NDF: Private Markets for Climate Resilience study

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The Private Markets for Climate Resilience (PMCR) is the first initiative by development institutions to better understand climate resilience solutions provided by the private sector. The Inter-American Development Bank (IDB) and the Nordic Development Fund (NDF) have funded this assessment that focuses on agriculture and transportation, and examines current best practices and opportunities related to climate resilience, by identifying leaders that are shaping the national markets, highlighting products, services, tools and processes.

The PMCR study took a frontlines look at how the private sector is addressing climate risk in the agriculture and transportation sectors in six developing countries - Colombia, South Africa, the Philippines, Nicaragua, Kenya and Vietnam.

In collaboration with:

The Private Market for Climate Resilience

The working assumptions underlying the PMCR study were that most people recognise that climate is changing, but lack an understanding of the associated risks and uncertainties for implementing practical measures to protect their businesses and communities from these risks. Moreover, the private sector is already supplying products and services to meet a growing demand from various stakeholders that need help in managing their exposure to climate risks, and that this demand represents a business opportunity for firms of all sizes.

Along with identifying a vast range of promising climate resilient business examples and solutions, the study also came up with findings and recommendations on how private stakeholders could become more active, as well as gain a better understanding of the business case for doing so. The PMCR has shown that awareness of the general impacts of climate change is well established across all the selected agriculture sectors in the project countries.

The role of the private sector in climate resilience

The PMCR study found that the private sector is already providing many solutions, but just not referring to them as ‘climate change adaptation’. Practical and, in many cases, cost-effective climate resilience solutions are already in place across the agriculture and transportation sectors in the selected PMCR countries. Notably, these are to protect against extreme events, by providing weather forecasting, agro-climatic simulations, flood control, irrigation strategies, soil management, resistant construction materials, and infrastructure design and refitting services, among many other products and services aimed at managing climate risks.

It is worth noting that many companies identified as providing resilience services were often small- and medium-sized businesses. In the countries and sectors under study, a general lack of awareness of the business case for resilience, combined with the relatively high cost of doing business for smaller companies, was apparent. Many of the barriers to market expansion identified during the project were not specific to climate but rather a general reflection of local market operating conditions. Typical examples are a lack of government incentive for business innovation, burdensome regulations and taxes, and the inability for smaller players and start-ups to get access to capital or to good credit. In turn, climate change can exacerbate these barriers even more for small producers and micro-, small- and medium-sized enterprises (MSMEs).

Resilience is place, time and actor specific

Resilience actions are dependent on the type of risk and vulnerabilities linked to the local climatic conditions that are being addressed. Political context, existing market structures, geographic and environmental conditions, institutional capacity, socio-economic conditions and regulation requirements are also key. Across the PMCR sectors, there were no single solutions applicable to all risks and vulnerabilities, but instead hundreds of sector-specific climate resilience options that work in complementary ways. This array of solutions is beneficial in that it allows decision-makers to tailor and access only those solutions appropriate for their context, based on their own assessment of risk. Adaptation benefits come down to good practices, but, without a clear understanding of vulnerability drivers, geographical settings, including climate risks and local context, even known good practices can lead to maladaptation.

Building private markets for climate resilience

To flourish, sustainable markets need more than just willing buyers and sellers, they also depend on relevant public services, including access to reliable information to promote behavioural change, as well as favourable policies, enabling market conditions, trust and oversight. Strong policies are needed to incentivize the private sector to embrace and invest on long-term business continuity, instead of focusing on short-sighted climate-proofing of operations and treating resilience as an added cost. These markets also need access to capital investment flows to scale up promising technologies and services. Consequently, the financial sector also has a key role to play in providing investment capital, affordable insurance, credit and other blended financing products.

PMCR Global Report and Resilience Solutions Factsheets

The PMCR Global Report builds on the findings of national reports produced by the country teams as well as resilience dialogues held in each country. Colombia, South Africa and the Philippines were designated as Tier 1 countries, in which extensive field data was gathered through workshops and resilience dialogues. Tier 2 countries were Nicaragua, Kenya and Vietnam, where the same approach was implemented mostly through desk studies made inside the countries.

As part of each country assessment an in-depth analysis of each sector was conducted, using the BRPM tool, including a value-chain analysis focusing on climate conditions, risks and impacts in key processes, as well as on the actors and activities leading such processes. Demand and supply characteristics of selected resilience solutions were then analysed, resulting in a systematic assessment of the resilience contribution and market opportunities of the solutions in the selected sectors and countries.

The conducted country-sector analysis resulted in the following Resilience Solutions Factsheets:

Country	Agriculture	Transport	Country	Agriculture	Transport
*Africa*			*Latin America*
Kenya	Potato		Colombia	Coffee	Roads
South Africa	Maize	Roads	Colombia	Rice	Ports
South Africa	Wine		Nicaragua	Cocoa
Asia
Philippines	Rice	Roads
Vietnam	Rice