been identied as one of the mainconstraints preventing farmers and small landownersfrom adopting new varieties of crops. 55 Facing these con-straints, it is clear that often a focus on aspects not directlyrelated to CCA may be the best way to increase agriculturalproductivity and thus indirectly contribute to food secu-rity and CCA. In order to do that, it is crucial to identifyregions and projects where agricultural and private sectorpromotion in general need to be improved before a CCAagenda can be promoted. 56

Organisations, such as the Sustainable Food Lab (membersinclude Oxfam and Unilever) focus on analyzing valuechains with the aim to link smallholders in developingcountries to local or global markets - including local streetmarkets and global value chains. They view the establish-ment of such links as a double-benet process in whichpoverty is fought and businesses get a chance to diversifytheir supply chains, enter new markets and engage inethical trade. The Sustainable Food Lab focuses on main-streaming new business models in which developmentand a fair distribution of rewards along the supply chainplay a critical role. 57 GIZ has been involved in projectswhere climate change adaptation is considered a second-ary goal, whilst the focus lies in providing market orienta-tion, building capacity and market structures.

GIZ: Focus on supply chains

GIZ has developed a comprehensive tool, known asValueLink, designed to improve the functioning of sup-ply chains in developing countries. Small landownerscan minimize their risks by forming cooperatives andagreeing to xed contracts with commercial organi-zations. GIZ gives support in three domains: marketorientation, lobbying and organization. In Bosnia andHerzegovina, GIZ has worked to promote marketorientation of fruit and vegetable markets. At rst itcoordinated the merging of farmers into cooperativesand later it advised the groups on the introduction ofresource-friendly techniques.

GIZ Advisory Service58

holding, are trapped in subsistence farming with very highdependence on maize, which is not a climate-resilient crop.Eakin, H. 2005, pp. 1923-38.

54 Agricultural Technology Adoption Initiative (ATAI) 2011.55 Institut für Organizatorische Kommunikation (IFOK) 2011.

Interview with Ben Jaques, Agriculture Program Manager

from ATAI.56 IFOK: Interview with GIZ, Christoph Feldkötter57 Sustainable Food Lab Website, available at http://www.sus-

tainablefoodlab.org/projects/ag-and-development.58 GIZ, n.d. GIZ, “Rural development, Value chains”, Adviso-

ry Service, Available at http://www.giz.de/de/downloads/giz2012-en-value-chains.pdf.

http://www.giz.de/de/downloads/giz2012-en-value-chains.pdf







Business Example in Vietnam: Green Saving Books

In order to halt further deforestation, farming families

are provided with long-term rights to the use of state-owned forest; they re-plant in a manner appropriate tothe location and manage the new forest themselves. Asseed capital they receive saplings, fertiliser and training,and they are also given a savings book containing theentire salary for the rst three years. The savings bookis interest-bearing and is paid out to the farmers in an-nual instalments over a period of eight years. The forestfarmers are brought into direct contact with interna-tional buyers, so that they can prot directly from thehigher prices paid for certied wood. The model of the“green savings books” is now contributing to povertyreduction and sustainable environmental managementin 13 provinces in northern and central Vietnam. A totalof 130,000 hectares have been reforested, and to date86,000 families have taken part in the project.

Kfw Entwicklungsbank 59

Business Example in Afghanistan: Improved Technolo-gies for Reducing Postharvest Losses

In the northern part of Afghanistan where a largepercentage of the country‘s cereals are produced, manyfarmers store their crop in plastic and ber bags orin farm buildings without proper ooring, doors andwindows. Signicant post-harvest losses have beennoticed due to this limited protection .The Govern-ment requested support from FAO to provide silos forgrain storage to communities and farming households.With funds provided by the Government of the FederalRepublic of Germany, FAO implemented a project (2004to 2006) with the objective of reducing post-harvestlosses and enhancing the technical capacity of localtinsmiths, blacksmiths and craftsmen for constructionof metallic grain silos. Seven main grain producing prov-inces were selected as focus areas. Technical personnelfrom the Ministry of Agriculture and NGOs trained 300

local artisans in the manufacture of silos. The projectalso oversaw the construction of grain warehouses forcommunity use in 12 sites and trained beneciaries onhow to best operate and manage the facilities. It wasfound that the use of the metallic silos had decreasedstorage loss from 15-20% to less than 1-2%, grains wereof higher quality (as protected from insects, mice andmould) and could be stored for longer. Based on thetraining received, tinsmiths, blacksmiths and craftsmenare now fabricating silos as a protable enterprise.

Food and Agriculture Organization 60

59 KfW Entwicklungsbank 2011.60 FAO 2010, 3.

One way of overcoming barriers to access agriculturalinputs is through organised collective action; for exampleproducer organisations can contribute to the improve-ment of input supplies for smallholders in developingcountries. One such structure is the Boutiques d’intrantsin Niger, a network of more than 300 input distributionshops, managed by farmer organisations. 61 Another waycould be the establishment of marketing platforms, for ex-ample the Plataformas project in Mexico, which was foundto positively affect the farmer’s marketed returns andincrease their participation in the production process. 62 Another opportunity to increase the productivity of localSMEs is through the creation of cooperative and advisoryservices in order to share knowledge on existing methodsand technologies.

Business Example in Sudan: Strengthening Communica-tion along the Entire Value Chain

“In 2003, Practical Action in Sudan started to work withhibiscus farmers (mainly women) in remote westernSudan. Initially farm plots were used to demonstratebetter varieties and harvesting techniques. It soon be-came clear that the major problems concerned poor re-lationships and communication along the market chain[…] Preparations to develop the hibiscus market-chainbegan with three large meetings involving farmers,traders and village development committee membersfrom 25 villages in north Darfur and Kordofan (the mainproduction area). These two-day workshops exploredmarket opportunities, and also involved service provid-ers (government extension agents, private agriculturalinputs suppliers) in understanding the problems andpotential of hibiscus. […] Having worked with producersand village councils for many years Practical Action ishighly trusted as a market facilitator, but it is less wellknown among the transporters, exporter agents andinput suppliers. A few individuals have been engagedwith encouraging results: one exporter is now payingextension workers to train farmers that supply him in a

novel harvesting technique. Further progress relies onidentifying tangible initiatives that attract and enablemore of these market actors to benet from upgradingthe hibiscus chain. The market opportunities or ‘hooks’include higher production standards, lower taxation andmore efcient regulation, and better services (seeds,storage, and transportation) to raise revenues along thewhole market chain”.

Universal Ecological Fund 63

61 Les Boutiques d’Intrants, available at : http://www.fao.org/ag/agl/eldpro/niger/pages/Boutiques_intrants.htm

62 Cavatassi et al, 2010.63 Universal Ecological Fund (UEF) 2011.




Labels, Certicates and Standards

A market-based approach to climate adaptation encom-passes the development of standards for climate-proof

or adaptation-related products and services. In otherareas, where market access difculties prevail, certica-tion schemes and labelling have shown positive results inadding price premium and market value to products e.g.labels for fair trade or organic production. The advantagesof those schemes are higher market prices for the certiedproducts, investment incentives and improved marketaccess if developed in cooperation with buyers and exportmarkets. Major challenges of this approach are a) in thedenition of criteria and indicators for climate-proof oradaptation related products, b) the implementation of thecertication process and monitoring of standards, c) thehigh number of existing labels and standards and d) theaffordability of certications for farmers and agribusiness-es, which might lead to market disadvantages for small-holders. It is thus advisable to explore opportunities tointegrate climate-proof criteria and adaptation measuresinto existing labels and certication schemes.

Key Messages

1. Strengthening capacities of local populations for inno-vation and technology adoption is key to increasing ag-

ricultural production.2. The creation of greater synergy between food security

and climate change adaptation in agriculture (for exam-ple through the focus on increasing agricultural produc-tivity through the employment of climate smart tech-nologies) is needed.

3. The exchange of autonomous and planned adaptationtechniques and strong collaboration of various actors(especially in new crop development processes) need to be fostered.

4. Focus on increasing the efciency of the productionprocess (supply chain management, market access etc.)also, albeit indirectly, fosters CCA agenda and should beprioritized where needed.

5. Options for certication schemes for adaptation-relatedor climate-proof products should be further explored.

To conclude the ndings in this chapter, table 6 summa-rizes the roles of the public and private sector in promot-ing CCA.

Table 6: Summary of the Roles of the Public and Private Sector in Promoting CCA in Agriculture

Critical inputs Provider/promoter

Providing and investing in reliable research linking climate change to the productivity levelsof specic plants, modelling changes and translating them to the business community.

Public sector

Leveraging local knowledge in autonomous adaptation – by creating links between privatesector, local populations and local research centres

Public sector

Research and Development into new weather-resistant crops

Private and Public Sector,Research departments ofBig Corporations, researchinstitutes

Implementation of new weather-resistant crops, leading pilot projects Private and public sector

Scaling up successful solutions and adjusting to new conditions – entering new markets,spreading solutions

SMEs

Providing credit lines to purchase new crops PPPs

Providing weather insurance to local populations Private sector

Promoting ecosystem-based approaches Public sector

Developing and implementing technologies for eco-system based CCA Private Sector, SMEs

Connecting farmers to global markets / market access and value chain approach Private and public sector

Identifying weak points in supply chains and targeting them to increase productivity Private sector

Identifying cash crops and upgrading supply chain Private and public sector

IFOK Analysis 2011




2.2 FIELD OF OPPORTUNITY: Information and communication technologies (ICT)

“Information can inform the actions of the govern-

ment, media, private sector, consumers and produc-ers, spurring them on to develop appropriate earlywarning systems and insurance products or selectthe right crops. In addition, market and job infor-mation too greatly enhance the resilience of theurban poor .”

Rockefeller Foundation 64

“Building these enterprises requires developing oflocal operational, repair, and maintenance exper-tise, and a pool of local technicians ”.

Calestous Juma 65

Bridging the informational gap

Bridging the gap between existing knowledge, local popu-lations and businesses has been identied as a big CCAchallenge. 66 An increasing number of businesses respondto this challenge by investing in the provision of informa-tion and communication technologies. Services can beclassied according to the target audience and aim theywish to reach. These include:

Technologies implemented to provide up-to-date agri-cultural, market and nancial information to the localpopulations (mobile and internet);

Technologies implemented to foster long-term educa-tion and training of the local populations (internet plat-forms, interactive portals, blogs etc.); and

Technologies implemented to collect and provide infor-mation on the needs and conditions of the developingcountries to the global society (blogs, news), includinggeographical data, 3D maps, etc.

The rst two categories can be classied as ‘community- based’ systems, due to their focus on local populations,while the third category belongs to ‘stakeholder-based’systems, aimed at providing platforms for exchange between stakeholders and institutions around the issue ofclimate change. The report focuses on business opportuni-ties resulting from connecting farmers (community-basedsystems) to each other, giving them access to relevantinformation and to nancial and insurance institutions.The need to develop a participatory framework for projectimplementation will be briey discussed.

64 Rockefeller Foundation, 2010, p.9.65 Juma C. 2011.66 UNEP, Oxfam, WRI 2011, p.42.

Community-based systems: the advantages of mobile

phone technology Within the ‘community-based systems’, mobile phonescan both serve as a way to distribute up-to-date informa-tion on prices, markets or weather conditions, and tostrengthen communication between various actors. Theow of up-to-date information increases the capacity offarmers and entrepreneurs to plan for extreme weatherevents (mobile use for disaster preparedness), to build business resilience to climate change related direct andindirect impacts and allocate their resources effectively.

Mobile Data Collection for DisasterTxteagle is a data collection and participation plat-form, which leverages mobile airtime compensation inexchange for data collection and customer engagement.Txteage have built their own platform atop the USSDprotocol that GSM phones use to communicate withtheir service providers. USSD communications are free,which gives TxtEagle a signicant competitive advantagein emerging markets where virtually all mobile servicesare prepaid.

The service is currently used by one nonprot organisa-tion to survey constituents about disaster preparedness.It also enables the 3 billion mobile phone subscribersliving in the developing world to earn small amounts ofmoney by completing simple tasks for companies whopay them in airtime or mobile money transfer service(details on that in the following section).

For further details see Txteagle 67

Increased connectivity allows for a more efcient com-munication between various actors along the entire valuechain, improves data visibility for supply chain efciencyand enhances access to global markets. Additionally, ICT

services can improve farmers’ access to nancial services,allowing them to spend more time in the elds instead oftravelling multiple days into town to make purchases andtransfers. The following examples show that mobile tech-nologies can solve many of the problems identied in theprevious chapter on agriculture. ICT serves as a platformtechnology for other business spin-offs, as a business enabler or facilitator and as a protable business opportunityin itself and can be a platform for new adaptation-relatedapplications and services.

67 Txteagle, 2011.




Business Example in Ghana and Malawi: Mobile Servicesin Agricultural Development

A mobile-integrated software built in Accra, Ghana,Esoko offers a variety of tools to the local farmers inGhana as well as in 7 other countries. The tools includeeasy proling in the eld and automatic SMS alerts sentto farmers. A team of data collectors lls the platformwith market prices on various products (e.g. maize,beans, soy) which is then distributed to farmers via SMS.According to Carana Corporation, who manages theproject, a reliable, cost-effective market informationsystem that connects everyone along the agribusinesschain—from farmers to transporters to traders to nalbuyers— is crucial in moving food to ready markets.When a mobile coverage of almost 95% is reached,Esoko’s information system will be able to touch eventhe most remote smallholder farmer in Malawi.

Esoko Press Release 68

Business Example in India and Indonesia: Positive Exter-nalities, Indirectly Serving the Urban Poor

Skymet is India’s rst weather forecasting company sup-plying accurate weather information to farmers throughtelecom-television and to energy companies to facilitatepower trading. Skymet also sends weather information

to city utilities enabling them to make better purchasedecisions, shipping companies, media companies—printand television channels—and insurance companies. Inpartnership with Nokia, Skymet provides SMS-basedweather forecasts through Nokia Life-Tools to 110,000farmers, helping them to make better decisions on ir-rigation and storage. In both India and Indonesia, NokiaLife-Tools provides hyper-localized information onagriculture, education, and entertainment over SMS.


ICT is a eld of opportunity for technology providers

to enter new markets and develop their products and brands. Mobile phones or internet-based services cancut out transaction costs by replacing several hours (ordays) of travel with a three-minute phone call and thusallow rms and producers to get up-to-date informa-tion on demand and markets and increase productivity.They can also redistribute economic gains and losses pertransaction between consumers and producers. Moreo-ver, mobile phones make it easier for social networks toabsorb economic shocks. 70 Farmers in Ghana who usedthe ESOKO SMS alert services reported 40% consistent

68 Esoko 201169 Rockefeller Foundation 2011, 9, 33.70 Juma C. 2011, 8.

revenue improvements. 71 Protable business models anda smart use of existing technologies may give companiesa competitive advantage in developing countries. Moreo-ver, the use of these technologies (particularly mobile)normally requires small initial investments and allowsfarmers to experiment with techniques to decide on theirrelative success. 72 It is key to develop specic and tailoredadaptation- relevant applications and services.

Community-based technologies

Cross-section of mobile technologies and nancial andinsurance institutions

Coupling mobile technologies with nancial or insuranceservices can become a protable business model for local

companies and communities. An example of a success-ful cooperation is the joint venture of Kenyan Safaricomand British Vodafone, which launched a pioneer mobilemoney transfer service called M-Pesa in March 2007. Theservice rst targeted the poor population in Kenya, and byMay 2009 the service had captured 6.5 million subscrib-ers with 2 million daily transactions in Kenya alone. As ofNovember 2011, M-Pesa has over 14 million subscribers,over 28,000 agents across the country, and has partneredwith over 40 banks and non-banking organisations. 73

“IT is like magic. By clicking a few keys on a mobilephone, money can be zapped from one part of Kenya toanother in seconds. For urban migrants sending moneyhome to their villages, and for people used to queuing atbanks for hours to pay bills or school fees, the M-PESAmoney-transfer service, operated by Safaricom, Kenya’slargest mobile operator, is a godsend. No wonder itis used by 9.5m people, or 23% of the population,and transfers the equivalent of 11% of Kenya’s GDPeach year; or that it has inspired more than 60 similarschemes across the world.”

The Economist 74

MicroEnsure has recently worked with the mobile phonecompany Tigoto to expand the M-Insurance product toTanzania. A new product was developed called Tigo Bima,which is is the rst mobile insurance product to protect

71 Esoko 2011: Press Release.72 “If farmers can achieve success with a small investment early

on, they are likely to devote more resources to the techniquelater as they become committed to the practice. An exampleof this type of technological investment is the planting pitsthat increase crop production and fostered more productivesoil for future years of planting.”Juma, C. 2011 , 34.

73 Shaw G., 2012. Barclays’ Pingit – will pinging money overyour phone take off?. Available at http://conversation.which.co.uk/money/barclays-pingit-mobile-payment-service/

74 The Economist, available at http://www.economist.com/node/16319635




against loss of life due to accident or illness offered inTanzania. It is provided free to all customers making aminimum spend per month on their mobile phone withTigo. As clients use their phone more, the level of coverincreases. A clients’ level of cover, which is based on theirprevious month’s usage, is communicated to the clients by text message at the beginning of the month. 75 Thisproduct has demonstrated the advantages of leveraging awidespread existing infrastructure to achieve scale, whichis an essential precondition for micro insurance to be vi-able. In order to enable farmers and entrepreneurs to gainaccess to adaptation- related information, products andservices, existing ICT capacity and business- to-businesscooperations can be leveraged for the development of new business models e.g in the insurance, nance and informa-

tion services sector.

Interactive platforms and SMS services

Other partnerships such as that of the Grameen Founda-tion with Google and the provider MTN Uganda havecreated interactive platforms (such as Appleby) that allowfarmers to get tailored, speedy answers to their ques-tions. The initiative consists of platforms such as Farmer’sFriend, a searchable database of agricultural information,Google SMS, a question and answer texting service andGoogle Trader, a SMS-based ‘marketplace’ application thathelps buyers and sellers nd each other. Climate Change Agriculture and Food Security’s website provides a plat-form for sharing autonomous practices of local farmersfor crop diversication, land and water management. 76

Incorporating CCA agenda in education facilities andextension services

Information and communication technologies can beused not only to spread information, but also to fosterlong-term education among local farmers. In the past, tra-ditionally organised extensions services have often failedto reach a high percentage of the population in developing

countries. 77 A number of interesting projects have beeninitiated by individual entrepreneurs or SMEs in the eldof introducing technology to extension services. Aakruthi Agricultural Associates of India, promoted by a group ofagricultural professionals, work on agricultural extensionfor rural transformation. 78 They have created Agri-Knowl-edge Centres (AKCs), each one covering around 20 villages

75 MicroEnsure Website Article available at: http://www.micro-ensure.com/news.asp?id=148&start=0

76 Climate Change Agriculture and Food Security website avail-able at: http://ccafs.cgiar.org/

77 IFOK 2011 (Interview with Ben Jaques, Agriculture ProgramManager from Jpal).

78 Aakkhruthi agricultural associates of India, available at http://www.iumap.org/aakruthi-agricultural-associates-of-india-pvt-ltd/

and providing information services to farmers. AKCsfacilitate exchange of the latest agricultural technologies,success stories, market news, new inventions and demosthrough trained employees. Another example of usingeducational services to spread climate change awareness,introduced by the public sector, is the incorporation ofclimate change agendas into existing structures (e.g inte-grated pest management schools).

Business Example in Indonesia: Climate Field SchoolsBuilding on FFS Success

The department of agricultural extension in West Javain Indonesia converted an integrated pest managementschool into a climate eld school, thereby incorporat-ing climate change in farm decision-making processes.They aim to tailor cropping management to weatherforecast data, in order to increase the awareness offarmers of climate change and spread climate adapta-tion techniques.

FAO79

Infrastructure Leasing & Financial Services Limited(IL&FS) Education and Technology Services is a socialinfrastructure arm of IL&FS 80 with specic interests ineducation and training through formal, non-formal andtechnology learning mediums. IL&FS Education will rely

on technology and social media to disseminate educationand information to the underserved populations of India.These educational topics could also cover climate changerisks, opportunities, and preparedness approaches. EnglishSeekho is India’s rst interactive multi-lingual Englishlearning programme for mobile phone users. 81 Launchedin association with Tata Indicom, the service has deliveredmobile-based English learning lessons to over 200,000subscribers. Such interactive tools can strengthen the par-ticipation of local populations in climate change adapta-tion projects and raise their climate change awareness.

Participatory approachThe key to success of ICTs is their strategical integrationinto the community. 82 For example, recent studies showthat Africa has more mobile users than landline subscrib-ers, making the investment in the dissemination of mobileservices more likely to be a success. 83 However, in many

79 FAO 2010.80 Available at http://ilfsets.com/81 Available at http://www.enterux.com/en/english-seekho82 “Strategically integrated ICTs, such as community radios,

mobile phones, knowledge centres and interactive media, areenabling tools that help to reduce climate change vulnerabil-ity and risk, while including the voices of those most affectedfor political advocacy.” In: Kalas, P. 2008, 9.

83 Afron News, available at: http://afrol.com/articles/12176




regions infrastructure needs to be improved rst, beforeusers can be connected to ICT. In order to foster the ac-ceptance and active use of technologies by local popula-tions, a participatory approach should be adopted, as itwas the case for example in the Information Village Re-search Project 84 conducted by MS Swaminathan ResearchFoundation. By participatory approach we mean:

Using existing structures and institutions to implementand spread new technologies (e.g. existing eld schools,existing social networks)

Engaging local populations in the implementation andspread of technology (both technically and in the crea-tion of ICT content).

Bhoomi e-governance project in India

Under the Bhoomi e-governance project all 20 millionland records of 6.7 million land owners in 176 taluks ofKarnataka have been computerised. This system workswith the software called “BHOOMI” designed fully in-house by National Informatics Center, Bangalore.

Advantages for the farmers• Farmers can quickly get their land records from kiosks

and are protected from harassment and extortion.• Reduction in processing time for mutation.• Online tracking of mutation status.• Easy access to farm credit. (Online connectivity to

banks would ensure farm credit to farmers in less than5 days as against 25-30 days in manual system.)

• Ease in case of legal matters.

Advantages to the administrators• Ease of maintenance and update of land record

documents.• Quick and easy access to land records.• Quick and easy access to land records for analysis

purposes.•

Ease of monitoring government lands.For nancial institutions, online farm credit relatedactivities• Online connectivity to nancial institutions would help

banks in planning for their farm credit related activi-ties. In manual system they worked on 2 year old dataor just guessed the farm sector requirement.

• Information availability for private sector.

Adapted from website on e-governance in India 85

84 Ms Swinathan Research Foundation 2005.85 Portal “e-Governance”, developed by Prathab K and Girish

Joshi, available at http://www.it.iitb.ac.in/~prathabk/egovern-ance/egov_success_stories_bhoomi.html

Provision of geographical data

Wide access to specic geographical data can increaseclimate change adaptation planning among policy makers

and other actors. Due to availability of such geospatialinformation, bankers may become more willing to providecrop loans, and land disputes could decline, allowingfarmers to invest in their land. The example (Bhoomi E-Governance project) shows an indirect approach towardsCCA by improving farming conditions as climate condi-tions worsen.

Generally, the role of the public sector in the support ofnew CCA technologies is more limited than in other sec-tors identied in this report. Importantly, the public sectorshould not target one technology over others in order to

avoid market distortions, but rather focus on providing agenerally business friendly competitive environment toattract business investment (this point is developed in thePreconditions and Instruments sections, chapters 3 and 4).

Key messages

1. ICT serves in the area of climate adaptations as a plat-form for business spin-offs, as a business enabler and asa business itself.

2. ICT should support and incorporate indigenous knowl-edge (experience in autonomous adaptation) rather thango against it, by fostering existing social networks, ex-ibility and self-organisation of local farmers.

3. Participatory approach in implementation process (e.g.through engagement of local volunteers) is crucial forthe success of technical transfer and distribution.

4. Due to “technology convergence” 86, there is a need forinteractions of actors and disciplines in the eld of cli-mate change adaptation.

5. The public sector should avoid supporting one spe-cic technology to avoid market distortions. (Sector-

based rather than technology-based approach to CCApromotion).

The following table sumarizes the roles of the public andprivate sector in promoting CCA in the ICT sector basedon the ndings in this chapter.

86 This means that there is a tendency for different technologi-cal systems to evolve towards performing similar tasks. Formore detail see Juma C. 2011.




Table 7: Summary of the Roles of the Public and Private Sector in Promoting CCA in the ICT Sector

Critical inputs Provider/promoter

Coordination of the existing actors to use available information and put in new formats,increasing accessibility Public sector

Work with service providers, banks, NGOs to provide favourable policies Public sector

Ensure integrity of content Public sector/private

Support development of locally relevant content through existing agricultural departmentsPublic sector/private sector/NGOs

Provision, transfer of technology Private sector

Provision of basic infrastructure where needed Public sector

Flexible SMEs friendly regulations for the provision of new technological solutions to en-able a learning-by-doing approach

Public sector

Increased cooperation among technology providers and nancial or educational institutions Private sector

IFOK Analysis 2011, based on the recommendations of PWC 87 and Vodafone and Accenture report and project evaluations. 88

87 PwC 2010.88 Vodafone, Accenture Report 2011.




New insurance products

New products, such as micro insurance and index-basedweather insurance, and initiatives driven by the privatesector have been developed in many countries, includ-ing Malawi, India, Morocco, Brazil, Rwanda, Indonesiaand others. Table 7 shows a compilation of instrumentsand formats in the eld of insurance and weather datacollection. 89

89 Swiss Re. 2007.

Figure 1: Cost of Large Natural Catastrophies 1950 – 2005. Economic and Insured Losses

Source: GeoRisikoForschung, Müncheneruck, 2003

2.3 FIELD OF OPPORTUNITY: Index Insurance and Financial Tools

Managing risks

Climate change and the higher frequency of extremeweather events have exacerbated the need for insurancein rural communities in developing countries. Developingcountries are the most exposed to climate change relatedextreme weather events.




Microinsurance is designed specically for low-incomepopulations and can reduce their vulnerability to manyclimate change related risks. Microinsurance is charac-terised by low premiums and low coverage limits. 97 Eventhough index insurance schemes are frequently imple-mented in collaboration with government agencies and/or supported by donor organisations, the private sectoris starting to play a more central role. For example, out ofthe 36 index insurance pilots described in a 2010 WorldFood Programme and International Fund for AgriculturalDevelopment report, 11 were led by private companies.Programmes are typically underwritten by major regionalinsurance companies and many are reinsured by globalrms such as Swiss Re and Munich Re.

Business Example in Senegal:Swiss Re - R4 Rural Resilience Initiative

R4 is a partnership of Swiss Re with Oxfam, Rockefel-ler Foundation and the World Food Programme. Whileindex insurance lies at its core, the programme takes aholistic and farmer-centric approach to risk manage-ment. It seeks to manage four risks: community riskreduction (i.e. improved agricultural practices andconservation activities), prudent risk taking (i.e., credit),and risk transfer (i.e., insurance) and risk reserves (i.e.savings). Farmers receive insurance by paying directlyfor it or through food and cash for work transfers. Bythe end of 2011, the programme will have successfullyreached 15,000 households in Ethiopia. This is a ten-foldincrease from 2010. Swiss Re has entered into its longestpartnership yet, ve years, to fund the development andexpansion of this project.

Swiss Re98

Index insurance represents a growing market withincreasing private sector involvement and rising levelsof interest. However, realizing the benets of insurancerequires that farmers make long-term plans and take

climate change adaptation into consideration. Anotherobstacle is poor availability and reliability of weather dataand often inexible laws and regulations. Index insur-ance in particular requires signicant technical assistancein the identication, design and pilot phases, which canmake products expensive with high frontend costs. Otherconstraints include:

Inadequate training of insurance sales representatives;Low level of awareness of the existing insuranceschemes among various stakeholders as well as localpopulations;

97 RF. 2011, 9.f.98 Swiss Re, available at: http://www.swissre.com/rethinking/

crm/The_R4_Rural_Resilience_Initiative.html

High transaction costs (distribution, marketing and pro-viding customer services); 99 and

High basis risk inherent in index-based insurance. Low nancial literacy among the local populations. Moral hazard.

Public-Private Partnerships (PPP) as a way to overcomethe constraints and mainstream micro insurance : Neitherthe private nor the public sector alone can overcomethe constraints associated with the distribution of microinsurance in developing countries. For climatic risks, thereis a high degree of volatility and insurers typically lackexperience in assessing climate change as a new variable.High transaction costs due to small policies, remote areas,communication and education challenges and the lack ofdata required to design policies are major constraints forinsurance providers. This is why synergies are needed toimprove the probability of positive margins for the privatesector. 100

Business Example in India: PPPs in insurance sector

Basix, a micro insurance rm in India, partnered withICICI Lombard, the World Bank’s Commodity InsuranceGround and private investors to launch rainfall insur-ance in India. At rst, the insurance was crop specic,but then in 2005 it expanded onto other areas.

Factors of success:• Streamlined administration• Specic Marketing (in six Indian states, in several

languages)• Strong collaboration of all partners• Doorstep and quick deliveries• Partnership between major insurer and micro-nance

institution• Started with small pilot programme and then scaled up• Designed to meet the needs of an under-served

market

Adapted from Skees J., Global AGRisk101

In recent years there have been a number of success-ful PPPs in the micro insurance sector. In the R4 RuralResilience initiative, Swiss Re partnered with Oxfam, theRockefeller Foundation and the World Food Programmeto successfully develop and expand its new insuranceinstrument in Ethiopia. Another example is a partnershipof BASIX, a micro insurance rm in India, ICICI Lom- bard and World Bank’s Commodity Insurance Ground

99 Rockefeller Foundation. “Opportunities in climate engage-ment in urban climate change resilience building”, avail-able at http://www.rockefellerfoundation.org/uploads/les/2ad3aea5-525b-4a9b-991c-a024a59a3762-private.pdf, 9.

100 UNEP 2006.101 Skees J. n.d.




to deliver rainfall insurance in India. The main successfactors for these projects are a strong collaboration amongall partners as well as using small crop insurance pilot as astrarting point for outwarrd expansion.

The following table summarizes the roles of the public andprivate sector in promoting climate adaptation insuranceand nancial tools. 102

Key Messages

1. Sustainable development, risk management and climatechange adaptation need to be integrated for a “triple

dividend”.2. Due to high basis risk and often high transaction costs

there is a need for supportive nancing from the publicsector and the establishment of well-functioning PPPsin the eld of weather insurance.

3. Credit literacy and awareness of existing programmesare preconditions for a wide-spread adoption and needto be promoted to lower transaction costs (that occurdue to educational constraints).

4. Research in data collection and modeling should be

improved to increase the protability of insuranceschemes.

5. Flexible regulations in the eld of insurance need to besupported.

Table 9: Summary of the Roles of the Public and Private Sector in Promoting CCA in the Financial Sector

Critical Inputs Actor

Highlighting the importance of adaptation from a social and environmental perspective in order to

attract responsible capital from investorsPublic sector

Subsidizing agriculture insurance (in early stages of project development/until economies of scalelead to self-sufciency/sustainable protability)

Public sector

Regulation design - developing exible legal and policy framework conditionsPublic sector – inconsultation withthe private sector

Integrating adaptation with disaster management and economic policy planning (UNEP 103) Public sector

Developing new research methods (modelling etc)Public and privatesector

Developing new products (microinsurance index insurance etc) and (Insurance) policy design, rein-

surance, underwriting, retail distributionPrivate sector

Educational efforts to spread insurance and nancial literacy among local populations Public sector

Creating synergies to lower transaction costs (for example by combining with aid payments 104) Private sector

IFOK Analysis 2011 102 103 104

102 Based on Stockholm Environment Institute (SEI) 2009 and UNEP 2006.103 UNEP 2006, 2.104 Combining the marketing of insurance products with distribution of cash payments has been an effective strategy in index insur-

ance pilots. For example, in Kenya the Index-Based Livestock Insurance programme worked in conjunction with the UK DfID’s Hun-ger Safety Net Program, leveraging the cash transfer programme’s point of sale agent network and technology to manage insurancecontracts through the same process. ILRI. 2010. Index Based Livestock Insurance for Northern Kenya’s Arid and Semi-Arid Lands:TheMarsabit Pilot. January. Available at: http://www.ilri.cgiar.org/bitstream/handle/10568/494/IBLI_PROJECT_SUMMARY_0110.

pdf?sequence=1.




2.4 FIELD OF OPPORTUNITY: Decentralized Services for Water and Energy

In 2010, the UN General Assembly adopted a resolution

on the human right to water and sanitation.105

Water isthe lifeblood of communities and the industry at the sametime. It is crucial both to human health and to the opera-tions of companies, which is why climate-change relatedweather risks, such as droughts, are both a developmentand a business concern. This creates a need for strongerengagement of the private sector in what has up until now been viewed as a public issue, especially as many govern-ments in developing countries struggle to manage chal-lenges such as water scarcity and access to existing waterresources.

“Decentralized water technologies and designs, suchas water-efcient appliances, rooftop rain gardens, andonsite wastewater treatment and resource recovery, arekey to enhancing the performance of the nation’s agingcentralized water and sewer systems and to assuringadequate water supplies and healthy ecosystems intothe future. Decentralized systems also create a hostof other benets for communities, including energysavings, improvements in air quality, creation of greenspaces, restoration of streams, aquifers, wetlands, andhabitat, and stimulus for new green companies and jobs.In the long-run, the nutrients in wastewater may be of

value, and synergies with distributed energy productionand other infrastructure may also be important. Use ofdecentralized infrastructure could be arguably secondin impact only to better farming practices in setting thenation on a sustainable path in water.”

The Coalition of Alternative Wastewater Treatment 106

Advantages of decentralized water and energy systems

A particular eld in which the private sector has beenand should continue to be involved is the distribution ofwater resources. In recent years an increasing numberof SMEs have developed smart and decentralized watermanagement solutions, which opens up a wide space forfuture private investment. Project experience illustratesthat decentralized water management systems enable aneffective distribution of scarce resources (reaching remoteareas), the involvement of local populations and exibleadjustment to local conditions (social, environmental andothers) as well as energy savings. Moreover, principallythey do not require a high initial investment (apart fromtechnologies combining water purication and energy so-lutions discussed below), promote the use of local resourc-es, and allow for a reduction in costs on transportation.

105 United Nations General Assembly 2010.106 The Coalition for Alternative Wastewater Treatment (CAWT),

available at http://sustainablewaterforum.org/new.html.

Water treatment and energy solutions

One of the most promising CCA business areas is the pro-vision of low-cost, low-energy water purication mecha-nisms, which have also been the subject of extensivenanotechnology research. 107 Private companies, such asSiemens, develop new high-tech solutions combining en-ergy savings (or energy generation) and water treatment.Siemens’ innovative approach, which desalinates seawater by channeling water through an electric eld (rather than by means of energy-intensive heating and vaporizingprocesses) highly reduces energy consumption. 108 Anothermethod of purifying water without much energy use, and

in a simple and affordable manner, has been created bySeldon Technologies and described below.

Business Example: Seldon WaterStick™ Personal WaterFiltration System

A versatile straw-like device the Seldon WaterStickPersonal Water Filter combines safety and simplicityin a hassle free, ow through ltration unit. UtilizingSeldon’s Nanomesh technology, the WaterStick unitcan handle up to 80 gallons (300 liters) of pretreatedcontaminated water. The rugged case and simple handpump make it ideal for a variety of personal applicationssuch as outdoor and recreational, military, disaster relief,and humanitarian use.

Seldon Technologies109

In order to solve the problem of the lack of basic resources(energy and water) in developing countries, Aqua-Aero WaterSystems (AAWS) has developed the concept of Waterand Energy Shops. The assumption behind the service isthat needs for water and energy often go together. Theyoffer various technological solutions, such as WaterPyra-mid to clean water and provide clean renewable energy at

the same time. Energy Shops can be operated in a (nan-cially) sustainable way in places where water shortagesare eminent and people are willing to pay money for thedelivery of clean water. 110

Another innovative water treatment technology is Real-Green Power (RGP), which transforms waste water intoclean water. RGP produces reclaimed water for irrigationand agricultural reuse as well as puried water for potable

107 Juma C. 2011.108 Siemens, available at http://www.water.siemens.com/en/mu-

nicipal/Pages/water-scarcity.aspx.109 Seldon Technologies, available at http://www.eb5water.com/

seldon-technologies/products.php.110 Aqua-Aero WaterSystems BV (AAWS), available at http://

www.aaws.nl/index.php/services.




and industrial uses. RGP also produces biogas containinghigh concentrations of methane gas, which can then beused for power generation, as transportation fuel, as com- bustion fuel for water heating, and for hydrogen produc-tion. Importantly, RGP’s solutions are adaptable to a broadrange of wastewater streams and are highly scalable. 111

Special role of SMEs in implementation and distribution ofwater and energy services

A constraint to the adoption of some of the above dis-cussed technologies or renewable energy solutions ingeneral are relatively high upfront costs. For example, aproject with an aim to construct a WaterPyramid in WestSenegal was halted, because the analysis of the onsite situ-ation has shown that the demand for fresh drinking water

and the ability to pay for the water was not yet at the levelneeded to deliver a nancially sustainable WaterPyramidproject. 112

WaterPyramid

The WaterPyramid is used in remote tropical regions todesalinate water and to harvest rainwater. The technol-ogy is best used where there is abundant solar radia-tion and ground space. The technology is based on theprinciple of large scale evaporation and condensationand has been rewarded by the World Bank with theDevelopment Marketplace Award 2006.

Water and Energy Shop 113

SMEs have a particular role in providing new scalablelogistics solutions for water distribution. For example,with Acumen Fund’s investment, Pharmagen HealthcareLimited has been distributing safe drinking water throughits chain of open water shops with each shop extractingwater from underground, purifying it through a reverse

Critical Inputs ActorProvision of basic decentralized infrastructure Public sector

Transfer of new water purication technologies to the developing world Private sector

Provision of innovative logistical solutions for water distribution SMEs

Engaging local entrepreneurs and local agents in the project work Private sector

Subsidizing sustainable decentralized technologies (e.g. Water and Energy solutions) Public Sector

Capacity building Public and private sector

IFOK Analysis 2011

111 Real Green Power, available at http://www.realgreenpower.com/rgpprocess.html.

112 Akvo, available at http://www.akvo.org/rsr/project/66/up-date/451/.

113 AAWS, available at http://www.aaws.nl/index.php/products.

osmosis plant, and re-mineralizing it. 114 The chain of localshops is a structure that enhances the employment oflocal populations, but also requires additional capacity building. 115 Thus, as in the case of ICTs, the establishmentof decentralized water systems or a decentralized infra-structure for hygiene and sanitation requires a participa-tive approach and the engagement of local entrepreneurs.

Business Example in Rajasthan: Micro-entrepreneursIncrease Access to Potable Water

The organisation Sarvajal (Rajasthan) develops de-centralized reverse osmosis water treatment plants. Itengages local entrepreneurs as franchisees to managetreatment plants and produce ultra-affordable drinkingwater. The enterprise identies and trains franchisees

that each make an initial token contribution towardsthe investment in equipment, and then share 40% ofmonthly revenues after the rst two months. Over 115franchises have been set up serving more than 60, 000people in a sustainable manner. Such a model not onlysafeguards the poor against widely prevalent water-borne diseases, but also provides livelihood opportuni-ties through supporting micro-entrepreneurship.


Key Messages

1. Decentralized water and energy technologies present both business opportunities for SMEs and a way to in-crease resilience of local communities.

2. Decentralized water and energy solutions enable ex-ible adjustment to local conditions and are thus highlyscalable.

3. For the success of decentralized solutions, a local en-trepreneurial base needs to be built and local entrepre-neurs recruited.

114 Acumen Fund Website, available at http://www.acumenfund.org/investment/pharmagen-healthcare-ltd.html.

115 AAWS, available at http://www.aaws.nl/index.php/how-we-work.

116 RF, 2011, 22.

Table 10: Summary of the Roles of the Public and Private Sector in Promoting CCA in the Water Sector




2.5 FIELD OF OPPORTUNITY: Built environment

Climate change will affect the built environment and in-

frastructure sector in two main ways: rstly new climaticconditions will need to be taken into account for the crea-tion of baseline infrastructure. Secondly, a range of newdedicated adaptation infrastructures will be required toaccount for climate change. 117 New techniques to increasethe resilience of buildings need to be considered, as wellas the increasing costs of maintenance and insurance. 118 The vulnerability of areas to climate change, includingexposure to risk, sensitivity to risk and adaptive capacityneed to be assessed. 119

Improving Resilience through Modern Engineering

Studies and project experiences have shown that mod-ern engineering can improve the resilience of buildingsand communities in regions exposed to severe weatherrisks. For example, a report from the Institute on Homeand Safety (IBHS) showed that the design-based buildingcodes positively impacted the performance of residentialhomes during the hurricane Katrina in Haiti. 120 TravelersRisks Control Services Group, which provides assistancein climate change adaptation and mitigation techniques,has provided the required nancing for mainstreamingthe building codes and training building inspectors and

private contractors.121

In its highly innovative infrastructure management projects, Siemens uses special sensors and materials, energysupply systems and information technology to makethese elements interact in an optimal manner. Siemenshas also developed building management systems thatcan automatically monitor and control the air condition-ing, water heating and cooling, re alarm, and generationsystems. 122,123

Monitoring and Early Warning Systems

Monitoring and early warning systems are becomingincreasingly important as the amount of extreme weatherevents increases. “Practical Action”, under the DIPECHOIV Action Plan in Banke and Bardia Districts in Nepal, hascreated a Banke Bardia Flood Warning Programme withthe use of newest technologies. The early warning systemwas improved by monitoring and disseminating the up-stream water level information to downstream communi-ties using telephone, hand microphone and hand sirens

117 Overseas Development Institute (ODI) 2011, iv.118 World Bank 2010c.119 Climate change 2007: Synthesis Report, 104. T.120 Institute on Home and Safety (IBHS) 2008.121 Pew Center for Global Climate Change 2008, 24.122 UN, Adaptation Private Sector Initiative.123 Siemens, available at http://www.buildingtechnologies.sie-

mens.com/bt/global/en/buildingautomation-hvac/hvac-products/hvac-sensors/xtra-sensors/pages/xtra-sensors.aspx

which provided more time for preparation and evacua-

tion. Additionally, bio-engineered dyke/spurs with river bank slopping technology were constructed at two placesas well as culverts/bridges at strategic sites and sheltersin target districts. 124 The private sector is also developingnew products to increase disaster preparedness of vulner-able communities. BASF is offering an environmentallyfriendly solution to provide effective and stable coastalprotection. Through a specially developed elastomerpolyurethane system (Elastocoast) dykes are protected byabsorbing the force of the breaking waves and slowingdown the water masses. 125 Many climate change adapta-tion infrastructure projects are particularily well-suitedto small-scale, low and medium technology, community-driven projects, for example the construction of smalldams, irrigation systems etc. 126 SMEs have a particular rolein this development as demonstrated by the previouslyoutlined project examples.

Key Messages

1. Policies and regulations in the infrastructure sectorshould take climate change into planning consideration.

2. Adaptation requires building resilience within systemsrather than only within sectors. There is a need to rec-ognize the interdependencies of various sectors (energy,transport, water infrastructure) and structure coopera-tion accordingly. 127

Table 11: Summary of the Roles of the Public and PrivateSector in Promoting CCA in the Infrastructure Sector

Critical Inputs Actor

New monitoring systems Private sector

New coastal protection so-lutions and infrastructuretechnologies

Private Sector

Early Warning systems Public and private sector

Capacity building Public and private sector

Design of climate proongprocedures and their legalratication

Public sector – in coopera-tion with the private sector

IFOK Analysis 2011

124 Practical Action 2007/2008.125 BASF, n. d.126 Overseas Development Institute (ODI). 2011, vii.127 While the report focuses on the UK market, many of the in-

sights on the relationship between infrastrucrure and climatechange are made for the global context. The Royal Academyof Engineering 2011, 8.



27Baseline study: Barriers and preconditions for the private sector

Business OpportunityBusiness Visibility

3 Barriers and Preconditions for

the Private SectorThis chapter (1) Outlines the business case to invest inopportunities arising from climate change, (2) Identiescommon barriers and constraints for private sector actorsto seize new business opportunities in the area of climate

adaptation in developing countries and (3) Analysespreconditions for private sector engagement in climateadaptation and outlines policy options and approaches forinternational cooperation.

3.1 A business case to invest in climate resilience

“ Adaptation to climate change is no longer theexclusive ambit of the public sector. Investment inadaptation makes business sense, due both to theneed for companies to climate-proof their opera-tions, as well as to the new business opportunitiesopening in the area of adaptation. Companies thatact on this vision place themselves in the forefrontof sustainable entrepreneurship .” 128

Christiana Figueres, Executive Secretary of the UNFCCC

There are three primary motivations driving companies toinvest in climate adaptation. These include:

1. Improving business security

Climate adaptation investments and resiliency build-ing strategies enable businesses to manage direct andindirect climate related risks. If a company’s core opera-tions are located in a region facing high climate changevulnerability, then the risks are direct. Indirect climaterisks result from direct impacts on secondary entitiesand involve uctuating oil and input prices or health is-sues. It is important to add that this report regards risksas those posed to businesses, and not risks to local socie-ties as a whole.

2. Increasing visibility

The private sector is motitivated to increase their publicvisibility so that it has a social license to operate and in-creases its access to markets, stakeholders and resources.

128 UNFCCC 2007.

Such actions go beyond classical Corporate Social Re-sponsibility (CSR) actions and encompass all opportuni-ties related to the role of the private sector as a stake-holder in climate change adaptation.

3. Seizing business opportunity

As prot-driven entities, the private sector has incen-tives to invest in adaptation by engaging in the numer-ous elds of potential business activities and future in-novations of products and services that arise as a resultof climate change, innovation and advances in tech-nology. This baseline study focuses on this the motiva-tion of the business actors to take advantage of theseopportunities.

Reasons for Private Sector Engagement in Climate ChangeAdaptation

For multinational companies engaging in climate changeadaptation may have a positive impact on the perceptionof a business and on its stakeholder relations and thatvisibility can also be regarded as a business opportunity.It is important to recognize the links between the threedimensions “security”, “visibility”and “opportunity”:without securing safe, reliable operations, new businessopportunities cannot be realized. Entering new marketsor offering new products might require fresh measures interms of business security. Increasing business visibilitymight attract new business opportunities, generate newpartnerships or create positive spill-over effects for otherprivate sector actors.

Business Security




The cost-benet analysis for each business is heavily con-text-dependent and requires a detailed analysis of localconditions and monetary and non-monetary cost factors.The strategic decision between options (B) and (C) in par-ticular depends on a strong understanding of markets andlocal conditions (information challenge) but also on thelevel of dependency of a business to certain input factors(e.g. natural resources). The higher this dependency is, thehigher the transformation costs, and thus the preferenceto to invest in option (B) and build business resilience. Toimprove international cooperation, it is a valuable effortto invest in research and analysis of particular cases andto identify the dimensions of transformation costs andinstruments to enable businesses to seize new opportuni-ties and engage in innovation processes.

“The factors that constrain adoption [of technologies]do not, of course, exist in isolation and the presence ofone constraint may be exacerbated by the presence of

others. Little is known, however, about the relative ef-cacy of interventions to address constraints one-by-oneversus interventions that address a suite of constraintssimultaneously. Other factors, such as gender, cut acrossthe constraints and affect the strategies for and thedistributional consequences of overcoming each of theadoption constraints.”

Agriculture Technology Adoption Initiative (ATAI)

3.2 Barriers hindering the private sector to capitalize on opportunities

The ability for private sector actors to seize opportuni-ties arising from climate change is highly inuenced by avariety of factors. The following section outlines a set ofcommon factors that constrain business engagement inadaptation and distils the preconditions that need to bemet in order to overcome those barriers.

3.2.1 Social and Contextual Factors

Perception Challenge

The current debate around business and climate adapta-tion shows a misperception of opportunities. Despite thelarge demand for new products and services and initial business activities, common perceptions involve the fol-lowing arguments:

a. There is no market for or a difcult market for adapta-tion products and services in developing countries andno direct cash ows can be created. The lack of best

practice and a general framing issue causes predomi-nately negative associations with climate change.

b. Adaptation is seen as a disaster management task andmainly a public sector responsibility. Companies lackinformation about the positive effects their engage-ment can have on their business performance.

c. Adaptation is a business security issue for compa-nies. Negative experience with extreme weather andclimate-based catastrophes discourage engagement invulnerable regions.

d. Adaptation efforts seem to be regarded as “second-best”options, requiring major change processes with hightransaction costs.

e. Private sector actors perceive mitigation efforts as apriority business opportunity.

f. Adaptation is not seen as a pressing need hence not anear term priority.

Preconditions for private sector engagement in climateadaptation:

Shift in perceptions and raised awareness about busi-ness opportunities rather than only the risk and de-struction dimensions of climate change. An increase incapacities and provision of consulting services to raiseabilities in (facilitating) change processes is needed.

Value-based dialogue on creating conditions to seize op-portunities of climate change and on positive framingand success stories needs to be enhanced.

Informational and communication challenge

Local research and data translation : The gaps betweenexisting information, technological opportunities and therate of knowledge transfer is a major obstacle to effec-tively develop and implement technological, social and business innovations in climate adaptation. The numerousuncertainties and mixed signals of how climate changewill impact economies constrain private sector invest-ments in adaptation. Contributing to the barrier are thedifculties in translating scientic data and analysis intoaction-oriented and locally applicable information. Atthe local level, uncertainties are often exacerbated by theabsence of local weather data and systematic research.

For entrepreneurs and businesses, climate projections,especially those on the national level, can hardly be madeapplicable to local business strategies.



30 Baseline study: Barriers and preconditions for the private sector

Furthermore, it is important to understand the methodsto access information and the patterns of learning and behavioural change at the company level. Based on theexperience of the MIT based Poverty Action Lab abouttechnological adoption in the agriculture sector, rule ofthumb principles have a much bigger impact than detailedinstructions. 129 In the eld of insurance, interpretation ofcomplex data is crucial for the wide-spread adoption ofinsurance schemes among local populations in developingcountries. However, a general lack of expertise to under-stand, model and price insurance products is observed,since “index insurance in particular, requires signicanttechnical assistance in the identication, design and pilotphases.”130

Climate variability versus change : Local actors typically donot differentiate between the effects of climate variabilityand climate change in their communication strategies.This leads to misconceptions in cost calculations based onimpacts and opportunities arising from short-term eventsor shocks versus long-term developments. To reduce thisrisk, local knowledge about climate variability should beleveraged to relate the impacts to existing experience,learning and adaptation practices of local businesses.

Lack of success stories : A lack of storytelling and best prac-tice sharing of business opportunities in the climate ad-aptation space is a barrier to private sector learning, trustand innovation. Local demonstration sites and knowledgecentres that strengthen networks between research and business stakeholders can spur innovation and increasethe understanding of communication needs. Transsectoraland international partnerships are needed to build trustabout climate related business opportunities, to facilitatematchmaking and bring together the right people andresources.


Availability of climate data and local level projectionsand research (e.g. for insurance market).

Ability to translate abstract data and information intoaction-oriented guidance and break it down into infor-mation applicable to local demands and needs.

Communication of best practice in adaptation, exist-ence of knowledge hubs and platforms for (bottom-up)knowledge transfer.

129 Based on IFOK interview with Ben Jaques, ATAI.130 IFC 2010, available at http://www.climateinvestmentfunds.

org/cif/sites/climateinvestmentfunds.org/les/IFC_pres_CC_PS_V8_Sep12010-_IFC_%20sk.pdf.

3.2.2 Policy and Institutional

Regulatory challenges

Conducive policy environment : In many areas wheresubstantial business opportunities in the eld of CCA have been identied, we observe a lack of regulatory experience.On the one hand, the absence of regulation, for examplein the ITC market, may generate private sector-drivenexperimentation and innovation. Rwanda and Kenya areexamples of countries with liberal regulatory frameworks,which are currently fostering innovation and competition.On the other hand, the lack of standards and incentivesmay prevent healthy competition and innovation inadaptation products and services due to higher initialinvestment costs. It is crucial for investors to encounter

consistent and reliable regulations and policy frameworksthat enable long-term investment planning and costassessments. It is furthermore regarded as important toset up a level playing eld and to develop a smart mix ofinstruments. This includes binding standards, investmentincentives as well as voluntary agreements that encour-age rms and organisations to invest in climate-smartsolutions. For example, climate-proof assessments andcertications for infrastructure developments can help tomainstream climate change adaptation practices into theoperations of businesses and foster competition in thateld. It needs to be acknowledged that in many develop-ing countries, private sector actors face a wide range ofinterrelated constraints, which together restrict invest-ment and business development and are not specic onlyto climate change.

Interministerial cooperation and mandates : While climateadaptation is increasingly being integrated into govern-ment policy and planning, private sector opportunitieshave been hampered by a slow and piecemeal policyapproach. Greater institutional coordination is needed be-cause responsibilities for climate resilience planning andinvestment among government agencies are not clearlydened. 131 There is a need for greater interagency coordi-nation at the working level and a matching of responsibilities and budget requirements. 132 While climate changeis a cross-cutting issue that affects several policy areas, e.g.the areas of economic development, investment climateand industry and commerce, in most countries we observethat the environmental ministries are typically mandatedto address CCA and coordinate actions with other minis-tries. NAPAs are mostly developed without consultation ofprivate sector actors, and economic development strate-gies overlook implications of climate change. Moreover, it

131 CIF 2011, 27.132 CIF 2011, 28.




can be observed that NAPAs fail to be sufciently trans-lated into the budgeting process, creating major barriers toimplementation. Due to the large-scale change processesnecessary to seize opportunities and mitigate risks ofclimate change, cross-sectorial measures and programmesare urgently needed.

Capacity for dialogue processes : An effective climatechange adaptation policy requires strong leadership andcommitment as well as coordination and dialogue of dif-ferent ministries to ensure consistency. It is also importantto engineer social consensus on adaptation and adopt apartnership approach based on local ownership. “Especial-ly with institutions from the outside this can only workwith a strong partnership approach, not competition,and the willingness to subordinate their own interests tolocal ownership. This should allow for coherence in theinternational response and help to reduce duplication ofactivities.” 133 There are needs within the national, regional,and local government levels to build capacity on multi-stakeholder dialogues, participatory policy planning andconsultation processes. The lack of cooperation skills andintegration of such methods into political processes ham-pers integrated planning and cross-sectoral collaboration.


Smart mix of regulatory and voluntary instrumentsto spur innovation and technology transfer includingstandards and assessment schemes for climate-proofinvestments.

Promotion of interministerial cooperation, integrationof policy planning into cross-sectoral programmes. In-tegration of private sector actors in to NAPA consul-tation processes and climate expertise into economicplanning processes.

Promotion of capacities for multistakeholder and dia-logue processes.

Infrastructure challenges

Insufcient Infrastructure : A serious challenge to businessinnovation is the lack of reliable energy, water and trans-portation infrastructure and, as a result, high input costsfor business investments. For example, the lack of cropstorage options has been a big constraint to the introduc-tion and spread of new technologies and increases thecosts of doing business in the agriculture sector. Businessgrowth is slowed due to difculties in transporting prod-ucts, employees being unable to get to work, and reliably

manufacturing products with an unstable electricity

133 GermanWatch/ WWF 2011.

grid. Distribution of products to and from the market isa signicant hurdle and its reliability is further worsenedwhen extreme weather events occur. Distribution ofinformation and of the physical products is often limitedto certain regions or urban areas, making new productsand/or services only available to those who can pay forthe additional cost to get it in a rural region. Off grid anddecentralized solutions are seen as major opportunities toovercome infrastructure deciencies in sparsely populatedand remote areas.

Lack of innovation hubs and clusters : Inefciencies in in-put factors and market risks can be countered by sharingresources and collaboration not only between businesses but also with other stakeholders. The lack of partnerships,innovation hubs and cluster strategies hampers businessdevelopment in the area of climate change. Success stories(Munich Re, Swiss Re, BASF) show the business opportuni-ties of scale-up strategies. Such approaches rst introducea new product or service to a small area and then expand-ed it across a larger scale in order to check its reliability.Such pilot projects require appropriate infrastructure andfunding that can be jointly provided in innovation hubs.Scale-up strategies also provide ample opportunities to in-tegrate indigenous knowledge into scientic approaches.


Promotion of an enabling infrastructure (such as ICT)and decentralized structures.

Innovation hubs and cluster strategies to create syner-gies between limited resources.

3.2.3 Market and Business challenges

Financial challenges

Financial products : Difculty in accessing credit and theprospect of high interest rates often prevent investment in

protable adaptation innovations. Financial decisions may be difcult without high levels of nancial literacy, whichis linked to the informational deciencies previouslyidentied. There is a need to expand research fundingin order to establish and scale up existing technologies.Green lending schemes and an increasing number of ad-aptation funding sources are available for business at thelevel of micro-credits and within large projects. However,there is still a nancing gap for investments that requirelarger upfront funding for SMEs. Furthermore, researchand innovation are needed to overcome the barrier ofmissing collateral and the inherent high risks of climatevulnerability.




Project funding : At the project level, funding is most oftenattached to previously agreed upon project outcomesand indicators. While this approach has had numeroussuccesses, it may prevent innovation if it is a main projectgoal. Instead of linking funds e.g. to specic applicationof technologies and business plans, it may be advisable toprovide seed funding for innovation processes that allowfor greater exibility with regards to time and opportuni-ty-based activities.

Information about funding sources : An increasing numberof international and national public and private climatefunds as well as venture capital and entrepreneurialfunds are becoming available to businesses. Yet, especiallyfor SMEs, it is difcult to gain information about theseavailabilities and sources and to identify the necessarypartnerships and requirements to qualify for funding.Furthermore, there is a need for support in applicationprocesses and business plan development. Cooperationwith national and local business associations and bankscan help to close the access gap to adaptation and entre-preneurial funding.


Cooperation with banks to develop nancial schemesfor adaptation-related innovation and for the de-

velopment of assessments for climate-proong forinvestments.

Funding for innovation processes that are not tied tospecic product outputs but that enable beneciaries toseize arising opportunities and invest in open innova-tion processes.

Knowledge and consultancy hub for information aboutavailable funding tools for adaptation investments andprocess consultation for applications.

Market challenges

Market access : Problems related to supply chains and weakcontracting environments often make access to input andoutput markets difcult, especially in the agriculture sec-tor. Market uncertainty and poor access to urban as well asinternational markets have been identied as severe con-straints. This has been observed in the examples quotedin this study, such as in the challenges of local farmers toadopt new crops. Moreover, mistrust and negative experi-ences with market dynamics have been noted as frequentreasons for the scepticism of farmers towards new climatechange related solutions, especially if they come fromthe outside and are not developed locally. Value-chain

approaches and close collaborations within the supplychain are necessary to overcome the barriers to innova-tion resulting from false perceptions, missing informationand cost/ nancial needs.

Business Associations and Business Development Services :Business associations and business development servicescontinue to lack expertise in the eld of climate change.In order for them to act as information hubs and providesupport services to businesses, it is important to buildtheir capacities to understand climate change as a riskfactor but also as a eld of opportunity for business de-velopment. Business associations can provide a platform(such as open source internet- or mobile phone-basedplatforms) for knowledge sharing, information centres forclimate funding and for partnership brokering and match-making of relevant actors.

Innovation capacities : The development of new prod-ucts and services requires innovation capacities at themicro level. Innovation processes require resources andcapacities often lacking especially within the SME com-munity. Since SMEs often depend on direct cash-owsand cannot afford long-term R&D and business devel-opment processes, there is a need to provide a space forefcient and effective business incubation, cooperationand resource sharing for innovation. SMEs furthermoretypically lack the capacity to develop business plans andto assess markets and ecosystems. Building an expert poolfor part-time direct or online-based consultancies linkedwith business incubators can help entrepreneurs to lowerinnovation and business transformation costs. Especiallywith international supply chains, international expertiseand downstream stakeholders can be involved into thoseprocesses.


Enable market access for adaptation and/or climate-

proof products and services from rural to urban mar-kets, from local to domestic and international markets.Follow a value-chain approach to link stakeholdersand enable innovation potentials through supply chainpartnerships.

Promote service provision and consulting services onclimate relevant issues through business associations, business development and extension services.

Create business incubators and innovation centres thatreduce the costs of innovation and business transforma-tion costs for individual companies.




Table 12: Examples of constraints in particular business sectors

Adaptation instru-ment/potential busi-

ness opportunity

Micro- Constraints(business level)

Meso-Constraints(relational level)

Macro-Constrains(policy level)

Crop diversication,new crops researchand implementation

• Low level of innovationwithin companies

• Short-term approach tobusiness-planning

• Low level of risk-takingapproach (sticking tothe known solutions andspreading them rather thanresearching new solutions)

• Lack of certainty aboutprots

• Little cooperation withresearch institutes

• Little cooperation with localpopulations, using localknowledge

• A need of PPPs andresearch-private sectorcooperation

• Often context-specic, noteasily scalable solutions

• Scepticism of the localpopulations, need of educa-tion and communication(information inefciency)

• Input and Output MarketInefciencies

• Lack of information aboutpotential markets

Innovative, decen-tralized irrigationsystems

• Mistrust • Infrastructural inefciencies,Lack of PPPs and incentivesfor off grid and decentral-ized solutions

Innovative, decen-tralized water puri-cation systems

• Unclear business case • SMEs – well positioned toprovide the services on theirown

• Entrance difculties

Innovative decentral-ized energy systems

• Need for local entre-preneurs, direct sellingagents (by decentralizedtechnologies)

• High initial investment

• SMEs – well positioned toprovide the services on theirown

• Entrance difculties

Crop and asset microinsurance

• Low creditworthiness andavailable capital in poorcommunities

• Lack of certainty aboutprots

• Need for public-privatecollaboration (commerciallending in more developedcountries, could mean moreconcessional lending owingto poorly developed coun-tries etc)

• Need to spread the experi-ence of multilateral andbilateral banks to privateinstitutions

• Insurers need to becomepartners in infrastructureplanning and assessment ofrisks (“Chartered InsuranceInstitute, 2001)

• Low level of awarenesswithin the local populations

• Low level of awarenessand capacity to assess risksamong nancial institutions

• Low investor awareness ofthe possibility of ‘responsi-ble capital’

• Scarce weather information(as long as information isscarce, companies will over-charge for climate changeinsurance)

Geographic Informa-tion technologies

• No short-term prot • Insufcient PPPs • Lack of infrastructure

Communicationtechnologies (mobileand internet based)

• Lack of cooperationbetween SMEs, largecorporations and the usercommunity

• Lack of technical skillsamong local populations,computer illiteracy, informa-tional inefciencies

• Lack of policies




3.3 Framework conditions and promotion of private sector engagement in climate change adaptation

The key determining factors for private sector invest-

ments and innovation are captured by indicators relat-ing to a country’s overall investment climate, its levelof competitiveness and ease of doing business. Thus, allinitiatives to engage and promote private sector activ-ity in climate adaptation in developing countries shouldcoordinate their efforts with those working on improvingthe business climate and building capacities of privatesector actors.

Therefore, we dene an optimal policy framework topromote private sector engagement in climate changeadaptation in developing countries as one that addresses

the following two issues:a) Promote Policy Integration and Cooperation:

International cooperation should seek to integrate climateadaptation policy and cooperation into economic andinvestment policies and pay signicant attention to engag-ing the private sector in the development of its climateadaptation framework. Both the NAPAs and economicand business policies typically overlook possible opportu-nities for leveraging synergies and building cross-sectoralprogrammes. Ideally, general development planningand policies need to be made not only climate-proof but

also conducive to seize new opportunities. These shouldinvolve revision of the legal framework and scal policies,and close coordination and harmonization of efforts withPilot Program for Climate Resilience (PPCR) processes,where present. There are also opportunities to integratethe role of the private sector in planning beyond the na-tional level and to regional and local levels.

b) Provide Incentives and Build Business Resilience:

International cooperation should promote and linkadvances in business environment, provide specicincentives and build capacities for companies to engagein climate change adaptation. Incentives for businessescan include corporate tax reductions, building standards,climate-proong standards and certications, adapta-tion of bonus schemes, green lending and innovationcredits. For example, central banks could be incentivisedto provide lending products that encompass adaptationinvestments. Furthermore, business relevant research anddevelopment activities can be promoted, and regionalforesight processes for research agendas and demand can be jointly developed with private sector actors. However,constraints on the private sectors’ engagement in CCA

are interrelated. In cases where direct opportunities orthose that generate short-term business benets due to

climate change cannot be identied or transformation or

investment cost cannot directly be lowered, it is advisableto focus efforts on promoting the general resilience of businesses. Improvements in the investment and businessclimate can enable private sector actors to build capacitiesand seize adaptation-related opportunities in the me-dium- or long-term.

c) Focus on Effective Process Architecture, Learning andInnovation:

International cooperation should help governments playan enabling role, and foster a process architecture con-ducive to innovation and cooperation. It is advisable for

governments to focus on supporting processes and createeffective transdiciplinary institutions to promote researchand business innovation, rather than unilaterally promot-ing specic products or adaptation methods. By prema-turely favouring specic technologies, the public sectormay create market distortions, curb competition and evenpromote maladaptation. “Recognize that adaptation isa capacity-building process. Adaptation will be ongoingfor decades—if not centuries—with distinct but interre-lated needs at the short-, medium-, and long-term timescales. In this context, building the capacities that enable

countries to be adapting on an ongoing basis is just as im-portant as undertaking particular adaptation activities.” 134 Importantly, climate change adaptation and private sectorpolicy should allow for exibility, acting in time and learn-ing approaches. CCA is a relatively new eld that does nott into one-size-ts-all format or follow given principles.From this point of view, focusing on processes and on theimprovement of innovation, partnerships and learningapproaches in developing countries is a better way tofoster climate change adaptation and business develop-ment than a product, output or technology-applicationapproach. At the same time, regarding externalities of in-novation though local contextual and ecosystem analyseswill be essential to avoid maladaptation as technologiescan create substantial spill overs that affect various areasand branches. By adopting this approach, it will be pos-sible to achieve greater consistence between economicdevelopment and climate change and nd efcient solu-tions for both.

134 GermanWatch/ World Wide Fund For Nature (WWF) 2011.




Table 14: A response to enable private sector engagement in CCA

Macro-measures (policy level) Meso-measures (relational level) Micro-measures (business level)

Approach Integration Learning and dialogue Resilience

Stage Framework conditions Innovation Implementation

Key words

• policy development • incentives • cross-sector cooperation • enabling infrastructure

• externalities • partnerships • resource sharing

• resilience • change and innovationprocesses

• capacities • business as usual or businesstransformations

Instrumentsrecommended

• ClimB Dialogues • Regional and local “Foresight”

Process • Climate Proof InfrastructureAdvisory Services for ResilientCommunities and Cities

• Capacity Building: Leadingmultistakeholder dialogues,cross-sector collaboration

• Research and UniversityCollaborations

• Business for Adaptationincubators

• PPP with National Banks todevelop insurance productsand green lending schemes

• Building Climate and BusinessCapacities

• (capacity building and knowl-egde centres)

• Business Innovation Awards

IFOK Analysis 2011



36 Baseline study: Instruments for international cooperation

4 Instruments for International

CooperationThis chapter outlines options on how internationalcooperation can support the realization of business

opportunities identied in Chapter II, taking into accountthe most critical preconditions identied in chapter III.

4.1 Target: Innovation and business friendly regulatory environment

4.1.1 Instrument 1: ClimB Dialogues (Climate and Business): Integrated Adaptation Policy Planning

Objective To promote integration and cooperation in climate, economic and business environment policymaking.

NeedsAddressed

A key requirement for an enabling policy environment that promotes adaptation initiatives by private sec-tor actors is a) a favourable investment and business climate and b) coordination and integration betweenclimate change and sector specic policy processes. It is therefore important to promote greater coherenceand synergies between policy elds. This is necessary for the private sector to access information and tocontribute to early stage adaptation planning. One critical input is to share private sector demands as well assolutions in terms of nance, technologies, capacities and know-how. For the public sector it is essential tohave an understanding not only of economic risks but also of business potentials in order to design policiesand to create an enabling business environment that promotes business innovation for adaptation. Varioussector-specic programmes and strategies (e.g. on climate change, rural development, investment promotion,agriculture, sheries or ICT) are affected by issues regarding climate change and the private sector. Oftenstrategies in these areas are not integrated.

InstrumentsUsed

• Technical assistance• Dialogue platform

• Private sector consultations • Interministerial coordination

Steps

The instrument of “public private dialogues” (PPD) has proven very effective in promoting investment andeconomic policies. The World Bank/ IFC has been a key contributor to dialogue platforms in more than 30countries today and GIZ has been supporting and facilitating PPD platforms such as the Provincial PublicPrivate Dialogue in Lao PDR. “Public Private Dialogue refers to the structured interaction between the publicand private sectors in promoting the right conditions for private sector development, improvements to thebusiness climate, and poverty reduction. It is about stakeholders coming together to dene and analyze prob-lems, discuss and agree on specic reforms, and then working to ensure that these ideas become a reality“. 135

Climate adaptation is a cross-cutting issue also for economic policy and private sector development. Theinstrument can promote a joint understanding of needs and opportunities and lay out a roadmap for ongoingaction.

a) Creating a ClimB (Climate and Business) Dialogue

Direct goals of a structured and facilitated dialogue forum are the joint development and implementa-tion of reforms to enhance resilience and adaptive capacities. Public and private sector stakeholders donot only share resources and knowledge in the planning phase but also carry a shared responsibility for theimplementation of projects. It facilitates better application of climate science data and risk assessments tolocal conditions and can help to coordinate public and private sector efforts (e.g. developing safety nets andinsurance products). The dialogue can generate a better alignment of local technology approaches, identifydemands and gaps and jointly develop measures and activities to address them. Mainstreaming methods and joint development planning will facilitate a more holistic approach to economic development, adaptation

and mitigation. Better integration of food security, safety nets and adaptation policies offers the potential forcross-sector benets. Indirect goals are that both stakeholder groups engage in a joint change process andcreate a learning platform that builds trust and unlocks innovative potentials.




Steps(continued)

Relevant players from science, industry, politics and society need to be involved in the process. At the begin-ning, a detailed analysis of players will be carried out for the topic at hand. On this basis, a core team isappointed, which can be expanded to include a broader group of experts if necessary. All strategic dialogues

take into account the priorities of these stakeholder groups in a specic combination of workshops, confer-ences or online forums. The format is determined by the specic demand to further develop the respectivecutting-edge elds.

Benets of a joint foresight and scenario planning approach at the local level are that it can overcomestrategic blind spots and enhance strategic exibility. Furthermore it generates buy-in and ownership ofparticipants and spurs local problem-solving capacities, especially of private sector actors. Thus, it also helpsto improve the quality and robustness of future public private partnerships and cooperations and increaseslocal ownership

Potential risks of the instrument are that anecdotal evidence often plays bigger role in scenario planning thanscientic evidence. This might lead to simplications and even distortions and runs the risk of promoting mal-adaptation. It will furthermore be essential to link such scenario planning to local planning and budgetingsystems and other forecasting techniques. It is adviseable to maintain a local or regional focus and to combine

scenario planning with local public private dialogue schemes or with existing consultation processes.137

PossiblePartners

• Department of Finance • Department of Trade and Industry • Department of Environment and Natural Resource

Management

• Regional banks • Business associations • Local leaders and authorities • Local NGOs and community organisations • Research institutions

136 137

4.1.3 Instrument 3: Climate Proof Infrastructure Advisory Services for Resilient Communities and Cities

ObjectiveTo develop climate-proof infrastructure assessments, raise standards, develop certication schemes and

services and promote private sector innovation.

NeedsAddressed

Most investment to build resilience will have to be made at all levels in key infrastructure sectors like power,transport, water, and sanitation. In the area of climate-proof infrastructure, engineers and private contractorsplay a crucial role in providing appropriate products and technologies. Preconditions for spuring competitionand innovation in sustainable infrastructure are a clear set of indicators and a transparent decision-makingprocess for setting building requirements. The public sector can facilitate an innovation process while closelyworking with private sector and R&D departments to understand technological possibilities and regulatoryinefciencies. Private sector companies and especially local producers that provide new technologies andclimate-proof building products could benet from incentives and a competitive advantage over other com-panies which produce without such advanced standards.

InstrumentsUsed

• Technical assistance • Development of assessments and standards • Promotion of assessment and quality control

capacities

• Building alliances and networks • Best practice exchange

Steps

Instrument : Climate Proof Infrastructure Advisory Services to a) develop climate proong indicators forpublic infrastructure projects, zoning and building codes, standards and certicates and b) optimize transpar-ent processes and decision-making tools for public authorities for infrastructure planning and contracting incollaboration with cities, regional government, national banks and in dialogue with construction business).

136 Swiss Re 2011.137 Adapted from IIED:, available at : http://www.environmental-ainstreaming.org/documents/EM%20Prole%20No%209%20-%20Scenar-

io%20Planning%20(6%200ct%2009).pdf.



39Baseline study: Instruments for international cooperation

Steps(continued)

International cooperation could strengthen Climate Proof Infrastructure Advisory Services and supportpublic authorities to improve laws, regulations and institutions that oversee public and private investment ininfrastructure projects. This will help to create a policy environment for competitive public-private partner-

ships. From early stage project conceptualization, and pre-feasibility project development, public authoritiesneed to be able to understand the requirements that climate change poses to modern infrastructure and tohave a decision-making tool at hand to make sustainable planning and investment decisions. The IFC PPIAFproject has been providing technical assistance for example in the eld of public utilities in Nigeria or in thetelecommunications sector in Afghanistan. In October 2011 UNDP published a guide for climate-proof infra-structures. 138 The report highlights that climate smart infrastructure planning not only requires hard solutionssuch as building and zoning codes and material standards, but also a set of soft solutions. These includedeveloping the capacity of government ofcials to make informed decisions and to create an institutionalsetting which facilitates and supports risk management.

Also in this eld a multidisciplinary approach is required to address the complexities of institutional planning.It is necessary to a) integrate private sector partners and R&D departments in order to determine appropri-ate levels of services that anticipate climate change impacts and b) identify private sector bottlenecks andrisks to applying new technologies that t the demands. The UNDP report underlines that “the resources,imagination and mobilizing power of the private sector are critical to support innovative and widespread riskmanagement in a world of changing climate”. The approach to Climate Proof Infrastructure Advisory Servicescan address national level Ministries and departments. It is also appropriate to develop such structures on amunicipality level.

GIZ India has started to explore opportunities in climate proong in the “Climate Change Adaptation in RuralAreas of India” programme. It is advisable to include the private sector perspective from an early stage toensure that the framework conditions are conducive to private innovations and competition in the infrastruc-ture market. 139

Possible

Partners

• Ministry of Public Works • Ministry of Environment • Research institutes • Business associations • Municipalities

• International consultancy services

138139

4.1.4 Instrument 4: Capacity Building: Leading multistakeholder dialogues, cross-sector collaboration, planning and facili-tating ecosystem or lifecycle analysis

ObjectiveTo build process competence in government ofcials to facilitate and engage in multistakeholder processesand cross-sectoral policy development.

NeedsAddressed

Governments need to play an enabling role, and foster process architecture conducive to innovation and

cooperation. In order to support governments in supporting processes and create effective transdiciplinaryinstitutions to promote research and business innovation, it is important to further strengthen capacities forparticipatory policy development, multistakeholder dialogues and cross-sectoral collaboration.

InstrumentsUsed

• Trainings• Awareness-building and learning tools


138 UNDP 2011: Paving the Way for Climate-Resilient Infrastructure, available at: http://www.beta.undp.org/undp/en/home/librarypage/environment-energy/low_emission_climateresilientdevelopment/paving_the_way_forclimate-resilientinfrastructure.html.

139 GIZ, available at: http://www.giz.de/themen/en/33409.htm.




Steps

The promotion of process competence for participatory policy development and multistakeholder dialoguesrequires a two-pronged approach with a) trainings and b) action learning processes and coaching.

a) Trainings: There is a growing number of training courses offered on process competences such as facilitat-

ing multistakeholder processes and on participatory policy planning. Successful training courses ensurethat participants have the opportunity to work on their own country or policy cases and can directly applyskills in action-oriented strategy development. It is advisable to bring together relevant actors from differ-ent ministries as well as from partner organisations such as business associations or chambers of com-merce and industry. Furthermore, it is preferable to include actors from various hierarchy levels (contextpermitting) to promote exchange and facilitate cooperation between departments and between decision-making and implementation agents.

b) Action-learning and coaching: The action-learning approach in change processes and participatory policyplanning is an effective way to ensure that new approaches nd a sustainable entry into organisations andinstitutions. Climate adaptation requires long-term transformative processes and thus process architec-tures that allow for ongoing learning and reection. Action- learning processes as well as the establish-ment of coaching skills and coaching partnerships inside or between institutions can promote the neces-sary environment and relationships for cross-sectoral exchange and cooperation.

PossiblePartners

• All Ministries and government agencies• Business associations • Municipalities

4.2 Target: Fostering innovation and partnerships

4.2.1 Instrument 5: Research and University Collaborations to promote platform technologies and local applications

Objective To enhance knowledge transfer and promote local research capacities and technological applications.

NeedsAddressed

A key barrier to technology transfer and technology-driven business opportunities is a lack of local researchthat tailors existing platform technologies into local applications that t local ecosystems and demands andcapacities. R&D partnerships, exchange programmes and cooperation with private research departmentscan foster a) local applied research capacities for adaptation products and services and b) build capacities ofresearchers and business developers.

InstrumentsUsed

• Trainings and study tours • Exchange programmes • Curriculum development

• Building alliances and networks • Best practice exchange • Public private R&D collaboration

Steps

Instrument a) : University curriculum development and promotion of applied interdisciplinary research.

a) Integrate climate change adaptation-relevant expertise (data interpretation, scenario planning) into univer-sity course programmes; offer courses and create a group of scholars devoted to bridging the gap betweenenvironmental, agricultural, engineering and business innovation research on climate change adaptation.

b) Increase the number of eld trips for students in climate change adaptation-relevant programmes andfacilitate the organisation of demonstration sites in order to support the development of applied learn-ing. This can be done in collaboration with local businesses and business associations as well as throughinternational collaborations.

c) Support the establishment of technology labs specically for applied climate change adaptation research.It is important to take an interdisciplinary approach which integrates professionals with expertise in a widevariety of elds, such as economics, social studies and areas studies. Furthermore local/ indigenous knowl-edge should be integrated with accumulated global research to achieve optimal solutions.




Steps

(continued)

Instrument b) : Strengthening research exchange through partnership with leading engineering and businessschools.

Exchange methods and research capacities through exchange programmes. This could be facilitated by

increasing the number of stipends for international exchange students and seminars in the eld of adapta-tion platform technologies and innovations. It is important to bring a cultural perspective into the study ofclimate change adaptation, respect the variety of approaches and understand that there is no one-size-ts-allapproach. The exchange of experience and research from different countries with an integration of a variety ofcultural perspectives will produce optimal results in the development of climate change adaptation research.

Instrument c) : Public Private R&D collaborations

Strengthening research collaborations between universities, research and development departments ofinternational companies (such as BASF) and the public sector in order to a) strengthen the perception of theclimate change adaptation as a common concern, and b) exchange knowledge of methods, experience of dif-ferent regions, and business perspectives on climate change adaptation and nd a nexus between the three as-pects. It is crucial that the business perspective is integrated into the prioritization of research areas in climatechange adaptation and that these are communicated often and effectively to the business community. On the

other hand, it is important that the experience and prot-oriented approach of the business sector informs theresearch topics chosen in order to make it more results-oriented.

Project example :

“In 2008 Caisse des Dépôts has launched an international research programme on adaptation focused on de-signing and funding infrastructure. It is run by Mission Climat, Caisse des Dépôts’ research center on the economyof climate change and carbon markets. Because infrastructure has a long lifecycle and requires considerable nancial investment, it is essential to take into account climate change in the design of new infrastructure andmodify old infrastructure if necessary. This requires active and effective debate between public decision-makers,companies and experts in climate change, as well as the development of economic tools adapted to this typeof funding. The research programme is structured around two topics: An analytic topic which analyzes the eco-nomic tools to be set up and application modules which are supported by concrete infrastructure managementexamples.”140

“Collaboration among institutions active on climate change in all developing country regions and with institu-tions in the North would help knowledge exchange and build capacity. National forums could help exchangeinformation on vulnerability assessments, and adaptation planning and implementation at regional level .”141

PossiblePartners

• International, national and local research institutes • Universities

• Private R&D departments • Ministry of Education

140141

4.2.2 Instrument 6: Business for Adaptation incubators

Objective To promote business innovation and local collaboration of private sector actors.

NeedsAddressed

An innovation and technology-driven approach to adaptation will require spaces for learning, informationsharing and innovation. Technological innovations will need to be tailored to local needs and combined withbusiness and social innovations. A cluster approach to business innovation can strengthen local informationand knowledge distribution and link resources and partner organisations.

InstrumentsUsed

• Business incubators • Partnership brokering • Matchmaking


140 United Nations Framework Convetnion on Climate Change (UNFCCC) 2007).141 UNFCCC 2007.




Steps

Instrument: Business for Adaptation Incubators as innovation hubs.

Business incubators can serve as a platform for private sector actors to support the development of businessmodels, technology adoption and market access strategies. The incubators can share knowledge and learning

of best practices and be linked with other business incubators in an open source network. Business for Adap-tation incubators can help to reach the following objectives:

• To serve as a local clearing house for adaptation data and information • To serve as learning centre, provide case studies and best practice examples • To serve as an interactive platform for local users (when linked to ITC technologies via internet and SME

services) • To serve as a partnership broker and match-maker for researchers, business, NGOs, funders and interna-

tional organisations • To connect resources and decrease transaction costs for business

The core task of the incubators is to connect information, technologies, resources and people in order toovercome the inefciencies outlined as constraints in Chapter III. The business incubators can be linked tolocal research centres, to dialogue platforms and with other local incubators at the national and international

level.In 2010, DFID launched an international platform for business innovations called the Business InnovationFacility, which helps with the development and uptake of inclusive business models in developing countries.A Practitioners Hub has been created at www.businessinnovationfacility.org to connect information, ideas,people and resources. The Facility will support at least 30 company-led initiatives and partnerships focusedon the development or scaling up of innovative ‘inclusive business’ models in ve countries: Nigeria, Zambia,Malawi, India and Bangladesh. The instrument is still in its pilot phase.

PossiblePartners

• Companies • Business associations

• Ministry of Commerce

• Chambers of commerce• Business Development Services • Extension services

4.2.3 Instrument 7: Enhancing market access for new climate proof products

ObjectiveTo provide incentives for climate-smart investments by supporting market linkages and access to exportmarkets.

NeedsAddressed

A major barrier to climate-smart investments especially in the agriculture sector is a lack of or limited accessto input and output markets. Market uncertainty and poor access to urban and international markets havebeen identied as severe constraints. Moreover, mistrust and negative experiences with market dynamicshave been identied as frequent reasons for the scepticism of farmers towards new climate change relatedsolutions.

Instruments

Used

• PPP

•

Value-Chain Approach • Mainstreaming

Steps

a) Integrate climate adaptation into existing market access projects, PPPs like CafeDirect. Build awarenessand expertise about climate risks and opportunities of involved stakeholders. Train value-chain promotionexperts to incorporate climate change research and innovation into their project work. Increase exchangeof knowledge and best practices between agriculture development projects, SME promotion, climatechange and environmental protection and natural resource management programmes.

b) Promote sector-specic programmes to enhance market access for climate-smart products. Leverageexperience with the GIZ Programme on Promotion of Social and Environmental Standards in the Industryto develop new partnerships including adaptation consideration in agriculture supply chains, manufactur-ing or industrial processes. Review lessons learned and develop manuals targeting different participants(supplier, buyer, trainer, and technician) on the impacts and opportunities arising from climate change incertain value and supply chains.




PossiblePartners

• Companies (PPP partners) • Business associations

• Ministry of Commerce • Chambers of commerce

4.2.4 Instrument 8: PPP with National Banks to develop insurance products and green lending schemes

Objective

a) To promote the development of insurance products and green lending schemes tailored to the needs offarmers and SMEs in the context of climate adaptation. Establish pilots for protable and scalable nan-cial solutions.

b) Create a platform for information and consultancy services on available nancial and insurance productsfor SMEs and farmers.

NeedsAddressed

Difculty in accessing credit and the prospect of high interest rates often prevents investment in protableadaptation innovations. Green lending schemes and an increasing number of adaptation funding sources areavailable for business at the level of micro-credits and within large projects. However, there is still a nanc-ing gap for investments that require larger upfront costs for SMEs. Furthermore, research and innovation isneeded to overcome the barrier of missing collateral and the inherent high risks of climate vulnerabilities.Especially for SMEs, it is difcult to gain information about the available options and sources and to identifythe necessary partnerships and requirements to qualify for funding.

In the insurance market, the assessment of basis risks is a critical input to the design and marketability ofinsurance products for climate adaptation. We suggest a Private Public Partnership Model as the best way toapproach climate adaptation insurance promotion.

InstrumentsUsed

• Technical assistance • PPP

• Capacity building • Database

Steps

a) PPPs with National Banks with the goal to a) create a best practice database containing funding andinsurance schemes available to the private sector for climate change adaptation related micronance andb) promote and pilot insurance schemes for SMEs and farmers in climate change adaptation in a specicregion. Capacities created in the PPP can be leveraged to develop further nancial services, certicationprogrammes, and accounting services. Necessary steps are to identify partners and adapt banks and exist-ing nance schemes for adaptation and identify the greatest barriers to SME investment in adaptation-related products/services in the area. It is advisable to take a sector-specic approach to initially focus onproduct development/design and to launch and test small-scale pilot projects. The instrument should belinked with existing GIZ initiatives promoting “green nance.” Green nance has been a component of GIZprojects in China and India and is the subject of a scoping study which is being conducted this year. 142

b) Create an (online) information hub and build capacities in business associations to provide informationand consultancy on adaptation nancing and insurance schemes. This should be done in close collabora-tion with other efforts to promote knowledge transfer and innovation processes to avoid double-effortsand contradictory approaches.

PossiblePartners

• National and regional banks • Microinsurance institutes • International insurance companies

• Business associations

142

142 GIZ. 2011. Financial System Development, available at http://www.giz.de/themen/en/18077.htm.; GIZ. 2011. Small and Medium Enter-prises Financing and Development. Available at http://www.giz.de/themen/en/11163.htm; ADFIAP. 2011. GIZ visits ADFIAP on scopingstudy for MSME green nance. May 26. Available at http://www.adap.org/news/giz-visits-adap-on-scoping-study-for-msme-green-nance/.




4.3.2 Instrument 10: Business Innovation Awards

ObjectiveTo promote competition and provide incentives for businesses to innovate in the eld of climate adaptation.Also to generate information, case studies about good practice and business examples to promote business

opportunities and to enhance information sharing.

NeedsAddressed

a) Perception and Information Challenge

A major barrier to private sector investments in the eld of climate adaptation is a perception challenge thatclimate change is associated with risk management, unwanted changes and threats to business operations.This is combined with a lack of information and business best practice on successful business opportunitiesand models.

b) Lack of incentives for business development in the eld of climate adaptation

Thus far, climate adaptation is not seen as a major eld of investments. Due to the factors under a), there is alack of competition and business innovation in the eld of climate adaptation.

InstrumentsUsed

• Business Awards • Building alliances and networks • Promotion of best practice

Steps

a) Denition of indicators for climate-smart or adaptation related initiatives and innovations. The denitionand assessment process should be done in a participatory process in collaboration with various stakehold-er groups from business, development organisations, research and NGOs.

b) Set up of a request for proposal process that enables the participation of large, small- and medium-sizedenterprises and microbusinesses.

c) Identication of reward system:

1) Public recognition and business visability: The Business Innovation Award can promote business vis-ibility, thus enhance access to partners and funding sources and improve market access.

2) Training and Networking: Development of a network for fellows or innovators that continuously engagein information exchange and are offered training, capacitiy building or coaching.

3) Financial rewards in form of access to funding sources: A strong incentive is the coupling of the Awardwith nancial rewards of enhanced access to funding sources that can help to scale or replicate businessmodels.

d) Identication of partners to showcase and promote the Business Innovation Award e.g. in collaborationwith Business Schools and Entrepreneurship Labs.

PossiblePartners

• MNCs • International NGOs • International organisations

• Business associations • Business incubators and organisations supportingenterpreneurship



46 Baseline study: Conclusions and key themes

5 Conclusions and Key Themes

This chapter distills some of the key ndings from ourresearch, organised around three themes that should bekept in mind in the process of formulation of interna-tional cooperation initiatives focused on adaptation andthe private sector.

1. Climate Adaptation requires Policy Integration andCooperation:

International cooperation should seek to integrate cli-mate adaptation policies into economic and investmentpolicies. Therefore, it is recommended to create syner-gies between existing government initiatives, invest incross-sectoral programmes, climate and business dialogueplatforms and build capacities for collaboration andintegrated policy planning. Furthermore, it is necessary toraise awareness and increase climate expertise in econom-ic and investment policy units to make development andeconomic policy efforts climate-proof.

2. Support and Incentivize Business Resilience:

Private sector development and promotion of business

climate are critical aspects to building resilience andraising the capacities of companies to provide prod-ucts and services for climate adaptation. Therefore, it isrecommended

a. To raise private sector awareness of climate change op-portunities and risks

b. To demonstrate and showcase the business case to in-vest in resilience measures or into business transforma-tion processes.

c. To provide adaptation-specic incentives and build ca-

pacities for companies to engage in climate change ad-aptation. Incentives for businesses can include corpo-rate tax reductions, building standards, climate-proongstandards and certications, adaptation bonus schemes,green lending and innovation credits.

d. To integrate the private sector into policy planning pro-cesses and joint implementation strategies. Consult business actors in the development of regulatory frame-works and engage them in standard setting to promoteinnovation and competition.

e. To provide businesses with the information and toolsthey need to make investments that support climate

resilience and integrate them into two-way knowledgetransfer platforms.

f. To support market access and value chain approachesin order to reduce transformation risks and costs and topool knowledge and resources for innovation.

Improvements in the general investment and businessclimate can enable private sector actors to build capacitiesand seize adaptation-related opportunities in the me-dium- or long-term.

3. Focus on Effective Process Architecture, Learning andInnovation:

International cooperation can help governments play anenabling role for climate change innovations and to fosterprocess architectures conducive to cooperation. It is advis-able for governments to focus on supporting processesand create effective transdisciplinary institutions andplatforms to promote research and business innovation,rather than unilaterally promoting specic products oradaptation methods.

Support the development of local solutions and tailoredapplications of technological innovations. Create part-nerships between research institutes and the privatesector to advance knowledge and technology transfer.

Develop knowledge centers and business incubators bringing together technological, social and business in-novations and support partnership brokering and clus-ter approaches. Since adaptation is an on-going process,it requires a space and platform for continuous learning.

Leverage the potentials of platform technologies and

build of existing and indigenous knowledge to spuradoption of innovations and promote sustainable trans-formation processes.

Invest in the improvement of communication and thedissemination of information by leveraging ICT andopen source and user-driver technologies.

In sum, it is recommended to focus on supporting pro-cesses, and not specic adaptation products or services,and to put emphasis on learning and innovation throughcollective action in multistakeholder processes, dialogueand networks.



47Baseline study: References

6 References

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51Country study: Mozambique

1 Mozambique

Country characteristics and statistics:

Population Characteristics 143 • Total population of 23,515,934• 61% live in rural areas

Economy

•

GDP $US 23 billion (PPP) in 2010144

• GDP per capita $US 428 (2010)145

• Poverty rate: 55% in 2008 (down from69% in 1996)146

• Growth: 8% annually between 1996and 2008

Key industrial sectors 147

• aluminium • chemicals • timber • food and beverage

Key agricultural products 148

• cashew nuts • sugar-cane • cotton • tea • beans • tropical fruits

Key climate risks • drought • ooding • cyclones

Ease of Doing Business149 • Ranked 139th out of 183 in 2011143 144145 146147 148 149

143 CIA World Factbook 2010. https://www.cia.gov/library/publications/the-world-factbook/geos/mz.html.

144 CIA 2010.145 World Bank (WB). 2011a. Mozambique Country Brief. Available at: http://web.

worldbank.org/WBSITE/EXTERNAL/COUNTRIES/AFRICAEXT/MOZAMBIQUEEXTN/0,menuPK:382142~pagePK:141132~piPK:141107~theSitePK:382131,00.html.

146 World Bank. n.d. Data: Mozambique. Available at: http://data.worldbank.org/coun-try/mozambique.

147 Ministry for the coordination of Environmental Affairs (MICOA). 2007. National Adaptation Program of Action (NAPA), December.

148 MICOA 2007.149 International Finance Corporation (IFC) 2011. Ease of Doing Business Index. http://

www.doingbusiness.org. The Ease of Doing Business Index measures the degreeto which the regulatory environment is conducive to starting and operating a lo-cal business. The Index combines 10 equally-weighted indicators on issues such astaxation, access to credit, property ownership and registration, infrastructure, per-mitting, contract enforcement, international trade, and investor protections. Coun-tries are ranked from 1-183, with a lower score indicating a better environment for business.

PART II: Country Studies

Services45%

Agriculture29%

Industry26%

Source: CIA World Factbook (2010).GDP composition by sector



52 Country study: Mozambique

1.1 Introduction

Climate change presents Mozambique with signicant

challenges as current natural disasters and developmentchallenges will be exacerbated by increased rainfall vari-ability, stronger and more frequent cyclones, and inlandooding. According to a ranking by Maplecroft, Mozam- bique is the fth most vulnerable country in the world tothe effects of climate change due to high levels of poverty,population density, reliance on agricultural land proneto ooding and drought, and exposure to climate-relatedevents. 150 Already over 25,000 per million persons areaffected by natural disasters annually, 30% higher thanthe average among countries with low levels of humandevelopment (19,221). 151 However, the country’s rich baseof natural resources, particularly water and agriculturalland, present signicant opportunities for building resil-ience and developing the market economy. For example,Mozambique has a low percentage of the population livingon degraded land (1.9%) relative to other developing coun-tries (19% average).152 Mozambique’s seven major riversand ample surface and internal water resources provideit with signicant advantages in key adaptation-relatedsectors.

These challenges and assets both present the private sec-tor with opportunities to play a critical role in buildingresilience against climate change. However, signicant barriers to investment exist. The Ease of Doing Busi-ness Index rates Mozambique in the bottom quartile ofcountries (139 of 183) and the Index of Economic Freedomplaces them in the middle of the range, scoring 56.8 out of100.153 Numerous hurdles hinder business development,particularly for entrepreneurs and Small and Medium-sized Enterprises (SMEs). In this context, the private sectoris dened broadly and includes everything from SMEs tolarger companies and international rms. SMEs are givena particularly strong focus due to their important role in

the Mozambican economy: small businesses with less than10 employees make up about 77% of employment in theformal sector. 154

150 Maplecroft. 2010. Big Economies of the Future Most at Riskfrom Climate Change. October 21, available at http://ma-plecroft.com/about/news/ccvi.html.

151 UNDP. 2011. Human Development Report, available at http://www.beta.undp.org/content/dam/undp/library/corporate/HDR/2011%20Global%20HDR/English/HDR_2011_EN_Com-plete.pdf, 153.

152 UNDP 2011, 153.153 DBI is developed by the World Bank’s International Finance

Corporation (IFC). See www.doingbusiness.org. IEF is a prod-uct of the Heritage Foundation, www.heritage.org.

154 Roberts, B. 2003. Small and Medium Enterprise Mapping –Mozambique. Product of the World Bank Group Small andMedium Enterprise Department. Maputo, Mozambique, Feb-Maputo, Mozambique, Feb-

As issues of poverty reduction and increasing economic

opportunity are addressed and Mozambique developswith a long-term vision in mind, it is critical that the chal-lenges presented by climate change are integrated intopublic and private sector planning. For example, on thepublic sector side, mainstreaming adaptation into privatesector-oriented policy design, institutional reform, infra-structure planning, public-private partnerships (PPPs),and other initiatives is critical. Private sector entities,on the other hand, need to understand not only climatevariability but also long- term climate impacts in order tointegrate climate change considerations into long-termcapital investment decisions and develop products andservices that meet emerging markets. This prole seeks toenhance these efforts by providing information on currentactivities, opportunities, challenges, and potential instru-ments that could build more resilience in – and through– the private sector.

1.1.1 Impact of Climate Change on the Private Sector

Three key climate vulnerabilities in particular create risksfor the private sector, each of which have impacts thataffect businesses directly through damage to assets anddisruption of operations, or indirectly through impact on

critical infrastructure or services. First, drought threat-ens businesses, particularly in the agriculture industry, but also businesses that rely heavily on stable water andpower supplies. Serious ooding can cause massive dam-age to crops, business assets, and critical infrastructure,and increased exposure to ooding can force relocationfrom highly productive river oodplains to more mar-ginal croplands. Finally, cyclones and storm surges createproblems in coastal areas where saline inundation candecrease agricultural yields and high winds and oodingcan damage infrastructure.

ruary. http://www.speed-program.com/library/resources/tip-moz_media/cat3_link_1115667066.pdf, p. 3.




While these vulnerabilities present serious challenges,Mozambique’s risks are also mitigated somewhat by thecountry’s underused agricultural production capaci-ties and substantial water resources. Seven major riv-ers provide ample surface water resources and internalresources are abundant: FAO data shows that of the 217 billion m 3 in renewable water resources available, only 600million m 3 (0.3%) are used.156 Areas suitable for cultivationare expected to increase as a result of climate change inthe northern half of the country, enhancing opportuni-ties for agribusiness. 157 Furthermore, even though rainfallvariability is likely to be exacerbated in the dryer southernand central regions, the National Disasters ManagementInstitute (INGC) notes a big gap currently between actual

156 Food and Agriculture Organization of the United Nations(FAO).2005a. Irrigation in Africa in Figures. AQUASTAT Sur-vey. Available at ftp://ftp.fao.org/agl/aglw/docs/wr29_eng.pdf.

157 INGC 2009, 35.

and potential yields due to the fact that nearly half ofrural land is currently fallow. Agricultural intensicationin existing agricultural operations could reduce the landneeded for agriculture by 30-50%, freeing it for other uses.Mozambique’s full agricultural production potential isalso under-realized due to very limited access to irrigationamong subsistence farmers. With adequate proliferationof irrigation techniques, technologies, and infrastruc-ture, as well as market integration of small-scale farmers,increased yields can far outstrip any losses due to climatechange. 158

158 INGC 2009, 35.

Table 15: Mozambique, Climate Change Impacts on the Private Sector

Climate Trend Exposure Unit Bio-physical Effect Socio-economic Effect

Drought

Agriculture • Reduced yields • Reduced access to water resources forirrigation and other business operations

•

Reduced quality of agriculturalproducts • Disincentive for investment in high-risk

areas • Increased price volatility of agriculture

products

Energy • Periods of reduced ow in some rivers• Increased volatility of energy supplies

(due to reliance on hydro power)

Flooding

Agriculture • Widespread crop loss • Damage to crop land

• Damage to irrigation infrastructure• Relocation to less productive land

Water • Decreased water quality•

Spread of disease • Unstable water supplies create disin-centive for investment

Buildings &infrastructure

• Destruction of buildings and otherinfrastructure

• Repair/replacement costs• Transportation disruptions due to dam-

aged roads

Cyclones /Tropical storms

Agriculture • Crop failure and loss of productive landdue to saline inundation of farmland

• Energy and food security challenges


• Damage to critical coastal assets (e.g.ports)

• Repair/rebuilding costs • Disruptions of business operations,

resource ows

Based on information from World Bank, INGC, CIF 155

155 World Bank (WB) 2011b. Climate Risk and Adaptation Country Prole: Mozambique. April. Available at http://sdwebx.worldbank.org/climateportal/doc/GFDRRCountryProles/wb_gfdrr_climate_change_country_prole_for_MOZ.pdf; Climate Investment Fund (CIF).2011. Strategic Program for Climate Resilience: Mozambique. June 14.; National Institute for Disaster Management (INGC). 2009. Studyon the Impact of Climate Change on Disaster Risk in Mozambique: Synthesis Report. May.; World Bank. 2007. Mozambique Country Water Resources Assistance Strategy: Making Water Work for Sustainable Growth and Poverty Reduction. August. (cite in CIF 2011, 9).




1. .1.2 Public Sector Framework on Adaptation

Climate risks are addressed in a number of governmentprogrammes and strategic priorities; however the role of

the private sector is not emphasized in most documents.The government is currently developing its next Five YearDevelopment Plan and has approved an updated Ac-tion Plan for the Reduction of Absolute Poverty (PARPA)that integrates climate risks and assigns implementationresponsibilities to the Ministry of Agriculture (MINAG). 159 A 2007 National Adaptation Programme of Action (NAPA)developed by the Ministry for the Coordination of Envi-ronmental Affairs (MICOA) has identied four key adapta-tion priorities:

1. Strengthening early warnings systems;

2. Strengthening the capacity of farmers to deal with cli-mate change;

3. Reduction of the impacts of climate change along thecoastal zone; and

4. Water resources management. 160

Private sector engagement is most emphasized throughMozambique’s participation in the Climate InvestmentFund’s Pilot Program for Climate Resilience (PPCR).Mozambique’s Strategic Program for Climate Resilience(SPCR), which is required to access nancing for adapta-tion projects, was developed between November 2009 and June 2011 when it was endorsed by the PPCR subcom-mittee. The SPCR outlined seven projects addressingissues such as roads, coastal cities, land and water resourcemanagement, and agricultural production and food secu-rity. 161 Participation in the PPCR will give Mozambique theopportunity to expand beyond mainstream developmentprogrammes and explore non-traditional, scalable modelsfor climate adaptation, with a particular focus on engag-ing the private sector. Of the seven projects outlined in theSPCR, four are particularly relevant to the private sector:

Project 1: Introducing climate-resilience into the designand management of Mozambique’s unpaved roads. Theproject seeks to identify highly vulnerable sections ofroad and pilot innovative engineering and maintenanceapproaches that will emphasize cost-effective preventionof breaches and other forms of weather-related dam-age. While upgrading and maintaining roads is typicallya public sector-funded effort, the private sector is bothan integral partner and beneciary of this initiative.The SPCR notes that this project will help develop skillsand capacities by channelling work through domestic

159 CIF 2011, 13.160 MICOA 2007.161 CIF 2011, 30-59.

contractors. Likewise, improved road systems enablemore efcient and extensive trade and play a vital role inintegrating rural and urban markets.

Project 5: Enhancing Climate Resilient Agricultural Pro-duction and Food Security. This project seeks to increaseagricultural outputs and climate resilience through cropdiversication, irrigation, and improved food storage,which will benet a wide range of agricultural producers.Increased seed certication and improved dissemina-tion processes will help provide access to a higher qualityand variety of seeds, increasing crop yields and resilienceagainst weather variability. Seed and food storage andmarketing facilities will help reduce post-harvest lossesand provide infrastructure needed to process and surplusproduction. The project also envisions larger scale irriga-tion infrastructure rehabilitation in the Xai Xai area, whichwill create opportunities for contractors and improve agri-cultural yields in the region.

Project 6: Developing climate resilience in the agriculturaland peri-urban water sectors through provision of creditlines from Mozambican banks. This project will partnerwith one or more Mozambican banks that are interestedin providing loans for resiliency-building investments andcompanies, particularly those that would increase farmeraccess to irrigation. This project has a stronger focus onthe private sector—particularly entrepreneurs and SMEs—than the other SPCR programs. Climate adaptation lend-ing would be supported by IFC consultants who would beimbedded in the banks to advise on programme designand selection processes.

Project 7: Climate Resilience of Rural Communities. Thethree sub-programmes of this project each address bothrural livelihoods and resilience as well as conservation offorested areas. Appropriate management of these naturalresources can generate business opportunities in eco-tourism, while protecting the existing livelihoods of localpopulations through responsible forest management. It ispossible that forestry certication schemes (e.g. FSC) couldincrease returns while also protecting forest-derived liveli-hoods in the long term.

These four projects lay a strong foundation for futureprogrammes and interventions in Mozambique and alsoprovide the opportunity to work in synergy with GIZprogrammes and instruments.




1.2 FIELDS OF OPPORTUNITY

This section explores current private sector activities that

contribute to greater resilience to climate change impacts,as well as emerging opportunities in this area. Climateadaptation-related elds of opportunity primarily centeron agriculture and water-related products and services,and hence these sectors are the focus of this section. Addi-tional elds of opportunity are nancial services, tourism,and renewable energy, which are also addressed briey. Inaddition, the Information and Communication Technolo-gies (ICT) sector plays an enabling role in the develop-ment of other critical markets, particularly by facilitatingtransactions in the agriculture industry.

1.2 .1 Activities and Opportunities in the Agriculture Sector

Rehabilitation and expansion of irrigation infrastruc-ture. Much of the nation’s small-scale agro-water infra-structure remains in a state of disrepair after damageduring civil war in the 1980s and ooding in the early2000s. If adequately funded, the expansion or repair ofirrigation systems represents a signicant market forprivate companies, particularly larger rms with sub-stantial technical capacity. Depending on the type (sur-face or sprinkler), irrigation systems can costs fromUS$1000-2000/ha. 162 Thus even if just 1% of the 48 mil-

lion hectares under cultivation were irrigated, thatcould create a US$500 million to US$1 billion indus-try. 163 The Government of Mozambique’s (GoM) 1995 Na-tional Water Policy envisions a role for the private sectorin the rehabilitation of irrigation systems, but the lackof institutional capacity, nancial resources, and tech-nical assistance hampers further development in thisarea.164 Small scale irrigation pilots are already under-way. For example, Mozambique-based Eco-Energia andits Swedish afliate SEKAB led a pilot focused on build-ing awareness of alternatives to rain-fed agriculture in

the sorghum and cane sugar industries, which includedtesting the impacts of irrigation-based solutions. 165

Market Integration of Smallholder Farmers. The GoMhas prioritized the expansion of irrigation equipmentand cultivation methods to smallholder farmers in or-der to increase yields, thereby strengthening farmers’livelihoods and building resilience to climate change.The ultimate goal of the government’s initiative is tomove vulnerable subsistence farmers along a trajectorytoward commercial market integration which will help

162 FAO 2005b.163 Calculated from World Bank data.164 FAO 2005b. Information System on Water and Agriculture.

Available at http://www.fao.org/nr/water/aquastat/coun-tries_regions/mozambique/index.stm.

165 B. van Logchem, pers. comm. 2011.

the overall economy grow and contribute to nation-

al climate resilience.166

Some successful private sector-driven initiatives have illustrated the potential of usingcooperatives and value chain integration to further thisgoal, such as the creation of a honey cooperative andcollection programme organized by the MozambicanHoney Company and V&M Grain. This model could besuccessfully applied to other cash crop value chainssuch as cashews, cotton, and sugar.

Commercialization of low-cost agricultural inputs. Thestart-up TERRA NOVA extracts and composts organicmaterial from urban waste streams and sells it to farm-

ers, gardeners and agribusinesses in order to improvesoil quality and crop yields. As of 2010, the company wasthe only seller of natural fertilizer in Mozambique butremains focused on the Beira-area market. This indi-cates a strong potential for market entry by other SMEsin different regions, as well as larger-scale collection,process, and distribution operations. 167

Developing commercial markets for high quality seeds.INGC and GIZ have worked to expand the practiceof “seed fairs” where farmers and regional distribu-tors can sell high quality seeds in rural communities.

As this practice expands, it will create opportunities forSME business models based on the collection, storage,and trade of seeds and other agricultural products. This builds resilience not only by stimulating a vibrant mar-ket but by ensuring the use of higher yield, weather tol-erant crop varieties. 168

Diversication to cash crops. While certain cash crops(e.g. sugar cane) are dominated by large rms, projectshave been implemented to build resilience and improvelivelihoods among rural smallholder farmers and SMEs by integrating them into broader markets. SME growth

has been particularly strong in a number of key valuechains including poultry, cashews, sesame seeds, soy,and honey. 169

166 Agricultural entities can be classied roughly into one offour categories: smallholder/ subsistence farmers generallycultivate about 1-2 ha of land but account for about 95% ofarea under cultivation and almost a ll of the food crops. (FAO2005b) Emergent commercial farmers are those who are be-ginning to produce enough to sell into the market and maycultivate up to 20-50 ha. Farmer entrepreneurs run success-ful agricultural businesses that may range from 200-1000 ha.Finally, agribusinesses manage large scale productions (1000+ha) and generate the majority of exported cash crops (Fuernk-ranz pers. comm. 2011).

167 BiD Network. TERRA NOVA : Composting urban waste. Avail-able at: http://www.bidnetwork.org/page/156855/en.

168 INGC. 2011. Improving Food Security in Central Mozam- bique. April.

169 Ilse Fuernkranz pers. comm. 2011.




While many private sector-oriented initiatives focus on

a single point in the value chain, an integrated approachcan greatly increase effectiveness by growing supply-side and demand-side capacities simultaneously. Thiscan be a highly effective strategy for developing SMEsand encouraging market integration of subsistencefarmers. Two industries where this strategy has beenused effectively are discussed below.

Honey Value Chain

Linkages between rural com-munities and the broadermarket have been facilitatedthrough the consolidated ef-forts of NGOs, government,donor organizations and privatecompanies. For example, with

the support of the Dutch NGO SNV and nancing fromBancoterra and the Mozambican Honey Company(MHC) helped organize a farmer cooperative aroundsmall-scale honey production that plans to integratemore than 5,000 beekeepers in the rst ve years.MHC provides technical assistance, collects productfrom local pick-up points, processes, packages, andexports the honey. Smallholder farmers are collec-

tively given a 45% in MHC’s ownership structure andare expected to see household incomes rise by at least$200 annually. By providing smallholder farmers withthe resources and access needed to enter this prot-able market, this approach develops both upstream andmidstream parts of the value chain and contributes tobuilding more resilient and sustainable livelihoods.

AgDevCo.com: Mozambique Honey Company;Ilse Fuernkranz pers. comm. 2011

While this model has been successful in these fea-

tured industries, signicant opportunities exist to buildresilience by applying the method to other industries.Developing integrated value chain approaches forthe cultivation and sale of cassava could help buildresilience because of its versatility and ability to begrown in dryer areas where resettlement programs haverelocated people previously living in ood-prone areas(Ilse Fuernkranz pers. comm. 2011). The integratedvalue chain model is also ideal for cash crops such ascashews, cotton, and sugar.

Information and Communication Technology (ICT) israpidly expanding in Africa and presents enormous yetoften under-realized potential for business develop-ment and adaptation. In particular, the proliferation ofmobile phones is creating new opportunities for infor-mation sharing and market transactions. For example,the Ghana-based SME Esoko has been involved in projects in over a dozen African countries involving the useof SMS technology to exchange market and agricul-tural information with rural farmers. Although mar-ket penetration of mobile phones in Mozambique is be-hind that of other countries in the region, subscriptions

have increased rapidly from only 3% in 2004 to 26% in2009.170 Mozambique is also one of eight countries tar-geted by the IFDC, the East Africa Community, andthe Common Market for Eastern and Southern Africa(COMESA) for a new programme AMITSA (Regional Ag-ricultural Input Market Information and TransparencySystem) which seeks to improve access to agriculturalinformation and inputs in southern Africa and inte-grates Esoko’s technology. 171

170 World Bank data: Mobile cellular subscriptions per 100 people.171 Esoko. 2011. Press Release: Agro-Input market information

system using Esoko launches across Eastern and Southern Africa. April 17. Available at http://www.esoko.com/about/news/pressreleases/2011_19_04_Esoko_AMITSA.pdf.

Poultry Value Chain

The poultry market in Mo-zambique has historically beendominated by inexpensiveimports from Brazil. Althoughimport restrictions soughtto level the playing eld fordomestic producers, other

constraints along the supply chain have hindered themarket’s development. To integrate rural farmersand SMEs into the poultry market, GAPI, GoM, andTechnoserve conducted a comprehensive market chainanalysis and initiated a program to address weaknesses

at various points in the value chain. The approachemphasized business and technical training; techni-cal support to upgrade machinery, increase capacity,and improve quality; strengthen links to smallholders;and forming the trade group Mozambican AvicultureAssociation to improve market a standardized product.The program helped grow the domestic poultry marketfourfold between 2004 and 2008, creating 1,200 jobsand capturing 76% of the market by 2009.

McNamer 2011; Ilse Fuernkranz pers. comm. 2011

Integrated Value Chain Strategies




1.2.2 Activities and Opportunities in Water Infrastructure

In the last decade, Mozambique has made signicantprogress in privatising water distribution and infrastruc-

ture development. Delegating water distribution to privatesector management attracted about US$350 million ofinvestments for urban water projects between 2002 and2008. Together with IDA and other donor contributions,this has led to a combined increase in expenditures in thesector of about 255% and a rise in the number of pipedwater connections in Maputo of about 40% during thatperiod. 172 These efforts have greatly increased urban accessto water, but additional private sector investment can help bring water to the remaining 23% of the urban populationand 71% of the rural population that is still without pipedwater access. 173

Treadle Pumps. While traditional water infrastructuremay not be cost effective in rural areas, the governmenthas been promoting the use of low-cost, low-mainte-nance “treadle pumps” in rural areas. 174 These are ver-satile foot-operated pumps frequently used in smallscale irrigation systems, allowing farmers to increase thegrowing season, diversify crops, and become more re-silient against rainfall uctuations and drought. Somemodels can deliver as much as 7000 litres per hour withminimal effort from a single user. 175 Although currentlydistributed primarily through government and donor-funded programmes, design, production, distribution,and sale of these systems presents signicant businessopportunities throughout the value chain. In addition,entrepreneurs could develop businesses based aroundleasing treadle pumps to local farmers or develop othertypes of competing pumps, such as those powered bysolar energy.

1.2.3 Additional Fields of Activity and Opportunity

Index insurance and micro-insurance. Index-based in-surance products (“index insurance”) are receiving in-

creased attention as a tool for building resilience againstnatural disasters and climate change. A report by the Alliance for a Green Revolution in Africa recommendsMozambique as a top candidate for an index insurancepilot due to the availability of necessary data in the re-gion and the country’s high vulnerability. 176 In March

172 World Bank 2011a; World Bank. 2007a. Rebuilding Mozam- bique’s Urban Water Supply Infrastructure. Available athttp://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:21258662~menuPK:141310~pagePK:34370~piPK:34424~theSitePK:4607,00.html.

173 CIA 2010.

174 FAO 2005b.175 Savon Trading. n.d. Treadle Irrigation Water Pump. Chimoio,Mozambique. http://www.savonprime.com/html/Irrigation- WaterTreadlePumps.htm.

176 Alliance for a Green Revolution in Africa. 2011. Weather In-

2011, the global reinsurance rm Guy Carpenter wasawarded a $1 million grant through the IFC’s Global In-dex Insurance Facility (GIIF) Program to launch an in-dex insurance programme in Mozambique. 177 The pro-gramme aims to develop a market for low-cost droughtand ood insurance that can be scaled to the pointwhere it is commercially viable and sustainable.

Eco-tourism. International tourism is an important partof the Mozambican economy, bringing approximate-ly US$285 million into the country each year (about 8%of the country’s exports). 178 Tourism is on the rise, withthe number of international visitors entering the coun-try having doubled between 2004 and 2008. 179 SMEsand entrepreneurs are playing an important role in thisgrowth. In particular, small, family-owned lodges are onthe rise, as is interest in eco-tourism-branded establish-ments which tap into the growing international marketfor environmentally-friendly destinations. 180 Howev-er, many of the eco-tourism destinations and family-owned lodges are developing along the coast where theyare vulnerable to sea level rise, storm surge, erosion,and other coastal zone climate impacts, making thisan important sector for private sector adaptation pro-grammes to focus on and a valuable opportunity for en-gineering and construction rms that could offer pro-tective services in this area.

Distributed energy generation. Renewable energy is agrowing market that faces strong growth prospects andhuge potential to contribute to private sector resilience- building by expanding the availability of electricity andreducing the impact of supply disruptions. The govern-ment recently announced a new 15 year strategy for in-creasing renewable energy and electricity access in ruralareas which will create signicant opportunities for de-velopers and equipment distributors. Private companieshave already begun making investments in renewableenergy, including Self Energy Mozambique, which is

investing US$42 million for off-grid electrication projects in the provinces of Nampula, Sofala and Maputo. 181

dex Insurance for Smallholder Farmers in Africa — Lessonslearnt and Goals for the Future. March.

177 ARTEMIS. 2011. Guy Carpenter and RMS to develop weatherindex-based microinsurance for Mozambique. March. Avail-able at http://www.artemis.bm/blog/2011/03/22/guy-carpen-ter-and-rms-to-develop-weather-index-based-microinsur-ance-for-mozambique/.

178 World Bank data.179 AllAfrica.com. 2010. Mozambique: Tourism Earnings Con-

tinue to Rise. March 29. Available at http://allafrica.com/sto-ries/201003291584.html.

180 Bid Network, http://www.bidnetwork.org/page/156243/en; I.Fuernkranz pers. comm. 2011.181 AllAfrica.com. 2011. Mozambique: ‘Self Energy’ to Invest in

Renewable Energy. March 7. Available at http://allafrica.com/stories/201103071430.html.




more risk averse. 194 Directing more investment and ca-pacity building at the legal system would help reduceuncertainty in business transactions.

Bureaucracy. Business development is hindered by ex-cessive and inefcient bureaucracy, despite recent im-provements in a number of areas. For example, whileMozambique has signicantly decreased the time ittakes to register businesses from 153 days in 2005 toonly 13 in 2010, it can still take over a year to completethe permitting process for new construction. 195 Many businesses remain unregistered and hence unable to ap-ply for formal credit. 196 Transportation clearance delayscan increase transaction costs and create a disincentivefor international trade. For example, delays in customsaverage 10 days or more and Mozambique scores low on World Bank’s ratings of customs process efciency. 197 While these and other challenges remain, the govern-ment has successfully implemented a number of ef-fective bureaucracy-reducing initiatives, including ex-panding “one-stop shops” for business registration to allprovincial capitals in order to reduce turn-around times.

Social and Contextual

Lack of market access. Access to regional or global mar-kets is extremely limited, especially in rural areas. Thisis due to a variety of factors including inadequate trans-

portation infrastructure, long distances between pro-duction centres and markets, inconsistencies in prod-uct quality, high transaction costs associated with smallquantities, lack of market information, and inadequatecommunication between potential buyers and sellers. Addressing these challenges requires an integrated ap-proach that addresses various stages of the value chain,including increasing production, organizing smallhold-er farmers into cooperatives, strategic investments intransportation infrastructure, and facilitating commu-nication and information sharing within the market.

Underdeveloped SME community. Although SMEs pro-vide a majority of the country’s employment, GDP isdominated by foreign capital-intensive investments(especially mega-projects) and foreign aid. 198 Togetherthese account for roughly half of annual GDP growth. 199 Increasing the growth and economic contribution ofSMEs will create a more sustainable, resilient economythat is less dependent on foreign assistance and invest-ment. Strengthening and expanding SME-focused busi-ness associations and their expertise on the dynamics

194 Borgarello et al. 2004, 10,13; Roberts 2003, 4.

195 World Bank data; IFC 2011.196 Borgarello et al. 2004, 12.197 World Bank data : indicators for Logistics Performance Index

and Average Time to Clear Exports Through Customs.198 WB 2003 data, in Borgarello 2004, 6.199 Borgarello et al. 2004, 11.

between climate change and business development willhelp this sector ourish.

Lack of business capabilities. SME development is sti-

ed by insufcient entrepreneurial capabilities stem-ming from an inefcient institutional framework andwidespread lack of business experience. 200 Key manage-rial skills are lacking, such as accounting, business plan-ning, quality standards, and market strategy 201 as wellas the skills needed to access, disseminate and interpretclimate change information. An insufcient supply ofqualied staff creates human resources restrictions. 202 This requires developing and linking business devel-opment services and expanding capacities of businessassociations.

High cost or lack of availability of professional servic-es. There is a lack of accredited accountants in Mozam- bique and other professional services, such as con-sulting, are prohibitively expensive or undervalued bySMEs.203 The high cost and low priority of strategic andadministrative activities (such as conducting studies ordeveloping business plans) requires subsidization in thenear-term and training/capacity building in the long-term, particularly with regards to the development ofclimate-adaptation- related products and services.

Access to information, resources, and technology. Lack of

access to modern technology is a signicant constraintin many industries. Leasing is an option that can helpovercome lack of access to capital in urban areas but israre in agriculture where leasing options are unavailableor unknown. 204

Lack of knowledge and information on adaptation. Cli-mate change is generally not on the radar screen formost businesses and particularly SMEs. 205 This is duelargely to the fact that climate change is typically con-sidered a distant, uncertain reality that is superseded by more immediate considerations. More awareness-

building and capacity-building is needed to increaseknowledge of potential climate change impacts andadaptation options. This could include encouraging in-formation and resource sharing between rms throughcooperatives and partnerships, expanding information-al resources, elaborating investment needs, and devel-oping a portfolio of concise and actionable adaptationstrategies, particularly with consideration of the uniqueneeds and capabilities of SMEs. 206

200 Borgarello et al. 2004, 4,9,10.201 Roberts 2003, 5; Borgarello 2004, 5,15.

202 Borgarello et al. 2004, 7; FAO 2005.203 Roberts 2003, 8,9.204 Borgarello et al. 2004,9-10.205 Carrie Davis pers. comm. 2011.206 CIF 2011, 31 ; INGC. 2010. INGC Phase II Donor Report. Octo-

ber. 3, 5.




1.3.2 Enabling Framework Conditions & Incentive Schemes

As presented in section 1.2, the PPCR is the main instru-ment which seeks to spur private sector investment and

activity in climate adaptation. Current activities in climatechange policies, climate adaptation programmes, anddevelopment of small businesses have also created theframework conditions to increase private sector engage-ment. Despite these efforts, avenues to strengthen theenabling environment through these activities remain.

Climate change policies. A stronger, integrated, and na-tionally-agreed upon climate strategy will lay the foun-dation for more effective private sector engagement inadaptation. The process of formulating such a strategyis already underway but requires the coordination of a

wide variety of stakeholders. In 2009 INGC and the En-vironmental Co-ordination Ministry (MICOA) proposedto develop a national strategy to respond to climatechange, including revisions to the legal framework andscal policies and measures that can help engage theprivate sector. However, as of June 2011 this remained indraft form with revisions and input still pending fromfurther consultations with ministries and civil societyorganizations. 207 This climate strategy should harmo-nize efforts with the PPCR’s planning documents (SPCR)and NAMAs. There are also opportunities to integratethe role of the private sector in planning beyond the na-tional level and to regional and local levels.

Climate adaptation programmes. Together with GIZ,Denmark, and UNDP, the INGC commissioned an ex-tensive study of the biophysical impacts of climatechange in Mozambique using downscaled climate da-ta.208 Phase II of this study is ongoing and addressesadaptation options along nine key themes, includingprivate sector engagement. 209 A team of independentconsultants led by Arthur D. Little was charged with de-veloping a portfolio of adaptation options and particu-lar project opportunities. It includes the implementa-tion of a pilot project focused on building resilience torainfall variability in the sorghum and cane sugar indus-tries. It was implemented in partnership with Mozam- bique-based Eco-Energia and its Swedish afliate SEK- AB and focused on building awareness of alternativesto rain-fed agriculture in local communities and testingthe impacts of irrigation-based solutions. 210 While thePhase II study is expected to help inform the govern-ment’s overall climate change strategy formulation, 211

207 CIF 2011, 14.208 CIF 2011, 15.209 INGC. 2010.210 B. van Logchem, pers. comm. 2011.211 CIF 2011, 15.

it can also serve as a platform for sharing lessons learnedwhich can be applied to other agricultural products.

Small business development. Two primary strategies

dominate the government’s approach to fostering SMEgrowth and development. The rst involves helpingMozambican SMEs capture the spill over benets as-sociated with the vast amounts of FDI coming into thecountry. For example, in 2001 the Small and Medi-um Enterprises Empowerment and Linkage Program(SMEELP) (later rebranded MozLink) was launched byaluminium smelting company Mozal in partnershipwith the IFC and the Mozambican Investment Promo-tion Agency (CPI).212 The programme sought to supportSMEs interested in bidding on Mozal construction con-tracts with the ultimate goal of helping SMEs acquireknowledge and achieve nancial independence throughintegration with FDI-funded projects. The second strat-egy for supporting SMEs is through programmes thatinvest more directly in SMEs through capacity-building,access to credit, technical assistance, etc. Support pro-grammes in this area are more numerous and diverseand include government, multilateral, and/or NGO-supported programmes. Recent and current examplesinclude the World Bank-funded PoDE-CAT (TechnicalLearning Component of the Enterprise DevelopmentProject) whose various ofces provide access to nanc-

ing, grants, training, technical support, capacity-build-ing, and market support; the Confederation of Business Associations, UNDP, and GoM “Enterprise Mozambique”programme which provides workshops, consulting, andnetworking; GAPI, FARE, and FFPI all of whom focus onSME development, particularly in the agricultural sec-tor; and Technoserve, a USAID-funded NGO focused onagribusiness sector which provides market and indus-try research, business plan development, consulting, andtraining. These and other programmes and organiza-tions lay a strong foundation for future initiatives and

partnerships.213

As presented in section 1.3.1, numerous barriers to private sector investment remain, particular-ly nancial hurdles. There are opportunities for the GoMto target both the demand and supply side challenges inorder to make it easier to create and grow businesses.

212 Borgarello et al. 2004, 7 ; Mozal Aluminum and IFC. 2008.Developing SMEs through Business Linkages : A Manual forPractitioners Based on the Mozlink Mentorship Experience inMozambique. November, 7-8.

213 Borgarello et al. 2004 ; Roberts 2003 ; Fuernkranz pers. comm.2011.




Instrument 1: A Business Incubator to Promote ICT Businesses and Facilitate Market Integration of Smallholder Farmers

Programme ObjectiveTo support adaptation and resilience-building by providing smallholder farmers with the c apacityand technical means to more fully participate in the broader market for their goods and by incu-bating successful ICT-based businesses. .

Needs Addressed

With access to credit and training, subsistence farmers will be able to acquire the equipment,inputs, and expertise needed to increase yields . With integration into regional, national, or inter-national markets , subsistence farmers will have an incentive to grow cash crops and produce foodbeyond their direct needs. These efforts will be mutually-reinforcing, helping increase crops andfacilitating market transactions.

By increasing awareness of available resources of climate and market information , and providingtraining in key areas like market research, business plan development, marketing, accounting, andtechnology, this programme will enable entrepreneurs in key adaptation-related industries.

Instruments Used

• Training • Mentorship • Business incubation • Innovation center

• Capacity building • Information platforms • Indicator/data collection • Formation of cooperatives

Steps

This business incubator programme would take a two-pronged approach to integrating smallholderfarmers into agricultural markets.

Supply side:

1. Capacity-building training for farmers in pilot communities, covering basics of market transac-tion and introducing available adaptation- related technologies and services.

2. Partner with UGC to identify existing and emerging cooperatives in regions currently served byagricultural ICT services.

3. Partner with cooperatives to enable resource and information sharing and minimize transactioncosts by consolidating sales to traders.

Demand side:

1. Identify ICT-based business models successful in other countries.2. Form training programmes to educate entrepreneurs on the opportunities emerging for start-

ups and SMEs in the elds of ICT and agriculture or water, as well as key climate trends that will

inform business decisions.3. Collaborate with existing business service training programmes to ensure participants receive

necessary training in business fundamentals.

Possible Partners

• SME-focused institutes and associations(e.g. GAPI)

• Ministry of Agriculture • Ministry of Trade & Industry • Ministry of Transportation & Communication

• Cooperative League of the U.S. • Training programmes (e.g. CEFE) • UGC (union of cooperatives) • UNC (small farmers organization) • UNIDO

Possible coop-

eration with existinginitiatives

• PoDE-CAT is a WB supported project which promotes Mozambican entrepreneurs through advi-sory services, training, nancing, and institutional capacity building.

• AMITSA (Regional Agricultural Input Market Information and Transparency System) is a pro-

gramme of the IFDC, the East Africa Community, and COMESA which seeks to improve access toagricultural information and inputs • CADI is a partnership between UNIDO, AIMO, and GoM which provides information sharing,business counselling research services and training.

1.4 Proposed Instruments for Internation Cooperation

The following three instruments are designed to address

critical barriers preventing full engagement of the privatesector in adaptation. In particular, they address obstaclesto integrating smallholder farmers in commercial markets

(Instrument 1), creating an enabling business environment

for adaptation investment (Instrument 2), and SME accessto capital for adaptation investments (Instrument 3).




ExpansionOpportunities

Once farmers have access to markets for their products, the next step will be to expand on initia-tives which provide them with the nancial, technical and human resources to increase production.In addition to providing farmers with information, expanding data gathering in rural areas could

help provide policymakers, aid organizations, private sector entities (e.g. insurance companies) andother interested parties with valuable intelligence on the state of agricultural production in Mo-zambique. This type of incubator programme could be applied to sectors beyond agriculture suchas water management or manufacturing processes.

Instrument 2: ClimB (Climate and Business) Dialogue – Engaging the Private Sector in Climate Adaptation

ProgrammeObjective

To engage the private and public sectors in an ongoing discussion to identify concrete policies andinstruments that would create an enabling environment for business investment in adaptation prod-ucts and services. To strengthen collaboration between ministries on climate adaptation, businesspromotion and economic policies and to integrate private sector demand and supply potentials intothe NAPA. Furthering the development of adaptation-related sectors will contribute to sustainableresilience-building throughout the Mozambican economy.

Needs Addressed

This public-private dialogue (PPD) will result in joint development and implementation of businessreforms to encourage adaptation investment in Mozambique. These dialogues will foster commu-nication and raise awareness in both sectors of the economic risks and business opportunities. Itwill promote private sector engagement by creating an enabling investment framework that targetsadaptation and integrates the private sector perspective into the NAPA .

Instruments Used • Public-private dialogues • Climate mainstreaming

• Awareness-raising • Knowledge-sharing

Steps

1. Identify a leading organization/agency that will be responsible for coordination of the PPD andimplementation of follow-on activities.

2. Select members for the dialogue (e.g. 20 from private sector, 20 from public sector), ensuringkey stakeholders (e.g. ministries, business associations) and a range of private sector interests arerepresented.

3. Host workshops to identify key roles the private sector can play in adaptation products/serviceprovision, hurdles to investment in these sectors, and ways to reduce the barriers.

4. Develop recommended actions.5. Propose recommended actions to the national government.6. Implement approved recommended actions.

Possible Partners

• Ministry of Trade and Industry • Ministry of Transportation & Communication • Ministry of Coordination of the Environmental • Confederation of Business Associations (CTA)

• INGC (Natural Disaster Management) • Technoserve (USAID funded programme thatsupports agribusiness)

• UNC (small farmers organization)

•

UGC (union of cooperatives)Possible coopera-tion with existinginitiatives

The initiative could work in partnership with the Climate Investment Fund (CIF) which is already help-ing facilitate private sector engagement in climate change as part of the Pilot Program for ClimateResilience (PPCR). PPDs could also be integrated with the NAPA consultation process.


ClimB could expand beyond its focus on businesses providing adaptation products/services and alsoidentify measures that would encourage businesses to incorporate resilience measures in their ownoperations. While the dialogue would initially take place on a national level, it could be scaled down tothe regional or sector-specic level (e.g. Agriculture, ICT, insurance).




Instrument 3: Develop a Package of SME-focused Adaptation Financial Instruments

ProgrammeObjective

To develop capacity within Mozambique’s lending and nancial institutions so they can providenancing solutions to SMEs seeking to be/expand activities in climate adaptation and to advise SMEs

on nance opportunities.

Needs Addressed

This programme would address the lack of information about adaptation nance and the lack ofcapacity in nancial institutions to assess environmental risks and technologies and provide SMEsin adaptation-related sectors with greater access to capital and credit . It would create an enablingenvironment for businesses to develop, produce and distribute adaptation products and services and/or to build own business resilience.

Instruments Used • Technical assistance

• Capacity building • Private sector awareness building and information hub

Steps

1. Identify partner banks and nance schemes for adaptation.2. Identify the greatest hurdles to SME investment in adaptation-related products/services.3. Select a target sector to initially focus upon for product development/design (e.g. water manage-

ment lending such as pumps, industrial ltration, etc.)4. Develop and test tools (e.g. loans, guarantees) in cooperation with the lending institutions.5. Create an (online) information hub and build capacities of business associations to provide infor-

mation and consultancy on adaptation nancing schemes.6. Test lending models and gather lessons learned.7. Adjust approaches and develop a manual for nancial institutions.8. Expand to other nancial instruments and services depending on needs and demands.

Possible Partners

• Ministry of Finance • Ministry of Trade and Industry • Micro-nance institutions (MFIs) • AMOMIF (MFI association)

• National and regional banks • Aid organizations funding SME nancing (CLUSA,USAID, CIDA)

• GAPI (facilitates nance for SMEs)

Possible coopera-tion with existinginitiatives

• As part of a SPCR project, IFC is partnering with a Mozambican bank to imbed consultants who willadvise on nancing resilience-building start-ups and SMEs.

• FFPI is a micronance organization spun off from a GoM project. It works like a bank, providingcredit and technical assistance at a rate slightly below market average.

• Rural Enterprise Innovation Grant Program (REIG) is a programme by USAID-funded organizationTechnoserve which funds Mozambican entrepreneurs.

• MEDA is a micro-project nancing organization funded by the Canadian Development Agencywhich provides small working capital loans

• The project could also link with existing GIZ initiatives promoting “green nance.” Green nancehas been a component of GIZ projects in China and India and is the subject of a scoping study be-ing conducted this year. 214


This programme could focus on a specic region and then scale up to a national level. Or, it could

focus on the country’s primary SME lenders and then expand to other banks looking to developadaptation/green lending products. Development of nancial services could expand to include indexinsurance, certication programmes, and accounting services.

214

214 GIZ. 2011. Financial System Development. Available at http://www.giz.de/themen/en/18077.htm; GIZ. 2011. Small and Medium Enter-prises Financing and Development. Available at http://www.giz.de/themen/en/11163.htm; ADFIAP. 2011. GIZ visits ADFIAP on scop-ing study for MSME green nance. May 26. Available at http://www.adap.org/news/giz-visits-adap-on-scoping-study-for-msme-green-nance/




1.5 Recommendations

Addressing the overall business climate is an essential

component of adaptationBuilding strong businesses in key adaptation-related sec-tors is essential for creating overall resilience in Mozam- bique. For example, helping provide small-scale agricul-tural producers with access to credit and other nancialservices (especially climate change funds) facilitates theinvestments necessary to increase yields and thus enhancethe country’s food security.

Private sector adaptation means making businesses moreresilient and leveraging businesses for overall communityand country resilience

Adaptation programmes should seek to make businessesmore resilient (e.g. ood protection for key assets) as wellas to use the products and services offered by the privatesector to enhance country-wide resilience (e.g. irrigationproducts). The most effective projects are those which do both, for example, increasing smallholders’ access to ir-rigation and markets increases their resilience to drought,and thereby the country’s food security.

Support market access and value chain approaches

Addressing barriers to growth in key adaptation-relatedsectors requires establishing a value chain approach thatlinks subsistence farmers and rural communities withother private sector entities and the broader market.Selecting instruments which allow smallholders to tapinto regional markets will build resilience in rural areaswhile contributing to overall food security and economicdevelopment. Thus programmes focused on the privatesector should be linked with programmes focused onsmallholder farmers to ensure both supply and demand-side success factors are considered.

Leverage the “multiplier effect” of ICT opportunities

In many cases, spurring adaptation is a matter of improv-ing communication and the dissemination of information.The explosive growth of mobile phones in Mozambiquepresents an enormous opportunity to grow new modelsfor market transactions and information campaigns whichleverage limited resources for great effect. The agriculturemarket data programmes cited in this report are an exam-ple of the benets these emerging technology platformscan have for smallholder farmers and rural communities.

1.6 References

ADFIAP. 2011. “GIZ visits ADFIAP on scoping studyfor MSME green nance.” May 26. Available at: http://www.adap.org/news/giz-visits-adap-on-scoping-study-for-msme-green-nance/

AllAfrica.com. 2010. Mozambique: Tourism EarningsContinue to Rise. March 29. Available at: http://allafrica.com/stories/201003291584.html

AllAfrica.com. 2011. Mozambique: ‘Self Energy’ toInvest in Renewable Energy. March 7. Available at:http://allafrica.com/stories/201103071430.html

Alliance for a Green Revolution in Africa. 2011. Weather Index Insurance for Smallholder Farmers in Africa — Lessons learnt and Goals for the Future. March.

ARTEMIS. 2011. Guy Carpenter and RMS to developweather index-based microinsurance for Mozambique.March. Available at: http://www.artemis.bm/blog/2011/03/22/guy-carpenter-and-rms-to-develop-weather-index-based-microinsurance-for-mozambique/

Bid Network, http://www.bidnetwork.org/page/156243/en

BiD Network. TERRA NOVA : Composting urbanwaste. Available at: http://www.bidnetwork.org/page/156855/en

Borgarello, A., Marignani, D., Sande, Z.M.P. 2004. What Hinders Small and Medium Entrepreneurs inMozambique? Italian Cooperation. August. Available at:http://www.italcoopmoz.com/docs/nostre_pubblicazioni/quaderno_7.pdf

CIA World Factbook (2010). Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/mz.html

CIF 2011, 31 ; INGC. 2010. INGC Phase II DonorReport. October.

Climate Investment Fund (CIF). 2011. StrategicProgram for Climate Resilience: Mozambique. June 14.

Esoko. 2011. Press Release: Agro-Input marketinformation system using Esoko launches across Easternand Southern Africa. April 17. Available at: http://www.

esoko.com/about/news/pressreleases/2011_19_04_Esoko_ AMITSA.pdf.




FAO 2005b. Information System on Water and Agriculture. Available at: http://www.fao.org/nr/water/aquastat/countries_regions/mozambique/index.stm

Food and Agriculture Organization of the UnitedNations (FAO).2005a. Irrigation in Africa in Figures. AQUASTAT Survey. Available at: ftp://ftp.fao.org/agl/aglw/docs/wr29_eng.pdf

GIZ. 2011a. Financial System Development. Availa- ble at: http://www.giz.de/themen/en/18077.htm

GIZ. 2011b. Small and Medium Enterprises Financ-ing and Development. Available at: http://www.giz.de/themen/en/11163.htm

INGC. 2011. Improving Food Security in Central

Mozambique. April.International Finance Corporation (IFC). 2011. Ease

of Doing Business Index. http://www.doingbusiness.org

Maplecroft. 2010. Big Economies of the Future Mostat Risk from Climate Change. October 21. Available at:http://maplecroft.com/about/news/ccvi.html

Ministry for the coordination of Environmental Affairs (MICOA). 2007. National Adaptation Program of Action (NAPA), December.

Mozal Aluminum and IFC. 2008. Developing SMEs

through Business Linkages : A Manual for PractitionersBased on the Mozlink Mentorship Experience in Mozam- bique. November.

National Institute for Disaster Management (INGC).2009. Study on the Impact of Climate Change on DisasterRisk in Mozambique: Synthesis Report. May.

Roberts, B. 2003. Small and Medium EnterpriseMapping – Mozambique. Product of the World BankGroup Small and Medium Enterprise Department.Maputo, Mozambique, February.

Savon Trading. n.d. Treadle Irrigation Water Pump.Chimoio, Mozambique. http://www.savonprime.com/html/IrrigationWaterTreadlePumps.htm

UNDP. 2011. Human Development Report. Availableat: http://www.beta.undp.org/content/dam/undp/library/corporate/HDR/2011%20Global%20HDR/English/HDR_2011_EN_Complete.pdf

World Bank. 2007a. Rebuilding Mozambique’s Urban Water Supply Infrastructure. Available at http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:21258662~menuPK:141310~pagePK:34370~piPK:34424~theSitePK:4607,00.html

World Bank. 2007b. Mozambique Country WaterResources Assistance Strategy: Making Water Work forSustainable Growth and Poverty Reduction. August.

World Bank. 2011a. Mozambique Country Brief. Available at: http://web.worldbank.org/WBSITE/EXTER-NAL/COUNTRIES/AFRICAEXT/MOZAMBIQUEEXTN/0,,menuPK:382142~pagePK:141132~piPK:141107~theSitePK:382131,00.html

World Bank. 2011b. Climate Risk and AdaptationCountry Prole: Mozambique. April. Available at: http://sdwebx.worldbank.org/climateportal/doc/GFDRRCoun-tryProles/wb_gfdrr_climate_change_country_prole_for_MOZ.pdf



66 Country study: Bangladesh

2 Bangladesh

Country characteristics and statistics:

Population Characteristics 215 • Total population of 160,000,000• 73% live in rural areas

Economy

• GDP $US 100,075,925,463 in 2010216

• GDP per capita $US 673 (2010)217

• 47% economically active of which 47%work in agriculture (2008) 218

Key industrial sectors 219

• textile and garment manufacturing• tea processing• paper newsprint• cement• chemical fertilizers

Key agricultural products 220

• jute• rice• cotton• tea • wheat

• sugarcane• potatoes• tobacco• pulses• beef• milk• poultry

Key climate risks

• drought• ooding• epidemic storms • typhoons

Ease of Doing Business 221 • Ranked 107th out of 183 in 2011215 216 217 218 219 220 221

215 FAO and Aquastat. 2010. Available at http://www.fao.org/nr/water/aquastat/countries/bangladesh/tables.pdf#tab1.

216 World Bank Data Catalog. 2011. Available at http://data.worldbank.org.217 World Bank Data Catalog. 2011. Available at http://data.worldbank.org.218 FAO and Aquastat. 2010. Available at http://www.fao.org/nr/water/aquastat/

countries/bangladesh/tables.pdf#tab1219 CIA World Factbook. 2010. Available at https://www.cia.gov/library/publica-

tions/the-world-factbook/geos/bg.html220 CIA World Factbook. 2010. Available at https://www.cia.gov/library/publica-

tions/the-world-factbook/geos/bg.html221 International Finance Corporation (IFC). 2011. Ease of Doing Business Index.

Available at http://www.doingbusiness.org.

Services53%

Agriculture19%

Industry28%

Source: CIA World Factbook (2010).GDP composition by sector



67Country study: Bangladesh

2.1 Introduction

Climate related vulnerabilities

The people of Bangladesh are constantly adapting to oodand drought cycles: in a “typical” year, 25% of Bangladeshwill be ooded, while about every 5 years, a severe oodmay cover over 60% of the country’s geography. 222 Climatechange threatens to exacerbate these cycles, putting agreater number of lives and livelihoods at risk. Multipleinternational organizations including the Climate Invest-ment Funds, United Nations Development Program andMaplecroft 223 rate Bangladesh as the most vulnerablecountry to climate change worldwide for the followingreasons:

The majority of inhabitants live in the country’s mostood- and sea level rise-prone areas; 224

Predictions estimate that Bangladesh will lose about 11-17% of its total land mass due to sea level rise, displacingroughly 15-27 million persons; 225

53% of the world’s deadliest tropical cyclones have oc-curred in Bangladesh; 226

Poverty levels are very high and climate change chal-lenges Bangladesh’s ability to sustain its current povertyreduction rates and meet its goal to become a middle in-

come country by 2021; 227

222 Government of the People’s Republic of Bangladesh. 2009.Bangladesh Climate Change Strategy and Action Plan 2009. Available at http://www.moef.gov.bd/climate_change_strat-egy2009.pdf.

223 Maplecroft’s 2011 Climate Change Vulnerability Index ranksBangladesh as the world’s most vulnerable country to climatechange.

224 UNDP. 2011. Human Development Report 2011. Available athttp://www.beta.undp.org/content/dam/undp/library/cor-porate/HDR/2011%20Global%20HDR/English/HDR_2011_EN_Complete.pdf.

225 Wheeler, D. 2011. Quantifying Vulnerability to ClimateChange: Implications for Adaptation Assistance. Work-

ing Paper 240. Center for Global Development, Washing-ton, DC. Available at http://www.cgdev.org/les/1424759_le_Wheeler_Quantifying_Vulnerability_FINAL.pdf; UNDP.2011. Human Development Report 2011. Available at http://www.beta.undp.org/content/dam/undp/library/corporate/HDR/2011%20Global%20HDR/English/HDR_2011_EN_Com-plete.pdf; Meister Consultants Group. 2009. Floating Housesand Mosquito Nets: Emerging Climate Change AdaptationStrategies Around the World. Available at http://les.mc-group.com/clst/Study%20Climate%20Change%20Adaption.pdf ; COAST Trust. 2007. Climate Change Impact and Disaster Vulnerability in the Coastal Areas of Bangladesh. Available athttp://www.equitybd.org/newsletter/english/Issue-5/Disas-ter_BD.pdf.

226 Climate Investment Funds. 2011. Bangladesh Expands Resil-

iency. Available at http://www.climateinvestmentfunds.org/cif/node/3369.


There is a high dependence on agriculture, particularly

crops that do not tolerate increasing salinization;There is a need for the government to build its capacityto adapt and respond to climate change. 228

Public Sector Framework on Adaptation

Bangladesh’s economy has more than tripled since itsindependence in 1971, 229 giving it the resources necessaryto invest in adaptation and build resiliency to a chang-ing climate. The Government of Bangladesh (GoB) hasinvested over $10 billion since the mid 1970s to reduce thecountry’s vulnerability through measures such as oodmanagement and protection, cyclone and ood shelters, 230 community based disaster preparedness, and infrastruc-ture fortication. 231

Government Structure & Frameworks

Bangladesh is viewed as a leader for its integration ofclimate change mitigation and adaptation into govern-ment planning, policies and programmes. The Ministryof Environment and Forest (MOEF) is Bangladesh’s focalpoint for climate change mitigation and adaptation and itcollaborates with over 10 national ministries and depart-ments along with local and rural development agencies to

implement adaptation initiatives. Furthermore, the MOEFalso coordinates climate adaptation activities through itsNational Steering Committee on Climate Change whichincludes secretaries from ministries and divisions that ad-dress climate change along with business and civil societyparticipants. 232

The GoB has several framework strategies which have built upon one another to create its current approachto climate adaptation. Bangladesh was one of the rstcountries to develop a National Adaptation Programme of

228 Maplecroft News. 2011. Big economies of the future - Bang-ladesh, India, Philippines, Vietnam and Pakistan - most atrisk from climate change. Available at http://maplecroft.com/about/news/ccvi.html.


230 The GoB has constructed over 2,000 cyclone shelters, 200evacuation ood shelters as well as over 3,900km of coastalembankments to protect from storm surges and tidal waves.(Source: Bangladesh 2009 NAPA)

231 Government of the People’s Republic of Bangladesh. 2009.Bangladesh Climate Change Strategy and Action Plan 2009. Available at http://www.moef.gov.bd/climate_change_strat-

egy2009.pdf.232 Harmeling, Sven et al (2011). Institutions for Adaptation: To-

wards an effective multi-level interplay. WWF and German-watch; Bangladesh, Government of, 2009: Bangladesh Nation-al Climate Change Strategy and Action Plan. Dhaka, http://www.moef.gov.bd/moef.pdf.




Action (NAPA) in 2005 and to concretely develop adapta-tion priorities and action areas. The 2005 NAPA led to thecreation of the 2008 Bangladesh Climate Change Strat-egy and Action Plan (BCCSAP). This was subsequentlyrevised in 2009 as was the NAPA. These documents haveclear goals to integrate adaptation measures into plan-ning processes, build resiliency to climate change andencourage sustainable development in Bangladesh.Through these efforts, Bangladesh has developed a plan(the 2009-2018 Bangladesh Climate Change Action Plan)which seeks to expand community based adaptation andlivelihood diversication to build resilience in vulnerablecommunities. 233

Participation in International Programmes

Bangladesh’s leadership in climate change dates backto the 1990s when Bangladesh became a member ofthe United Nations Framework Convention on ClimateChange (UNFCCC) and established a National ClimateCommittee to guide the implementation of the UNFCCCmandate. Bangladesh ratied the Kyoto Protocol in 2001.

Snapshot of Bangladesh’s 2009 NAPA

• The updated 2009 NAPA emphasizes four security is-sues: food; energy; water; and livelihoods.

• It developed 45 adaptation measures which are

grouped into six topics: research and knowledge man-agement; agriculture, sheries and livestock; health;building climate resilient infrastructure; disastermanagement; livelihood; biodiversity; and policy andinstitutional capacity building.

Source: Government of the People’s Republic of Bangla-desh. 2009. National Adaptation Programme of Action(NAPA). Updated Version of 2005.

In its 2009 NAPA, Bangladesh set the goal to create aninternational fund, which it has achieved in a relativelyshort time period. In 2010, the government received $110

million from the UK, Sweden, EU, and Denmark to estab-lish a Bangladesh Climate Change Resilience Fund whichis administered by the GoB. 234 The fund aims to build cli-mate change resilience and operates in cooperation withthe World Bank for technical assistance. 235

233 Withey, Lauren et al (2009). Making Climate Your Business:Private sector adaptation in Southeast Asia. Published by Sidein cooperation with World Resources Institute and CSR Asia.

234 The Daily Star. 2010. Bangladesh gets $110m climate fund. Available at http://www.thedailystar.net/newDesign/news-details.php?nid=141068.

235 The Daily Star. 2010. Bangladesh gets $110m climate fund. Available at http://www.thedailystar.net/newDesign/news-details.php?nid=141068.

Additionally, Bangladesh participates in the ClimateInvestment Fund’s Pilot Program for Climate Resilience(PPCR) initiative. This is the only programme whichexplicitly focuses on integrating the private sector inclimate adaptation. In order to access PPCR funding, theGoB rst submitted its required Strategic Program forClimate Resilience (SPCR) documentation in 2010. TheSPCR identied three investment areas and two pro-grammes for technical assistance. The three investmentareas particularly seek to create opportunities for privatesector engagement and are presented below. The techni-cal assistance areas identied are climate change capacity building and knowledge management, and a feasibilitystudy for a pilot programme for climate resilient housingin the coastal region. 236

Investment Project 1: Promoting climate resilient agricul-ture and food security. The project aims to promote ad-aptation of agricultural products and practices in coastalzones by promoting stress tolerant, and hybrid rice andvegetable strains, providing training to farmers on differ-ent management techniques, developing storage facilities,and promoting efcient water conversation technologies.

Investment Project 2: Coastal embankments improvementand afforestation . Under the SPCR, the GoB suggested in-vestments in rehabilitating, modernizing, and expandingthe country’s coastal embankment system. Such fundingtypically stems from the public sector or internationalorganizations, but relies on private sector engineers, build-ers and contractors to provide the services. Sending clearsignals regarding the government’s ability and plans toexpand embankments under the PPCR will set the stagefor private sector engagement.

Investment Project 3: Climate resilient water supply, sani-tation, and infrastructure improvement. This suggestedinvestment project under the PPCR has three components,which provide clear opportunities for the private sector.This includes the development and upgrading of drains,pumps and ood management systems; climate proonginfrastructure by raising road height and durability; andexpanding the use of water irrigation and storage facilities.

Major impacts/vulnerabilities of climate change on theprivate sector

In this study, the private sector is dened broadly toinclude small and medium-sized enterprises (SMEs), largercompanies, international corporations. Climate changehas the potential to exacerbate current risks, create new

236 Government of Bangladesh. 2010. Bangladesh: Strategic Pro-gram for Climate Resilience. Prepared for Climate InvestmentFunds Meeting of the PPCR Sub-Committee. Washington,D.C. November 10, 2010.




Table 16: Bangladesh, Climate Change Impacts on the Private Sector

Climate Trend Exposure Unit Bio-physical Effect Socio-economic Effect

Drought

Agriculture

• Reduced yields • Reduced access to waterresources for irrigation andother business operations

• Erosion

• Reduced quality of agricultural products • Disincentive for investment in high-risk areas • Increased price volatility of agriculture products • Food security challenges

Energy • Periods of reduced ow insome rivers

• Increased volatility of energy supplies (due to reli-ance on hydro power)

Flooding

Agriculture

• Widespread crop loss • Damage to crop land

• Damage to irrigationinfrastructure

• Relocation to less productive land • Food security challenges

Water • Decreased water quality

• Salinization

• Spread of disease • Lack of potable water • Unstable water supplies create disincentive forinvestment

• Delta congestion and poor coastal drainage hin-

ders navigation and shippingBuildings &infrastructure

• Damage to buildings andother infrastructure

• Repair/replacement costs• Transportation disruptions due to damaged roads

Cyclones /Tropicalstorms

Agriculture • Crop failure and loss ofproductive land due to salineinundation of farmland

• Energy and food security challenges • Loss of foreign direct investment (FDI)


• Damage to critical coastalassets (e.g. ports)

• Repair/rebuilding costs • Disruptions of business operations, resource ows

threats, and reduce nancial and ecological sustainabilitywithin the private sector. These climate change risks affectthe agriculture and water sectors in many ways. Lacking ordestroyed infrastructure threatens the supply and distribution chains for both the agriculture and water sector.

2.2 FIELDS OF OPPORTUNITY

While the private sector is particularly active in theagriculture and water management sectors in Bangladeshrelative to other sectors involved in adaptation, manymore opportunities remain for investment and resilience building in SME, international companies and multina-tional rms alike. Opportunities in each sector can becategorized into multiple broad opportunities, as high-lighted below.

2.2.1 Activities and Opportunities in the Agriculture Sector

Crop diversication provides the opportunity for farmersto prot from crops that are more suited to the changing

or changed climate. Diversication can serve as a bufferfor farmers should a single crop type fail and can alsofetch higher market prices if the products are in short sup-ply and high demand. Diversication impacts both SMEand large buyers’ supply chain management in two keyways. First, they can turn to Bangladesh for products otherthan those they typically source. Second, the products thatare typically sources may become more expensive becauseof negative climate impacts and/or shifts in demand away

from those products towards others. Examples for diversi-cation include:




While rice is the main product of Bangladesh, manyother cash crops such as chickpeas are more tolerantto heavy rains and add nutrients to the soil because oftheir nitrogen-xing properties. The GoB has decidedthat maize is a priority growing crop because of its highyield and drought tolerance 237— if this priority remainsthen there is a likelihood of future incentives for itsproduction.

Japanese mushroom producer, Yukiguni Maitake Co. ,has partnered with the Grameen Group to develop asocial agricultural business for Mung Beans in Bangla-desh. 238 Farmers are incentivized to diversify their cropsthrough reduced seed costs and recycling of prots intothe social enterprise to support training and develop-ment of local enterprises in the industry. The projectis currently in its pilot stage (in Rungpur) with plans toscale-up.

Farmers could also diversify by investing in poultry,such as d ucks and other waterfowl , which can swimduring oods and feed upon insects and sh.

Given Bangladesh’s growing coastline, declining world-wide sh stocks and that shrimp is the most importantinternational commodity in the seafood industry, thereare many opportunities for farmers, SMEs, and larg-er businesses to develop and expand shrimp aquacul-

ture production and processing . GIZ is working withNaturland to help producers meet organic certication criteria enabling farmers to sell shrimp at a premiumand also incorporate environmentally resilient featuresin production. The criteria include embankment (dyke)greening—using grasses and trees to buffer storm surgesand protect the farms.

Cultivation of fruit trees such as mango and jujubethrive in drought prone environments and can be a vi-able drought impact reduction strategy. These treescan be intercropped with some rice (mainly Boro and

T.Aman) and vegetable species. The higher cash valueof fruit trees can improve lives and livelihoods and canserve as rewood.

237 Mallubhotla, S.2011. A rapid assessment on agriculture in thecontext of climate change in selected areas of Barguna andPatuakhali districts, Bangladesh. Prepared for the DisasterPreventive Coastal Area Rehabilitation Project (CARP), GIZ.

238 INSAM. 2011.Yukiguni Maitake and Grameen Group Launch-ing Joint Mung Bean Project in Bangladesh. available athttp://www.agrometeorology.org/news/news-highlights/yukiguni-maitake-and-grameen-group-launching-joint-mung-bean-project-in-bangladesh.; Grameen Creative Lab.2011. Grameen, Yukiguni Maitake and Kyushu Univ singed joint venture agreement. Available at http://gcl.kyushu-u.ac.jp/english/maitake.html.

Agricultural Productivity

Along with identifying the need to diversify crops, theGoB has also laid signicant emphasis on boosting pro-

ductivity. Bangladesh currently is a net food importer thatis under pressure to boost productivity in order to feed itsgrowing population and prepare for more variable grow-ing conditions. Ways to improve productivity include:

Develop and distribute “climate ready rice” varieties that tolerate drought, ooding and/or increased salini-ty.239 The private sector can collaborate with the GlobalRice Science Partnership (GRiSP-IRRI) to develop alter-nate rice strands, as well as play a signicant role in pi-loting, demonstrating, educating and distributing suchproducts. Business to business benets can occur in this

scenario — seed distributors can sell at a premium andproducers benet from a higher quality and amount ofrice harvested. The rice industry is the key sector in thegovernment’s priority to close the food gap because itcomprises 77% of the country’s total cropped area andproductivity has tripled in the past 40 years. 240 Theremay be opportunities for businesses to benet from in-centives to invest in R&D, distribution , or other areasneeded in order to develop “climate ready rice”.

SME productivity can improve through sharing tech-nology and methods with the creation of cooperatives

or advisory services . Cooperatives give farmers greater buying power for equipment and seeds as well as fos-ter knowledge sharing. Advisory services, such as thoseprovided by the Jigyasha 7676 call-center helpline, canprovide advice and information to SME farmers. Theseadvisory services have the ability to reach more farm-ers, increase productivity, disseminate new farmingapproaches, and save resources. The helpline is knowl-edgeable in a broad range of crops as well as livestock,poultry, and shery management. 241

Agricultural Water Management

There is a plethora of water control and managementsystems that could be used to help the agriculture in-dustry adapt and build resiliency. While many types of



241 KATALYST. 2009. Banglalink Jigyasha 7676 won GSMA AsiaMobile Awards 2009 Available at http://www.katalyst.com. bd/docs/newspieces/News_Issue_09.pdf; Mobiles4Dev. 2011.Bangladesh Case Study. Available a t http://mobiles4dev.cto.int/bangladesh .




water pumps, rain water collectors, and irrigation sys-tems exist, there are gaps in affordability, distribution,and applicability to the Bangladeshi context. The privatesector has opportunities to develop innovative low-cost, energy efcient options that suit needs for coastaldrainage and pumping needs (e.g. aquaculture), inlandwater transportation (e.g. in drought-prone rice regions),and aeration (e.g. sheries and aquaculture).

The production, distribution, and use of low-cost dripirrigation technologies can help farmers save water andtime, allowing them to spend more time on harvest-ing, management or other businesses. Entrepreneurialfarmers could purchase easily portable drip irrigationtechnologies, such as that provided by DripTech, 242 andshare them with their community members on a pay-per-use basis, for example.

Disaster Relief Management

During heavy ood periods, farmers can mitigate totalincome losses by preparing oating beds used to growhydroponic plants with low soil reliance. These beds,typically made of water hyacinth, straw, and duckweedcan be used to grow vegetables including okra, cucum- ber, bitter guard, tomato and potatoes. Hydroponicfarming activities have increased in Bangladesh and areproviding income solutions especially to landless indi-

viduals and farmers with water-logged land. 243 SMEs orcorporations could expand this production method byproviding ready-made beds that can withstand morethan the typical 2-3 seasons. Rooftop gardens in urbanregions that are used for rainwater collection and emer-gency food sources could be an area for the constructionindustry to develop products as well.

The ITC industry has opportunities to further developand expand the country’s current SMS early warningdisaster information services. The Disaster and Emer-gency Warning Network developed by the University of

Moratuwa Mobile Communications Research Laborato-ry meets many of these goals but could add a subscrib-er service that provides tips for risk reduction methodsalong with disaster alerts. Ideally, such a service would be free and accessible to all. A public-private partnershipcould enable the service to be free to the public but paid by the government. Additionally, such services could

242 DripTech sells easy to install drip irrigation solutions to smalllandholder farmers in India and China. Currently the com-pany has low activity in Bangladesh but is looking to expandwithin Asia.

243 Meister Consultants Group. 2009. Floating Houses and Mos-quito Nets: Emerging Climate Change Adaptation Strategies Around the World, available at http://les.mc-group.com/clst/Study%20Climate%20Change%20Adaption.pdf.

partner with the insurance industry which requiresdata collection in order to effectively design products.

2.2.2 Activities and Opportunities in the Water Sector

Distribution of safe drinking water is a key challenge inBangladesh and is exacerbated by climate change catas-trophes. There are opportunities for the private sector toinvest in water purication and industrial waste manage-ment as well as to fortify distribution networks to ensurereliable delivery.

Water Purication

Floods, storm surges, and cyclones in Bangladesh addto the millions of Bangladeshis without potable water.The business community (entrepreneurs, SMEs, and

large companies) can seize development, production,distribution, and sale of treatment technologies target-ing different needs (e.g. single-use tablets, multi-use l-ters, ofce UV lters) and cost structures in Bangladesh.Products such as the Sodis Water Bag can be lled withwater and left out in the sun to disinfect biologicallycontaminated water while storage of single-use tab-lets is essential to have available at emergency cycloneshelters.

There are opportunities to expand water infrastructurethrough municipal water treatment plants, desaliniza-

tion plants, distribution systems. Veolia Bangladesh, forexample, is investing about US$ 800,000 in 5 water treat-ment plants is distributing the puried water throughstand pipes, dedicated salespersons, and rickshaws. 244 Water infrastructure expansion could occur throughPPPs as well as through large international companies(e.g. Coca-Cola, Nestle), which typically develop treat-ment plants for their own production purposes.

Industrial Water Management

Large, international and small to mid-sized businessesalike can improve their bottom line and build resiliencythrough water recycling and conservation in industrialmanufacturing and processes plants.

While water and electricity prices are typically low, sud-den price shocks and medium-term shortages due togrowing global demands should provide incentivesfor businesses to prepare themselves. There are oppor-tunities for manufacturers to become more resilientwhile realizing cost savings through water conserva-tion and recycling in industrial processes. For example,Levi Strauss has been a leader of the Natural Resource

244 Grameen Social Business. 2009. Grameen Veolia, avail-able at http://www.grameensocialbusiness.org/index.php?option=com_content&view=article&id=97&Itemid=95.




Defense Council (NRDC) Responsible Sourcing Initiativeand has been working with its suppliers in Bangladeshand China to become more efcient and sustainable inits milling and dying processes. 245

The GoB is encouraging investments in sustainable, re-silient manufacturing practices which reduce business-es’ reliance on external inputs such as water and energy. As highlighted before, the GoB has set special lendingrate terms to spur greater MFI lending to SMEs in biogasand efuent treatment plants.

While efuent treatment plants (ETPs) are required bylaw in industrial processing, many manufacturers (e.g.textile industry) have been slow to install them be-cause enforcement has been weak. As a major interna-

tional textile buyer, IKEA requires all of its manufactur-ers to install ETPs. This has not only fended off costlynes as the GoB has increased its enforcement, but it hasalso lead IKEA to identify different inputs such as dyeswhich require less water and produce less waste.

Spotlight on the Textile Industry

Textile manufacturing is one of the largest industrialsectors in Bangladesh. The industry is vulnerable to themore volatile raw material prices (e.g. cotton, jute) and

also weather hazards preventing reliable processingand manufacturing.

GIZ is leading a Promotion of Social and EnvironmentalStandards in the Garment Industry programme whichbuilds eco-efciency and sustainable practices on themanufacturing side. There are additional possibilitiesfor suppliers and textile purchasers to invest in wastewater treatment, water recycling, combined heat andpower to reduce costs and reliance on external inputs.Such cost-saving changes help factories improve theirbottom line and create a greater need for service/equipment providers to make these industrial changes.

Sources: GIZ. 2011. Promotion of Environmental Stand-ards and Eco- efciency. Environmental ComponentOverview. GIZ. 2010. “Going Green” in the Ready MadeGarments and Textile Value Chain in Bangladesh.

245 Levi Strauss & Co. 2010. Fabric Mills. Available at http://www.levistrauss.com/sustainability/product/fabric-mills.

2.2.3 Additional Fields of Activity and Opportunity

Insurance and micro-insurance products. There are op-portunities to develop insurance products that pro-

vide a safety net for families, farmers, and companiesthrough tailored products for disasters, investments, ag-riculture and livestock. The market for such products isunderserved and private sector involvement has beenminimal. The NGO BRAC has announced an agriculturalinsurance scheme and INAFI Asia has identied possible private sector actors that could become involved in apartner-agent model. 246, 247, 247247

Resilient housing. There are opportunities to retro-t and build new homes so that they are more resilientto wind and ooding. Such housing could be built on

stilts, could use more durable, local materials (e.g. bamboo) and could employ rooftop water collection sys-tems. This provides opportunities for small and large building industry players who retrot rural homes, de-sign buildings in cities, and develop climate adaptivetechnologies. 248

During ood periods, boats are an essential way for fam-ilies and communities to stay healthy, protect valuables,and support their livelihoods. Most Bangladeshi boats,especially in rural regions, are made of wood. These areeasily destroyed during violent storms and are prone to

becoming waterlogged. There are avenues for the boatindustry to develop low cost breglass shing boats thatare more able to withstand violent weather and multipleseasons compared to wooden rafts and boats 249

246 Bangladesh Economic News. 2010. Brac plans crop insurancefor farmers. Available at http://bangladesheconomy.word-

press.com/2010/03/25/brac-plans-crop-insurance-for-farm-ers/247 Silver, E. and French, L. 2007. Crop Insurance in Bangladesh:

Providing Social Security to Farmers in Flood-Prone Areas.INAFI Asia and PREM.

248 Asian Tiger Capital. 2010. Climate Change Adaptation inBangladesh. Prepared for the International Finance Corpora-tion.


2.3 Barriers, Enabling Framework Conditions & Incentive Schemes

2.3.1 Barriers to private sector investment




There are great opportunities for the private sector todevelop competitive advantages by improving own corpo-rate resilience of operations and by developing innovativeproducts and services that can be distributed nationallyand internationally. To seize these opportunities, severalnancial, political and social barriers that keep the privatesector from providing and purchasing adaptation prod-ucts and services need to be overcome.

Financial

Access to capital. SMEs in particular face challenges toaccessing capital which prevent investment and growth.Such barriers include: difculty in accessing loans, aninability to meet collateral requirements, and a lack ofventure capital nancing. Interest rates are high (e.g.

roughly 16-17% in the textile industry) making invest-ments nearly impossible for many SMEs.

High transaction costs. Both government regulation andtrade barriers increase the time it takes to implementprojects, increasing the cost of capital to the investor. Additionally, many of the private sector actors seekingfunding have little to no nancial cushion, making themhighly risk adverse to projects that do not provide near-term nancial recovery and reward.

Price volatility. Since climate change impacts affect thequality and quantity of agricultural products, the costsof raw materials often uctuate more than typical. Fre-quent contract cancellations in processing make inves-tors hesitant to invest in and improve their processingfacilities.

Capacity of nancial institutions. Climate adaptation in-vestments typically extend over a longer time span thanlending institutions are used to. This, combined with alack of know-how to evaluate projects leaves many capi-tal providers lacking the capacity to provide nancing. 250 While Bangladesh’s micro-nance institutions are high-ly active, adaptation requires additional funding sources.

Policy and Institutional

Competing priorities. The GoB and the private sectoralike have to balance multiple demands, including oneswhich are more pressing in the near term. The combi-nation of the short-term political and business cycles isa hurdle to addressing the long-term nature of climateadaptation. This is particularly evident in infrastructureinvestments, a GoB priority, but which requires long-term, expensive investments even prior to incorporat-ing resiliency features.

250 BidNetwork. 2006. Bangladesh: SME-focused growth vi-tal for economy, available at http://www.bidnetwork.org/page/38079/en.

Institutional capacity. There are needs within the na-tional, regional, and local government levels to buildthe technical and commercial capacity to help the pri-vate sector innovate and capitalize upon adaptationopportunities.

Government bureaucracy. While the GoB has takensteps to encourage private sector engagement in climatemitigation, adaptation and corporate social responsibil-ity, such actions typically take longer to implement thanpredicted.

Social and Contextual

Unclear business opportunities. The Bangladeshi privatesector is largely uninformed about the opportunities inclimate adaptation and frequently characterizes suchinvestments as part of their corporate social responsibility activities. 251 Communication of success stories andopportunities would raise awareness while providingadaptation-specic nancing opportunities would in-centivize investment.

Confusion over responsible party. The majority of cli-mate change mitigation nancing comes from the Gov-ernment of Bangladesh, multi-lateral and developmentorganizations, micro-nance institutions, and NGOs.Many corporations and SMEs assume that such climatenancing will encompass adaptation, therefore makingit unnecessary for them to commit their own resourc-es.252 Additionally, confusion between purchasing com-panies and their suppliers over who is responsible fornancing and developing the tools to implement resil-ience measures can delay or halt progress.

Technology and information distribution. Consultationsemphasized the signicant disconnection between de-velopments in new, more productive technologies andgetting it to those who need it the most. The distribu-tion of information and of the physical products is of-ten limited to certain regions or urban areas, makingnew products and/or services available for those whocan pay for the additional cost to get it to a rural region.This results in businesses missing out on the tools (bothphysical and knowledge) to improve their productivity.

Infrastructure. Distribution of products to and from themarket is a signicant hurdle. The reliability of the in-frastructure is further weakened when extreme weatherevents occur. Consultations and research emphasized






that business growth is slowed due to difculties intransporting products, employees being unable to get towork, and problems in reliably manufacturing productswith an unstable electricity grid. The weak infrastruc-ture also deters some international investors from locat-ing to Bangladesh.

2.3.2 Enabling Framework Conditions & IncentiveSchemes

The GoB does not lay signicant attention on engagingthe private sector in its climate adaptation frameworkdocuments. Both the NAPAs and the BCCSAPs overlookpossible opportunities for the private sector to serve aspart of the adaptation solution. At most, the 2009 BCCSAPincludes two recommended actions that would involvethe private sector. First, it proposes developing a knowl-edge management and training center for technologysharing and learning. Second, the BCCSAP highlights howstrengthening institutional capacity to manage climatechange will strengthen capacity of public sector, privatesector and civil society to respond to climate change.

There are many opportunities to explicitly integrate theprivate sector into Bangladesh’s adaptation plans while si-multaneously strengthening the government’s adaptationmanagement approach. This can occur through expandingexisting policies to incorporate adaptation principles and by integrating the private sector in multiple levels of gov-ernment planning. Such examples include corporate taxreductions, green lending, data collection, and integrationof adaptation in planning.

Corporate tax reduction. Currently, corporations are eli-gible for a 10% corporate tax reduction if they partici-pate in corporate social responsibility initiatives (CSR). 253 This exemption includes CSR activities that relate to cli-mate adaptation such as, “agricultural production andprocessing, crop diversication, employment genera-tion, education and training…global warming, ecologi-cal balance, pure water management, carbon emission,sea water level, forestry, city beautication and wastemanagement.” 254 If the GoB wants to strengthen ties toadaptation, it could tailor the exemption to adaption oradd an “adaptation bonus” that is an extra 2-5% exemp-tion (making 12%-15% total) for adaptation activities.

Green Lending. The Bangladesh Bank (central bank)has a green lending policy which could be expanded to

253 The Daily Star. 2008. 10pc tax waiver on CSR spending, avail-able at http://www.thedailystar.net/newDesign/news-details.php?nid=68609.

254 The Daily Star. 2008. 10pc tax waiver on CSR spending, avail-able at http://www.thedailystar.net/newDesign/news-details.php?nid=68609.

encompass adaptation investments. Currently the bankhas set a maximum lending rate of 12% (up from 10% in2009) to encourage micro-nance institutions to makenance available for solar energy, biogas plants and ef-uent treatment plants (ETP) investments. 255

Data collection. The GoB could create incentives for keyindustries, such as insurance and ICT, to assist in datacollection so that tailored tools and approaches can bedeveloped to build resilience.

Integration of Adaptation in Planning. While Bangla-desh currently includes climate change considerationin its National Water Plan, there are opportunities tofurther integrate adaptation into planning at the na-tional strategy, regional and local levels. As this is done,

there are ways to engage the private sector throughknowledge sharing approaches, cooperatives, and dem-onstration sites featuring resilient technologies andapproaches.

There are multiple needs and variables to successfullycreate an enabling environment for adaptation invest-ment. Key steps for creating an enabling environment inBangladesh include: awareness raising in the public sector,private sector and civil society; further incorporation ofadaptation into planning and programmes highly affected by climate change at the regional and local levels; and

data collection and best practice dissemination so thatdecision-makers can develop tools and methodologiestailored to the Bangladeshi context. 256

255 The Daily Star. 2009. BB sets green loan target. Availableat http://www.thedailystar.net/newDesign/news-details.php?nid=99985; Daily Sun. 2011. BB hikes lending rate forgreen nancing. Available at http://www.daily-sun.com/de-tails_yes_13-09-2011_bb-hikes-lending-rate-for-green--nancing_333_1_3_1_4.html.

256 Government of the People’s Republic of Bangladesh. 2009.National Adaptation Programme of Action (NAPA). Updated Version of 2005.




Instrument 1: Technical Assistance for Private Sector Integration in Government Planning

ProgrammeObjective

• To integrate the private sector into government adaptation planning, programmes and initiatives.• To create an enabling framework for the private sector to innovate and provide solutions for cli-

mate adaptation.

Needs Addressed

Under this programme, GIZ would provide technical assistance to Bangladeshi policy-makers to helpthem integrate the private sector in national planning documents (NAPA and BCCSAP). This will givepolicy-makers the capacity to develop tailored tools and approaches for adaptation at multiple imple-

mentation levels. Additionally, well-designed targets and/or incentives for private sector engagementin these adaptation planning documents will create framework conditions to drive investment.

Instruments Used • Technical assistance • Awareness-building

• Workshop with public and private sectors

Steps

1. Develop partnership with the Ministry of Environment and Forest and National Steering Commit-tee on Climate Change

2. Run public-private sector workshop to identify framework needs and establish goals3. Develop action plan and milestones for private sector engagement4. Harmonize recommendations with past and new national planning documents (NAPA and

BCCSAP)

Possible Partners

• Ministry of Environment and Forest• National Steering Committee on Climate

Change • Ministry of Disaster Management & Relief • Ministry of Commerce

• Ministry of Industries

• Ministry of Agriculture• Ministry of Land • Ministry of Water Resources • UNDP • Chambers of commerce and businessassociations


UNDP has provided assistance to Bangladesh in the past to develop the 2005 and 2009 NAPAs. SinceUNDP supports NAMA initiatives in other countries, GIZ could collaborate with UNDP to developprivate sector indictors that could be applied in the development of NAPAs in additional countries.


This technical assistance could expand beyond initially targeting private sector engagement in theNAPAs and BCCSAP and scale down to the regional and local levels. Additionally, this service could beapplied to specic sectors (e.g. textile or chemical industries).

2.4 Proposed Instruments for International Cooperation

In order to tackle the most critical constraints to building

private sector engagement in climate adaptation, the re-port team proposes three ideas, which are described below.




Instrument 2: Agriculture Innovation Collaborative

ProgrammeObjective

To create rural agriculture innovation centres which serve as hubs for knowledge sharing, technologytesting, demonstration sites, and collective purchasing for small shareholder farms and SMEs.

Needs Addressed

This programme will reduce the information disconnect among agriculture networks by establishingtesting and demonstration sites in pre-existing cooperatives and/or agricultural associations so thatfarmers can test, borrow, and apply different farming methods. It will create greater market lever-age by enabling farmers to share resources (e.g. mobile drip irrigation systems), hence reducing highinvestment cost barriers to purchase new equipment that most SMEs and individual farmers face.Additionally, it will improve agricultural productivity and showcasing different crops/livestock in thedemonstration sites will create incentives to diversify agricultural products and improve productivity .

Instruments Used • Technical assistance • Demonstration sites

• Knowledge-sharing• Awareness-building

Steps

1. Identify what products will be tested (different rice strains, shrimp/rice rotation, drip irrigationproducts)

2. Find test site partners (cooperative, agricultural association, local farmers who are also communityleaders)

3. Test approach in local conditions4. Collect data (perhaps in partnership with universities and insurance companies looking to develop

agricultural insurance products),5. Train people who want to implement approaches so they can do it on their own

Possible Partners

• Ministry of Agriculture • Ministry of Local Government and Rural De-velopment & Co-operatives

• Ministry of Land • Ministry of Fisheries and Livestock • Ministry of Water Resources • Regional and local authorities

• Crop farmers • Farming equipment providers • Seed/fertilizer distributors and manufacturers • Agriculture associations and cooperatives

• Universities and research centres • Bangladesh Centre for Advanced Studies


• Once the programme becomes known as a way to improve resiliency and for companies to gainmarket access, this programme could charge beneciaries of the service or companies looking topromote their products a small membership fee.

• This programme could also become an adaptation-focused arm of DFID’s Business InnovationFacility. The Facility seeks to help businesses grow by providing affordable services to and/or en-gaging disadvantaged populations as employees, suppliers and distributors.

• It could develop in cooperation with and/or incorporate the lessons learned from the Naturlandand GIZ organic shrimp certication programme in Bangladesh (and elsewhere).

• The reach of the programme could be expanded by incorporating methodologies in the advisoryservices provided by the Jigyasha 7676 call-center helpline.

• This programme could also link with Katalyst, an organization that aims to develop a pro-poor mar-ket for agriculture and small businesses. The innovation collaborative could work with Katalyst todevelop an agriculture adaptation arm or to provide information/resources for Katalyst incorporateresiliency measures in its business promotion approaches.


This programme could be applied to a wide range of agricultural, livestock, and shery products.Additionally, test sites could support the collection of data on resilient farming methods to be usedfor the GoB and/or for insurance companies. This concept could be used in other sectors such as low-cost infrastructure solutions, water management methodologies, or industrial processing plants.




Instrument 3: Dialogue Platform for International Textile Buyers and Bangladeshi Suppliers

ProgrammeObjective

To create a dialogue platform between international buyers and Bangladeshi suppliers in the textileindustry so that adaptation measures can be taken to improve resilience in manufacturing processes

and business operations.

Needs Addressed

To address the confusion over who is responsible to pay for adaptation between international textilebuyers and suppliers, GIZ would expand its current Promotion of Social and Environmental Standardsin the Industry Program to include a project which brings together the relevant parties to implementadaptation consideration in industrial processes . Additionally, this programme will build awarenessand private sector capacity by providing training, information, and tools for both parties to meetadaptation goals.

Instruments Used • Technical assistance • Awareness-building

• Capacity building

Steps

1. Create stakeholder dialogue between supply chain and international textile buyers and GIZ col-leagues to understand disconnects

2. Identify key areas for building resiliency and pathway forward3. Develop training tools4. Start a pilot programme with 1-3 supplier/international buyer partnerships5. Review lessons learned and develop training manuals targeting different participants (supplier,

buyer, trainer, and technician)6. Create a knowledge sharing platform7. Create a network of local experts and technicians who can be trained to implement changes in

manufacturing facilities

Possible Partners

• Ministry of Textiles and Jute • Ministry of Local Government and Rural De-velopment & Co-operatives

• Ministry of Agriculture • Regional and local authorities

• Textile industry associations

• GIZ Promotion of Social and EnvironmentalStandards

• Cotton, jute and raw material associations andcooperatives

• International textile purchasers (e.g. IKEA,H&M, Walmart)

• Chambers of commerce


• The platform would be a strand within GIZ’s current Promotion of Social and EnvironmentalStandards programme and would focus exclusively on reaching adaptation solutions.

• The platform could share the lessons learned among the suppliers and buyers with the BangladeshBetter Business Forum (BBBF). The BBBF is a PPP that develops recommendation and actionablesteps for the Bangladeshi government in order to resolve business issues.

• Training tools and methodologies could be developed in partnership with CEFE, which providessustainable entrepreneur training.


This programme could be applied to a wide range of industrial export items in Bangladesh such as teaprocessing, chemical fertilizers, paper newsprint, water services, and the cement industries. It couldalso be used at a domestic level between suppliers and buyers.




2.5 Recommendations

Raise private sector awareness of climate change opportu-

nities and risksThis report has demonstrated the numerous businessopportunities to develop needed products and servicesto build resiliency in Bangladesh. Many businesses areunaware of the opportunities, lack the necessary tools, orare hindered by an unfavourable business environment toturn these opportunities into business realities. Addition-ally, there is low awareness of the climate change risks andthe need to plan in advance to reduce potential conse-quences. Short-term nancial cycles and investment bar-riers keep businesses from investing in strengthening their

own resilience to climate change. A combination of raisingawareness and reducing barriers to investment will createa stronger enabling environment for the private sector toseize adaptation opportunities and reduce risk.

Create nancial incentives for businesses

Ultimately, the private sector will make its decisions based on nancial returns and risk-reward ratios. Pro-viding a clear business case for businesses to invest intheir own resiliency (e.g. an adaptation tax benet with asunset clause) or to provide adaptive solutions will build

momentum in adaptation investments. Financial incen-

tives do not need to come solely from traditional methodsof tax breaks and subsidies. It is preferable to developinstruments, such as the proposed Agriculture InnovationCollaborative (Instrument #2), which aims to ultimately beself-sustaining and independent of public sector support.Successful implementation of the instruments suggestedand PPPs can be possible solutions that the private sectorcan both provide and prot from.

Need for dialogue among private and public sectors to ndcommon solutions

Ongoing dialogue between the private and public sec-

tors can be a method to raise private sector awareness,reduce investment barriers, and highlight the businessopportunities and risks. Such a dialogue process should bestructured so that the businesses nd their participationto be worth their while. The dialogue process should avoidtaking special requests from participating businesses andfocus instead on cross-sectoral solutions and collaborationopportunities. Since adaptation cuts across many sectorsand regions, such an approach can provide more holisticoutcomes.

2.6 References

Bangladesh Economic News. 2010. Brac planscrop insurance for farmers. Available at: http:// bangladesheconomy.wordpress.com/2010/03/25/ brac-plans-crop-insurance-for-farmers/

Silver, E. and French, L. 2007. Crop Insurance in Bangla-desh: Providing Social Security to Farmers in Flood-Prone Areas. INAFI Asia and PREM.

BidNetwork. 2006. Bangladesh: SME-focused growth vitalfor economy. Available at: http://www.bidnetwork.org/page/38079/en

CIA World Factbook. 2010. Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/ bg.html

Climate Investment Funds. 2011. BangladeshExpands Resiliency. Available at:http://www.climateinvestmentfunds.org/cif/node/3369

COAST Trust. 2007. Climate Change Impact andDisaster Vulnerability in the Coastal Areas of Bangladesh.

Available at: http://www.equitybd.org/newsletter/english/Issue-5/Disaster_BD.pdf

Daily Sun. 2011. BB hikes lending rate for greennancing. Available at: http://www.daily-sun.com/details_yes_13-09-2011_bb-hikes-lending-rate-for-green-nancing_333_1_3_1_4.html.

FAO and Aquastat. 2010. Available at: http://www.fao.org/nr/water/aquastat/countries/bangladesh/tables.pdf#tab1

Government of the People’s Republic of Bangladesh.2009. Bangladesh Climate Change Strategy and ActionPlan 2009. Available at: http://www.moef.gov.bd/climate_change_strategy2009.pdf

Government of the People’s Republic of Bangladesh.2009. National Adaptation Programme of Action (NAPA).Updated Version of 2005.

Government of the People’s Republic of Bangladesh.2010. Bangladesh: Strategic Program for Climate Resilience.Prepared for Climate Investment Funds Meeting of the PPCRSub-Committee. Washington, D. C. November 10, 2010.




Grameen Creative Lab. 2011. Grameen, YukiguniMaitake and Kyushu Univ singed joint venture agreement. Available at: http://gcl.kyushu-u.ac.jp/english/maitake.html

Grameen Social Business. 2009. Grameen Veolia. Available at: http://www.grameensocialbusiness.org/index.php?option=com_content&view=article&id=97&Itemid=95

GIZ. 2010. “Going Green” in the Ready MadeGarments and Textile Value Chain in Bangladesh.

GIZ. 2011. Promotion of Environmental Standardsand Eco- efciency. Environmental Component Overview.

INSAM. 2011.Yukiguni Maitake and Grameen GroupLaunching Joint Mung Bean Project in Bangladesh.

Available at: http://www.agrometeorology.org/news/news-highlights/yukiguni-maitake-and-grameen-group-launching-joint-mung-bean-project-in-bangladesh.

International Finance Corporation (IFC). 2011. Easeof Doing Business Index. Available athttp://www.doingbusiness.org

Levi Strauss & Co. 2010. Fabric Mills. Available at:http://www.levistrauss.com/sustainability/product/fabric-mills

Mallubhotla, S.2011. A rapid assessment on agricul-

ture in the context of climate change in selected areas ofBarguna and Patuakhali districts, Bangladesh. Prepared forthe Disaster Preventive Coastal Area Rehabilitation Project(CARP), GIZ.

Maplecroft News. 2011. Big economies of the future— Bangladesh, India, Philippines, Vietnam and Pakistan —most at risk from climate change. Available at:http://maplecroft.com/about/news/ccvi.html

Meister Consultants Group. 2009. Floating Housesand Mosquito Nets: Emerging Climate Change AdaptationStrategies Around the World. Available at: http://les.mc-

group.com/clst/Study Climate Change Adaption.pdf

Mobiles4Dev. 2011. Bangladesh Case Study. Availableat http://mobiles4dev.cto.int/bangladesh

The Daily Star. 2010. Bangladesh gets $110m climatefund. Available at: http://www.thedailystar.net/newDe-sign/news-details.php?nid=141068

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List of Interviewees

Name Organization

Ben Jaques Abdul Latif Jameel Poverty Action Lab (J-PAL), Agriculture TechnologyAdoption Initiative (ATAI)

Carrie Davis Associação de Comércio e Indústria ACIS, Mozambique

Mr. Javed Bin Karim BRAC EPL Investments Ltd.

Ms Ilse Fuernkranz-Deroua GAPI (sociedade de investimentos/ investimento no desenvolvimento)

Mr. Mark Astley IKEA

Mr. Omar Hamid Chowdhury Syntex Knitwear Limited

Barbara van Logchem

Dr. Purnima Chattopadhayay-Dutt GIZ

Mr. Christoph Feldkötter GIZ

Ms. Susanne Hartmann GIZ

Ms. Konstanze Kampfer GIZ

Mr. Berthold Shirm GIZ

Ms. Elke Shrestha GIZ