CLIMATE ADAPTATION FINANCE STUDY REPORT - 2020 Nepal
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CLIMATE ADAPTATION
FINANCE STUDY REPORT
Nepal
2020
SAMARTHYA PROJECT: PROMOTING INCLUSIVE GOVERNANCE
AND RESILIENCE FOR THE RIGHT TO FOOD
Publisher : SAMARTHYA: Promoting Inclusive Governance and Resilience for the Right to Food, CARE Nepal Citation : Rai, S., Chhetri, R.P. & B. Dhital (2020). Climate adaptation finance study report Nepal. Kathmandu: CARE Nepal. Disclaimer : This publication is made possible by the support of CARE Denmark DANIDA. The contents of this publication are the sole responsibility of CARE Nepal and do not necessarily reflect the views of CARE Denmark DANIDA. Paper : Environment friendly, wood free paper, May 2020 Designed by : Pentagram Pvt. Ltd. 01-5548180, business.pentagram@gmail.com
ACKNOWLEDGEMENT
Nepal is a landlocked Himalayan country with high in the Partners for Resilience Strategic Partnership
vulnerability to the impacts of climate change and and is managed by CARE Nepal.
disasters and has already experienced changes in
temperature and precipitation at a faster rate than I am very pleased to share with you the Climate
the global average. Climate change adaptation Adaptation Finance Study Report Nepal 2020.
is at the center of Nepal’s development plans This document intends to provide an overview of the
and policies. Accessing and utilizing international adaptation finance coming to Nepal and whether
climate finance is key to enhancing Nepal's they are aligned with the standard adaptation
resilience to climate change and achieving finance principal. This report was written by an
sustainable development. However, climate finance assessment team from Prakriti Resources Centre
is a new ‘genre’ for the government. As no clear and were assisted by an Advisory Group consisting
definition of climate finance exists nationally or of various experts from Nepal. We wish to thank
internationally, the government is still in the process everyone who has contributed to this report.
of understanding and navigating the tools to access
internationally available resources. Nepal receives I would like to express my sincere thanks to all the
a significant amount in the name of adaptation multi-lateral and bilateral agencies, I/NGOs; and
finance, however, there are discrepancies in tracking government agencies who provided their generous
how these funds are being planned and utilized by support in providing project information, feedback,
all involved parties and as per the objectives of the taking lead; and for their effective collaboration to
United Nations Framework Convention on Climate achieve the results. I am equally thankful to the
Change (UNFCCC). government officials from Ministry of Finance for
their ownership and contribution in the report. The
In light of this, CARE Nepal has recently generosity and support of various CARE Nepal
accomplished a study on Adaptation Finance colleagues and Samarthya Project Team primarily
Tracking. This report presents part of the outcome Mr. Jib Nath Sharma, Ms. Jyoti Baidya and Ms.
of an international pilot project on tracking climate Barsha Rani Gurung have been instrumental in
adaptation finance which was simultaneously preparation of this document.
conducted covering six developing countries –
Nepal, Ghana, Uganda, Ethiopia, Vietnam, and Thanks also goes to CARE Denmark, for their
the Philippines. Civil society organizations with consistent inspiration and their continuous efforts
expertise in the areas relevant to this report’s to have the voices of the impact groups heard.
analysis assessed multilateral and bilateral projects
in support of climate change adaptation in the
respective countries. In Nepal, the study was carried
out in partnership with Prakriti Resource Center …………………………………………..
(PRC), Kathmandu. The project has been financed Program Coordinator for Food and Nutrition Security,
by CARE Denmark and CARE Netherlands using Livelihoods, Natural Resources and Climate Change
public funds from Danida and the Dutch government CARE Nepal
III
CLIMATE ADAPTATION FINANCE STUDY REPORT
FOREWORD
Nepal is prone to multiple types of hazards and the international and national needs for adaptation
is disproportionately affected by the effects of finance, received climate finance in Nepal and an
climate change. According to the Global Climate analysis of adaptation relevance. The assessment
Risk Index 2016 it ranks as the 17th most looks into the reliability of the reported amount
vulnerable country. Climate change impacts of adaptation finance and reviews whether the
have a disproportionate impact on women, poor, interventions were gender responsive and put
vulnerable and socially excluded groups who climate vulnerable population at the core of their
often lack the resources, capacities, assets and work.
power to adapt to or withstand such shocks and
stresses. It is estimated that millions of Nepalese We hope this document will help provide a
are at risks from the impacts of climate change and broad picture of the climate vulnerability context,
disasters impacting lives and livelihoods of people comparison of assessment and reported adaptation
due to reductions in agricultural production, food finance and further information on the poverty
insecurity, stressed water resources, loss of forests orientation, gender and the Joint Principles for
and biodiversity as well as damaged infrastructure. Adaptation.
For this, Climate finance is needed for mitigation.
According to the Paris Agreement under the I would like to extend my gratitude to everyone who
United Nations Framework Convention on Climate directly or indirectly helped to make this document
Change , climate finance is equally important for a success and helped assess multilateral and
adaptation, as significant financial resources are bilateral projects in support of climate change
needed to adapt to the adverse effects and reduce adaptation in the respective countries.
the impacts of a climate change.. With this, as part
of the Paris Agreement, the progress in provision
and mobilization of support needs to be tracked.
…………………………………………..
In view of this, CARE Nepal is proud to present John Nordbo
Climate Adaptation Finance Study Report Nepal Senior Advocacy Adviser, Climate
2020. This study report provides an overview of CARE Denmark
IV
CLIMATE ADAPTATION FINANCE STUDY REPORT
TABLE OF CONTENTS Page
Acronyms and Abbreviations IV
LIST OF TABLES V
LIST OF FIGURES V
SUMMARY OF KEY FINDINGS AND RECOMMENDATIONS VI
Recommendations 3
CHAPTER 1 INTRODUCTION 4
CHAPTER 2 INTERNATIONAL AND NATIONAL NEEDS FOR ADAPTATION FINANCE 5
CHAPTER 3 OVERVIEW ON RECEIVED CLIMATE FINANCE IN NEPAL 7
CHAPTER 4 ANALYSIS OF ADAPTATION RELEVANCES 11
4.1. Brief methodology 11
4.2. Step 1 - Climate vulnerability context 17
4.3. Step 2 - Statement of purpose or intent 19
4.4. Step 3 - Linkage between climate vulnerability and project activities 21
4.5. Consolidated 3-step analysis 23
4.6. Comparison of assessed and reported adaptation finance 24
4.7. Comparison of assessed and reported Rio markers 29
CHAPTER 5 ANALYSIS OF POVERTY ORIENTATION, GENDER AND
THE JOINT PRINCIPLES OF ADAPTATION 31
5.1. Poverty orientation 31
5.2. Gender orientation 32
5.3. Joint principles of adaptation (JPA) 34
5.4. Brief conclusion of the chapter 35
LIST OF ANNEXES 36
Annex A: Methodology for the research 36
Annex B: List of Assessment Team and Advisory Group 37
Annex C: List of persons interviewed or consulted (external persons
and from the CSO network) 38
Annex D: List of project documents 39
Annex E: List of 18 projects selected for assessment 42
V
CLIMATE ADAPTATION FINANCE STUDY REPORTAcronyms and Abbreviations
ADB Asian Development Bank
ADS Agriculture Development Strategy
AF Adaptation Finance
CCBC Climate Change Budget Code
CPEIR Climate Public Expenditure and Institutional Review
CRS Creditor Reporting System
CSO Civil Society Organisations
EIB European Investment Bank
EU European Union
GCF Green Climate Fund
GDP Gross Domestic Products
GoN Government of Nepal
IPCC Intergovernmental Panel on Climate Change
JPA Joint Principles for Adaptation
LAPA Local Adaptation Plan of Actions
LDC Least Developed Countries
NAP National Adaptation Plan
NAPA National Adaptation Programme of Actions
NDC Nationally Determined Contribution
MDB Multilateral Development Bank
OA Observation Assessment
ODA Official Development Assistance
OECD Organization for Economic Cooperation and Development
OEDC DAC Organization for Economic Cooperation and Development – Development
Assistance Committee
PD Project Document
SIDS Small Island Developing States
UNFCCC United Nations Framework Convention on Climate Change
UNDP United Nations Development Programme
UNEP United Nations Environmental Programme
USD United States Dollar
UK United Kingdom
WB World Bank
VI
CLIMATE ADAPTATION FINANCE STUDY REPORTLIST OF TABLES Page
TABLE 1 ADAPTATION COST ESTIMATION 6
TABLE 2 REPRESENTATION OF GENDER EQUALITY MARKERS IN ADAPTATION
PROJECTS 10
TABLE 3 LIST OF PROJECTS SELECTED FOR ASSESSMENT 13
TABLE 4 COMPARISON OF THE RIO MARKERS AND GENDER EQUALITY MARKER 25
TABLE 5 IMPLICATIONS OF ADAPTATION FINANCE- COMPARING REPORTED
AND ASSESSED ADAPTATION FINANCE FIGURES 29
TABLE 6 POVERTY ORIENTATION- SUMMARY OF PROJECT RATINGS 32
TABLE 7 GENDER INTEGRATION- SUMMARY OF PROJECT RATINGS 33
TABLE 8 JOINT PRINCIPLES OF ADAPTATION (JPA) RATINGS 34
LIST OF FIGURES Page
FIGURE 1 CLIMATE REALTED PROJECTS IN NEPAL AND THEIR COMMITMENT VALUES
BROKEN DOWN BY YEAR 7
FIGURE 2 PROVIDERS OF CLIMATE FINANCE COMMITMENT TO NEPAL 9
FIGURE 3 ANALYSIS OF CLIMATE VULNERABILITY CONTEXT- SUMMARY OF PROJECT
RATINGS 18
FIGURE 4 ANALYSIS OF STATEMENT OF PURPOSE OR INTENT- SUMMARY OF PROJECT
RATINGS 20
FIGURE 5 ANALYSIS OF THE LINKAGE BETWEEN CLIMATE VULNERABILITY AND PROJECT
ACTIVITIES- SUMMARY OF PROJECT RATINGS 22
FIGURE 6 ASSESSED ADAPTATION-RELEVANCE OF THE PROJECTS- CONSOLIDATED
SUMMARY OF PROJECT RATINGS 23
VII
CLIMATE ADAPTATION FINANCE STUDY REPORTSUMMARY OF KEY FINDINGS AND
RECOMMENDATIONS
Chapter 1: Introduction USD 54.5 billion in 2017, of which only 12.9 billion
This report presents part of the outcome of an USD, or 23%, targeted adaptation activities and
international pilot project on tracking climate only 15% was channelled towards LDCs.
adaptation finance that covered six developing
countries – Nepal, Ghana, Uganda, Ethiopia, Nepal is a landlocked Himalayan country with high
Vietnam, and the Philippines. Civil society vulnerability to the impacts of climate change.
organizations with expertise in the areas relevant According to ND-GAIN index, it is the 47th most
to this report’s analysis assessed multilateral and vulnerable country to climate change. An LDC with
bilateral projects in support of climate change a per capita gross national income of USD 1,012,
adaptation in the respective countries. the country bears a huge cost due to extreme
climatic events every year. The growing impact
The Nepal part of the project assessed 15 such of climate change requires Nepal to take urgent
bilateral and multilateral interventions, 10 of them action. Accessing and utilizing international climate
the largest ones implemented in the country finance is key to enhancing Nepal's resilience
between 2013 and 2017, with a focus on the to climate change and achieving sustainable
donors’ reporting on adaptation finance. The development.
assessment looked into the reliability or accuracy
of the reported amount. The project further Chapter 3: Overview on received climate
investigated whether the interventions were finance in Nepal
gender responsive and put the poorest and most A total of 609 climate-related projects were
climate vulnerable segments of the population at committed to Nepal in the period 2013-2017. The
their centre. total climate commitments amounted to 1.92 billion
USD, of which 643 million USD was committed
Chapter 2: International and national needs in 2017. Nepal’s three largest climate finance
for adaptation finance providers are Multilateral Development Banks
Across the 15th and 16th sessions of the (MDBs -- the World Bank (WB), Asian Development
Conference of the Parties (COP) to the United Bank (ADB) and European Investment Bank (EIB).
Nations Framework Convention on Climate The contribution of WB, ADB and EIB to Nepal’s
Change (UNFCCC) in Copenhagen and Cancun, total climate-related finance flow over the period
respectively, developed countries committed to was about 33%, 29% and 11% respectively.
mobilise climate financing to developing countries
of 100 billion USD per year by 2020, to address Key finding 1: Only some projects reported by
the needs of developing countries. At COP21 in MDBs, mostly in 2017, have detailed mitigation
Paris, it was urged that the allocation of funds strive and adaptation budget breakdowns, severely
to be balanced between adaptation and mitigation decreasing the accuracy of recipient perspective
objectives. Yet, recent OECD (2019) reporting climate finance calculations.
indicates that these targets and the stated balance
are far from being met. With public climate finance The breakdown of adaptation and mitigation
from developed to developing countries reaching finance received by Nepal was 640 million USD
VIII
CLIMATE ADAPTATION FINANCE STUDY REPORT(53%) and 563 million USD (47%) committed for An initial and important finding of this report is
adaptation and mitigation projects respectively, concerned with donor transparency. Accessing full
marginally tending towards adaptation. project documents of many of the adaptation-relevant
development projects was extremely difficult due to
Key finding 2: Adaptation finance received by donor reluctance to share information. Of the initial
Nepal grew rapidly in 2017 and was primarily a list of 19 projects for assessment, 5 were hindered
result of large MDB led projects. by such issues. For 3, project documentation was
not publicly available whilst for another 2 the
Between 2013-2016, just over half of adaptation documentation provided was insufficiently detailed.
projects in Nepal also reported gender equality
objectives. Yet, only 39% of adaptation finance to Key finding 5: Accurate and independent analysis
Nepal is found to target gender equality, meaning of adaptation finance, and climate finance more
that 61% of this adaptation finance lacks gender generally, is hindered by a lack of willingness
co-targets. among donors to make project documentation
public. This lack of transparency makes it difficult
Key Finding 3: The projects Rio Marked by the for recipients of climate finance to determine if it
donors as climate relevant are not necessarily suitably meets national, regional and local needs
understood as climate projects by the national and priorities.
stakeholders as there is no national system to
verify them. Hence having a clear national data Within the individual assessments, the 3-step
base (eg incorporating climate finance data into process highlighted key characteristics of projects
aid management platform) is imperative. which effectively target adaptation. Most importantly
it was found that a project’s ability to adequately
Key finding 4: Although the majority of donor’s assess and outline the climate vulnerability context
adaptation projects report gender co-targets, 61% within the relevant implementation area or sector
of adaptation finance does not address gender leads to more successful adaptation projects.
equality, indicating that many large adaptation
projects lack a gender equality focus. Key finding 6: Adaptation projects which more
successfully address adaptation needs produce
Chapter 4: Analysis of adaptation relevance vulnerability analyses relevant to the project
Chapter 4 presents the results from the assessment activities, location(s), and impacted stakeholders.
of the 15 adaptation-relevant climate finance Furthermore, projects which are found to have
commitments received in Nepal, including the 10 effectively considered the relevant context of
largest from 2013-2017. The assessment focused climate vulnerabilities, are also found to have
on analysing the quality of the adaptation activities developed activities addressing the identified risks,
undertaken and the accuracy of donor reporting vulnerabilities and impacts. Similarly, projects which
on adaptation finance. For this purpose the study fail to outline an adequate vulnerability context,
followed a multi-step process adapted from the often fail to meet the adaptation needs of those
3-step assessment developed by the MDBs, affected by the project’s activities.
including assessments of: (1) the climate vulnerability
context outlined by a project; (2) the stated intent of With a specific focus on their adaptation activities,
a project and its consideration of the identified risks, the team assessed 769 million USD of climate-
vulnerabilities and impacts; and (3) the demonstration related finance, or 40% of the total climate-related
of a direct link between these identified risks, commitments received by Nepal between 2013
vulnerabilities and impacts, and the financed activities. and 2017. Using the individual assessments the
1
CLIMATE ADAPTATION FINANCE STUDY REPORTteam was able to produce adaptation-relevance reported, the team determined that only 4
coefficients for each project, which allowed adaptation Rio marked projects were inaccurately
adaptation finance figures to be calculated from allocated by donors indicating that the source of
a project’s climate finance commitment. This inaccurate adaptation finance reporting is primarily
enabled the team’s adaptation finance figures to a consequence of current non-granular climate
be compared with those reported by donors, who finance accounting methods.
make use of the Rio marker method or a 3-step
approach (utilised by the MDBs). The team also found that only 3 projects reported
by Finland, UK and EU have reported well
Key finding 7: The team calculates that, of the the adaptation finance figures as close to the
649 million USD of adaptation finance reported assessment. All these projects have rio marker 1
by donors across the 15 assessed projects, 384 indicating that 40% of the total budget allocation
million USD can be considered over-reported, is for adaptation finance.
or 59%. This figure is the result of over-reported
adaptation finance across 9 projects provided by Key finding 9: For many of the projects accessing
multilateral donors, and furthermore predomintely the right and full document was extremely difficult.
a result of over-reporting from a single project, the The transparency level was found to be low.
World Bank’s “Earthquake Housing Reconstruction Similarly, since the project scope did not allow it,
Project”, which accounted for 328 million USD, or field verification accessing the right source for
90%, of the adaptation finance found to be over- information was also difficult.
reported in this report.
Chapter 5: Analysis of poverty orientation,
The team also found that cross-cutting projects gender and the Joint Principles for
target mitigation and adaptation co-targets to Adaptation
different extents, depending on the specific Chapter 5 assesses whether the 15 projects
activities undertaken. This is at odds with current adequately integrate gender concerns, poverty
climate finance accounting methods, which produce orientations, and the Joint Principles for Adaptation
generic cross-cutting finance figures without within their design.
mitigation and adaptation breakdowns, or simply
split a cross-cutting figure equally to attribute it to Most of the projects have some element of
mitigation or adaptation finance figures. gender analysis within them, but they fall short
of adequately covering the particular context of
Key finding 8: The team also found that 6 million climate vulnerability viewed through a gender
USD of adaptation finance, resulting from two lens, and how disproportionately women and girls
cross-cutting projects with both mitigation and get affected by climate change. Furthermore, the
adaptation objectives, was under-reported. Providing reviewed projects demonstrate varied poverty
evidence that mitigation and adaptation finance in orientation and poverty ratings. Although most of
cross-cutting projects, as estimated using current the project analyses imply that they have prioritized
non-project-specific climate finance accounting diversity, they do not seem to be addressing the
methods, can also be a source of donor inaccuracy. specific needs of marginalized groups including
ethnic minorities.
Although a significant portion of adaptation-
relevant finance to Nepal is found to be over-
2
CLIMATE ADAPTATION FINANCE STUDY REPORTRecommendations For donors:
Several interesting findings have been generated • For many of the projects, accessing the right
through this assessment. The scope for improvement and full documents was extremely difficult. The
still remains when it comes to transparency, transparency level of bilateral donors was found
information disclosure and reporting adaptation to be low. Although in the case of some donors,
finance accurately, in such a manner as to benefit such as the Multilateral Development Banks,
the poor and climate vulnerable communities. Some project documents were publicly available
of the specific recommendations are as follows: online, in several other cases they were not, or
the documents that were available were limited
For the government: in scope. It is important that these documents
• The government needs to develop a definition are made available for public.
or a set of criteria to define what climate finance • Donors should increase the detail in their
means for Nepal. This would clearly help project documentation regarding the share of
assess the donor supported climate finance as the budget and objectives relating to climate
well as the national contribution made by the change in project’s with climate change as one of
government in tackling climate change. multiple development objectives. Some projects
• It is important that the government develops with multiple development objectives including
a system to track climate finance right from climate change were found to have large
planning to the actual implementation phase, differences in the budget amount mentioned
for all donor funded projects. in the project document and the actual amount
• The projects Rio marked by the donors as reported to OECD, without any explanation as
climate-relevant are not necessarily understood to how the climate-relevant portion had been
as climate projects by the national stakeholders deduced. It is difficult to ascertain and evaluate
as there is no national system to verify them. the accuracy of these allocation of climate
Hence having a clear national database (e.g. an finance if a record of the decision making
aid management platform) is imperative. process/methodology is not made clear.
3
CLIMATE ADAPTATION FINANCE STUDY REPORT1
INTRODUCTION
This report is part of an international pilot project on This report is only about adaptation finance going
tracking adaptation finance. The project builds on to Nepal but results from all six countries will be
civil society assessments of international support summarized in a global report.
for climate adaptation to six developing countries:
Ghana, Uganda, Ethiopia, Nepal, Vietnam, and the The project is a pilot project in the sense that
Philippines. it aims to facilitate future adaptation finance
tracking activities by others, and all seven
The project seeks to assess if multilateral and reports from the project will be available at
bilateral donors’ reporting of adaptation finance is https://careclimatechange.org/. An overview of
reliable in the sense that the amounts reported are background materials for this report can be found
reasonably accurate. Earlier studies of international in Annex D at the end of the report.
climate finance have indicated that donors have a
tendency to report higher than the actual amounts This report was written by an Assessment Team
spent on adaptation activities on the ground. from Prakriti Resources Centre. The team was
assisted by an Advisory Group consisting of various
The project also investigated whether the experts from Nepal (see Annex B). We wish to
interventions were gender responsive and put the thank everyone who has contributed to this report.
poorest and most climate vulnerable segments of
the population at their centre. Although politically The project has been financed by CARE Denmark
important, this subject has not been researched and CARE Netherlands using public funds from
adequately. Danida and the Dutch government in the Partners
for Resilience Strategic Partnership and managed
by CARE Nepal.
4
CLIMATE ADAPTATION FINANCE STUDY REPORT2
INTERNATIONAL AND NATIONAL NEEDS
FOR ADAPTATION FINANCE
Nepal is a landlocked Himalayan country that is small island developing states and Africa. These
highly vulnerable to the impact of climate change. commitments were re-confirmed with the adoption
It is experiencing the impacts of climate change of the Paris Agreement in 2015.
in the forms of floods, landslides, retreating Hima-
layan glaciers, erratic but intensive rainfalls, and As the impact of climate change is being felt more
warm and drier winters. As a Least Developed rapidly Nepal needs to take urgent actions. Climate
Country (LDC) Nepal has a mere per capita GNI of change has emerged as one of the hurdles to the
USD 1,012. According to the Human Development country’s progress as Nepal suffers from high eco-
Report 2018 (UNDP, 2018), Nepal lies in the low nomic costs due to current climate variability and
human development category with the positioning extremes. Accessing and utilizing international cli-
at 149 out of 188 countries and territories. Poverty mate finance is key to enhancing Nepal's resilience
incidence or poverty headcount rate for Nepal is to climate change and achieving sustainable devel-
21.6%. According to 2017 data of ND-GAIN index, opment. However, climate finance is a new ‘genre’
Nepal is the 47th most vulnerable country to cli- for the government. As no clear definition of cli-
mate change with high vulnerability score of 0.516. mate finance exists nationally or internationally, the
It ranks 131 among 181 counties in ND-GAIN in- government is still in the process of understanding
dex for climate vulnerability.1 and navigating the tools to access internationally
available resources.
Therefore, it is perfectly appropriate that the Unit-
ed Nations Climate Change Convention from 1992 Nepal is supported by various international develop-
establishes the obligations of developed countries ment partners such as the bilateral donors, multilater-
to assist poor and vulnerable countries in meeting al development banks, UN agencies and international
the costs of climate adaptation. Ten years ago, this organizations to address poverty. Although gradually
commitment was quantified at COP15 and COP16. climate change support is forthcoming, much remains
It was agreed that developed countries would de- yet to be done. Lately, Nepal is also accessing fi-
liver new and additional climate financing to de- nance to support adaptation actions by the inter-
veloping countries and that funding should grad- national dedicated climate funds such as the Least
ually be scaled up to USD 100 billion per year by Developed Countries Fund, Adaptation Fund, and
2020. It was further agreed that the allocation of Climate Investment Fund. Nepal is in the process of
funds should be balanced between adaptation and accessing funds from the Green Climate Fund.
mitigation, and that funding for adaptation would
be prioritized for the most vulnerable developing Nepal bears a huge cost due to extreme climatic
countries, such as the least developed countries, events every year. The Ministry of Home Affairs re-
1
ND-GAIN Country Index, 2017 https://gain-new.crc.nd.edu/country/nepal
5
CLIMATE ADAPTATION FINANCE STUDY REPORTported that during the first 9 months of 2019 the In 2010, Government of Nepal prepared and ap-
estimated economic loss from climate related disas- proved the National Adaptation Programme of Ac-
ters such as floods, landslides and other extreme tion (NAPA). This was done by conducting a vulner-
weather events stood at over NRS 5 billion (USD ability assessment in a participatory manner. The
45 million)2. An estimate of the economic cost of NAPA document prioritized nine combined profile
climate change in three major sectors (i.e. agricul- projects with an estimated implementation cost of
ture, hydroelectricity and water-induced disasters) US$ 350 million. Its implementation framework
puts the economic losses at the equivalent of 1.5- also envisaged that the operating costs would be
2% of Nepal’s Gross Domestic Product per year. It kept to a minimum and at least 80% of the avail-
amounts to approximately USD 270-360 million at able financial resources would reach the local level
2013 price. It is projected that the growing trend to fund activities on the ground. However, Nepal
of climate change in Nepal is likely to increase the is still demanding that these internationally agreed
current level of impacts and lead to additional costs projects be implemented. Lack of finance has de-
equivalent to 2-3 % of current GDP per year by railed the implementation of the identified projects.
mid-century3. For these three sectors alone climate
finance needs would reach USD 2.4 billion by 2030.
Table 1Adaptation Cost Estimation
Type of estimation Estimation Period Source
Loss due to climate change/ 2 % to 3 % of GDP [USD IDS-Nepal, PAC and
by 2050
climate variability 62.384 billion (2013 est)] GCAP, 2014
IDS-Nepal, PAC and
Climate finance needs USD 2.4 billion By 2030
GCAP, 2014
National Adaptation Pro-
USD 350 - Government of Nepal
gramme of Action (NAPA)
In 2010, Government of Nepal prepared and ap- Similarly in 2014, Oxfam Nepal conducted a study
proved the National Adaptation Programme of Ac- on climate change adaptation finance and gover-
tion (NAPA). This was done by conducting a vulner- nance in Nepal. The report stated that a total fund-
ability assessment in a participatory manner. The ing of US$ 550 million was pledged for adaptation
NAPA document prioritized nine combined profile during the period 2009 to 2012 for Nepal. This
projects with an estimated implementation cost of was based on the assessment of the OECD da-
US$ 350 million. Its implementation framework tabase. However, the study also found that most
also envisaged that the operating costs would be of the allocations were ODA related rather than
kept to a minimum and at least 80% of the avail- new and additional. While the source of the large
able financial resources would reach the local level amout was unknown, it was not clear what actually
to fund activities on the ground. However, Nepal it was allocated for.
is still demanding that these internationally agreed
projects be implemented. Lack of finance has de-
railed the implementation of the identified projects.
MoHA. 2019. http://drrportal.gov.np/reports (Accessed on 17 September 2019)
2
IDS-Nepal, PAC and GCAP, (2014), Economic Impact Assessment of Climate Change in Key Sectors in Nepal
3
6
CLIMATE ADAPTATION FINANCE STUDY REPORT3
AN OVERVIEW OF RECEIVED CLIMATE
FINANCE IN NEPAL
This overview provides figures on climate finance bilateral and some multilateral providers of climate
commitments received in Nepal from 2013-2017. finance.
All figures are produced by analysing internation-
ally funded climate change related development A total of 609 climate-related projects were com-
projects, for which the donors of climate finance mitted to Nepal in the period 2013-2017 with
annually report project level information on to the the related total climate commitments summing
OECD-DAC. Climate finance data was accessed to 1.92 billion USD. Of the 609 climate-related
from the OECD-DAC climate-related development projects, 159 were committed in 2017 and 123
aid database4, where providers report all project in 2016. However, commitments were more evenly
level data to recipient countries along with project distributed in the other years covered by the study
budgets and policy markers including climate miti- with 108, 113 and 106 projects in 2013, 2014 and
gation and adaptation Rio markers, in the cases of 2015 respectively.
Figure 1: Climate realted projects in Nepal and their commitment values broken down by year
Rio marker adjusted: Total climate commitments (thousand USD)
800,000 643,582
600,000 427,066 434,116
400,000 302,342
111,472
200,000
2013 2014 2015 2016 2017
Total number of climate projects in Nepal
210
159
160
123
108 113 106
110
60
2013 2014 2015 2016 2017
4
Data is found at OECD’s webpage on climate finance: http://www.oecd.org/development/financing-sustain-
able-development/development-finance-topics/climate-change.htm
7
CLIMATE ADAPTATION FINANCE STUDY REPORTCommitments in 2017 show a significant increase Nepal in 2017. Two particularly large adaptation
as compared to those in 2016 and make up the projects committed in 2017 were from the WB.
largest figures received by Nepal in a single year Both the projects titled “Earthquake Housing Re-
over the analysis period. The total climate finance construction Project” had different CRS identifica-
commitment averages at 383 million USD per year tion numbers but the same commitment value of
for the period. However, the actual commitments approximately 132 million USD. Analysis of these
are not evenly spread over each year with peaks two similar projects could greatly impact Nepal’s
of approximately 427, 434 and 643 million USD in 2017 commitment figures. Another notably large
the years 2013, 2015 and 2017, respectively. The 96 million USD-project provided by the ADB was
peak in 2015 is primarily due to three large proj- a mitigation project titled “Power Transmission and
ects financed by the European Investment Bank Distribution Efficiency Enhancement Project”.
(EIB) (110 million USD) and two by the World Bank
(WB) (81 and 80 million USD) bringing the total Over the entire analysis period the WB’s commit-
figure to 273 million USD. The peak in 2013 is, ments totalled 643 million USD spread across 23
similarly, a result of large multilateral bank-funded projects; 1 in 2013, 6 in 2014, 7 in 2015, 2 in
projects. The largest project with a budget value of 2016 and 7 in 2017. This equates to an average
86 million USD in this year came from the Asian project commitment of 28 million USD over the full
Development Bank (ADB). This can be compared period.
to another large total commitment figure (302 mil-
lion USD) for 2014 and the significantly smaller The EIB’s total commitment of 209 million USD
climate finance flows (111 million USD) in 2016 is spread across three mitigation projects. These
despite the notable increase in the number of cli- were concentrated in 2013 (71 million USD) and
mate-relevant projects in that year. 2015 (138 million USD), which has heavily influ-
enced the totals observed for those years. The
MDBs stand out as the three largest providers of ADB committed 567 million USD over 40 projects
climate finance to Nepal. The largest provider of (10 in 2013, 11 in 2014, 4 in 2015, 1 in 2016
commitments during the period was the WB, con- and 14 in 2017) averaging at 14 million USD per
tributing around 33% to all climate-related finance project. The ADB is the only MDB of the top three
flows. The next largest provider was the Asian De- committers to show any gender equality Rio mark-
velopment Bank (ADB) (29%) followed by the Eu- ers, with 11 projects assigning a marker of “1”.
ropean Investment Bank (EIB) (11%).
The largest providers of bilateral climate finance
In 2017, commitments from the WB and ADB over the period are the UK (83 million USD – 4%
totalled 297 million USD (across 7 projects) and of total) followed by USA (76 million USD – just
233 million USD (across 14 projects), respectively. under 4% of the total) and Germany (48 million
The EIB made no climate-relevant commitments to USD – 2.5% of the total).
8
CLIMATE ADAPTATION FINANCE STUDY REPORTFigure 2 Providers of Climate finance commitment to Nepal
The Paris Agreement calls for a balance in climate The ratio of adaptation to mitigation finance for the
finance for mitigation and adaptation, addressing single year 2017 is 70% (449 million USD) to 30%
conditions and capacity constraints in the poorest and (194 million USD) respectively with cross-cutting
most vulnerable developing countries (Article 9.4). commitments distributed equally between the two.
This may partly be explained by more detailed
The ratio of adaptation and mitigation finance for reporting from MDBs on the breakdown of their
Nepal during the period 2013-2017 has swayed project’s budgets with regards to separate mitigation
towards adaptation, as compared to the ratio over and adaptation targets in this year’s data.
the years 2013-2016 (due to the large 2017 annual
adaptation commitments observed) with 640 million Parties to the Paris Agreement have recognized the
USD and 563 million USD committed for adaptation importance of incorporating gender equality aspects
and mitigation projects, respectively. When cross- into adaptation. Furthermore, COP 23 established
cutting figures are divided between mitigation and a gender action plan. A dataset was provided by
adaptation objectives, the ratio stands at 53% finance the OECD on request by the consultants to include
committed to adaptation and 47% for mitigation. gender equality markers for the years 2013-20165.
Ratio of Adaptation Ratio of Mitigation For Nepal, the overall trend of adaptation projects
Finance (including Finance (including with a gender equality marker can be described
cross-cutting) cross-cutting) as relatively stable in the years 2013, 2014 and
2015, before a peak of 66% of projects having a
53% 47%
gender marker in 2016 (see Figure 5 below). On an
5
Gender-related climate finance analysis for the recipient country of Nepal for the period 2013-2017 has been made using data provided on request by the OECD
Financing for Sustainable Development team.
9
CLIMATE ADAPTATION FINANCE STUDY REPORTaverage 52% of adaptation projects in the period total value of adaptation commitments lack a gender
have a gender equality marker of either 1 or 2. marker. The fact that such a large total number
of gender-adaptation co-marked projects (100)
Approximately 39% (56,071 thousand USD) of accounts for such a small percentage (39%) of
the value of adaptation commitments during 2013- total adaptation climate finance indicates that many
2016 targeted gender equality. However, this means large-scale adaptation projects are lacking gender
61% (equivalent to 87,886 thousand USD) of the markers.
Table 2: Number and value of adaptation-related commitments from 2013-2016 with gender co-targets.
Value of adaptation-related
2013-2016 Number of projects commitments
(thousand USD)
Adaptation projects with a gender 100 56,071
marker (1 or 2) (39%)
Adaptation projects without a 91 87,886
gender marker (0 or blank) (61%)
Total 191 143,957
10
CLIMATE ADAPTATION FINANCE STUDY REPORT4
ANALYSIS OF ADAPTATION RELEVANCES
4.1. Brief methodology Rio markers are applied to relevant projects by all
TAs outlined in Chapter 3, this study seeks to developed country providers of ODA and climate
assess the accuracy and quality of donors’ own finance, and also by multilateral organisations other
reporting to the OECD-DAC - which provides the than the MDBs. Importantly these Rio markers
most comprehensive and detailed set of data at are the basis for the calculation of international
the project level on climate-related development flows of climate finance using the so-called ‘Rio
aid. The OECD’s guidelines for assigning the marker method’ of climate finance accounting –
adaptation relevance of a project stipulates that which is utilized by all providers excluding the US,
a project should only be classified as adaptation- UK and MDBs. In which, Rio markers of 2 result
related, when it intends to reduce the vulnerability in 100% of a project’s budget being considered
of human or natural systems to the current and as climate finance, whilst Rio markers of 1 result
expected impacts of climate change, including in lower coefficients being used to report only a
climate variability, by maintaining or increasing portion of the project’s budget as climate finance.
resilience, through increased ability to adapt to, Where project’s are assigned both mitigation and
or absorb, climate change stresses, shocks and adaptation markers, i.e. cross-cutting projects, a
variability and/or by helping reduce exposure to variety of climate finance accounting methods are
them (OECD-DAC Annex 18, Page 7). used by different donors to determine levels of
provided climate finance.6
The adaptation (and mitigation) relevance of a
development project is assigned by allocating a Whilst bilateral and multilateral donors report Rio
‘Rio marker’ to a project of 0, 1 or 2 to indicate markers to the OECD, this is not the case with
an objective was “not targeted”, a “significant” the Multilateral Development Banks (MDBs) who
objective, or a “principal” objective, respectively. have their own “climate components” method of
A “significant” marker would indicate adaptation calculating the climate finance resulting from their
and/or mitigation objectives are explicitly stated projects. The method is published, in part, in their
but not the fundamental driver or motivation for annual Joint Report on Multilateral Development
undertaking and designing the activity. Whereas Banks’ climate finance and Common Principles
a “principal” marker shows that the objectives are for Climate Change Adaptation Finance Tracking
explicitly stated as fundamental in the design of, or documents. The method results in a granular
the motivation for, the activity. Additionally, donor percent figure indicating the climate-relevance of a
countries have the obligation to inform at project given project, and the portions of its budget going
level about policy markers for gender equality. towards adaptation and mitigation budgets.
6
See the OECD’s “Results of the first survey on coefficients that Members apply to the Rio marker data when reporting to the UN Conventions on Climate Change
and Biodiversity” for more details on accounting methods: http://www.oecd.org/dac/financing-sustainable-development/Results%20of%20the%20first%20sur-
vey%20on%20coefficients%20that%20Members%20apply%20to%20the%20Rio%20marker%20data%20when%20reporting%20to%20the%20UN%20Con-
ventions%20on%20Climate%20Change%20and%20Biodiversity.pdf
11
CLIMATE ADAPTATION FINANCE STUDY REPORTDue to the limitations of international estimates of strains of analysis: (1) Project Document (PD) -
climate finance when calculated using a simple and where the assessment was completed by analysing
limited set of coefficients relating to combinations of the most relevant information from the project
Rio markers, our approach, outlined below, builds on document; and (2) Observation Assessment (OA) –
and adapts existing methodologies which produce where the assessment was undertaken using field
adaptation finance figures and assess the relevance observations from well-connected CSOs working
and quality of an adaptation project’s activities. in the relevant area, who collate observations
from relevant sources. In this way, a comparison
To assess a selection of adaptation projects, the between the planned and actual initiatives can be
quality of their activities and resuling accuracy of established and used to inform our analysis of the
their reporting a total of 15 projects were selected quality of adaptation activities.
for this report’s assessment. The selection was
conducted to include the 10 largest adaptation- A rating scale of 0-10 was applied to assess how
relevant projects by budget, which included bilateral, strongly the project performs against each of the
multilateral and MDB funded projects. The other 5 three analysis steps. With 0 being the lowest rating,
projects were selected as complementary projects, indicating the project does not at all address the
and include projects with adaptation Rio markers guiding questions and 10 being the highest rating
of 1, cross cutting projects, projects Rio marked which indicates the project fully address all aspects
“2,2” (i.e. with “principal” objectives assigned for of the guiding questions. The resulting project rating
both mitigation and adaptaion) and projects with after the 3-step analysis was then used to produce
comparatively smaller budgets. an adaptation-relevance coeffient, as pesented
in Section 4.5, which allows the calculation of
The methodology follows a 3-step approach adaptation finance figures from a project’s total
analysis informed by the MDB’s joint approach to climate finance figure. Allowing the comparison of
assess the adaptation-relevance of development this report’s assessed adaptation finance figures
projects, which includes 3 guiding questions, or with those reported by the donors themselves to
steps: the OECD-DAC.
(1) Climate vulnerability context: How well
does the project set out the context of risks, The projects for this study were chosen from the
vulnerabilities and impacts related to climate suite of projects received in Nepal and reported
variability and climate change? to the OECD-DAC from 2013 to 2017. About
(2) Statement of Purpose or Intent: Is the intent 67% of the chosen projects were marked as
of the project to address the identified risks, adaptation relevant. However, MDB projects which
vulnerabilities and impacts related to climate had no indication of adaptation relevance, yet
variability and climate change? large amounts of non-specified climate-relevant
(3) Link to Project activities: Is there a finance, were also chosen so as to not overlook
demonstrated direct link between the their potential contribution to adaptation activities.
identified risk, vulnerabilities and impacts, and
the financed activities? The studied projects were selected on the following
basis:
Project activities were rated based firstly on the 1. Large projects with high volume of adaptation-
project documentation, and, where possible,also relevant finance
by the collective observations of the Assessment 2. Projects Rio marked as climate adaptation-
Team. These two sources of evidence result in two relevant
12
CLIMATE ADAPTATION FINANCE STUDY REPORT3. Projects selected for a balance between services development programme (NASDP) –
multilateral, bilateral, UN agency and main credit phase 1”, and “River protection works
international organization providers. in East Chitwan”. Even after direct communication
4. Consideration of the suggestions provided by with the donor, project documentation for the
the advisory group. “River protection works in east Chitwan” project
was not made available to the assessment team.
Information regarding another 3 projects Regarding the third project, the Climate Investment
were saught after but not accessed. Project Fund’s “Expansion of IFC-PPCR Strengthening
documentation was not readily available for public Vulnerable Infrastructure Project”, the documents
access for two Swiss projects: “Nepal agricultural that were available did not provide relevant and
necessary information for the assessment.
Table 3: List of selected projects for assessment
Climate-re-
Project lated com- Financial
Abbreviation CRS ID Short description
name mitment instrument
(OECD)
This project includes
both the original financ-
ing and first addition-
al financing to the
Earthquake Housing
Reconstruction Project
(EHRP) in 2015 and
2017, respectively. As
World Bank: both are reported as
Earthquake adaptation finance, ei-
Housing Re- WB: EHRP 2015028262 427,802,122 Credit ther to the OECD or in
construction World Bank documenta-
Project tion. The objective is to
restore affected houses
with multi-hazard resis-
tant core housing units
in targeted areas and
to enhance the govern-
ment's ability to improve
long-term disaster
resilience.
13
CLIMATE ADAPTATION FINANCE STUDY REPORTRural Access Pro-
gramme 3- Road main-
tenance, Upgrading
and economic infra-
structure is a compo-
nent of a larger project
United King- named Rural Access
dom: Rural Programme 3 (RAP
UK:RAP3 2013000572 48,792,977 Grant
Access Pro- 3) 2013. The overall
gramme 3 aim of RAP3 project
is:improved incomes
and resilience through
employment, sustain-
able access to markets
and improved access to
economic opportunities.
The programme is a
European support through pol-
Union: EU icy dialogue, budget
Contribution support and capacity
to Agriculture building measures to
EU: EU-CARD 2017000672 43,768,000 Grant
and Rural the Government of
development Nepal in implementing
(CARD) in its Agriculture Develop-
Nepal ment Strategy 2015-
2035 (ADS).
The project is basically
designed to increase
World Bank: productivity, enhance
Nepal Live- value addition, and im-
WB: Nepal
stock Sector 2017028618 32,129,210 Credit prove climate resilience
Livestock
Innovation of smallholder farms
Project and agro-enterprises
in selected livestock
value-chains in Nepal.
14
CLIMATE ADAPTATION FINANCE STUDY REPORTHariyo Ban programme
has three main focuses.
These include- biodi-
United versity conservation,
US: Hariyo
States: Hari- 2013013487 31,478,000 Grant sustainable landscapes
Ban
yo Ban and climate adaptation
into a single program
that benefits biodiversity
and people.
This is an additional
financing to a parent
Road Sector Develop-
ment Project (RSDP)
World Bank:
2007. The additional
Additional
financing expands the
Finance to
WB: AFRSD 2007011444 30,800,000 Credit parent project objective
Road Sector
as it aims- (i) reduced
Development
bridge vulnerability; (ii)
Project
enhanced resilience
of RSDP roads; (iii)
enhanced access as re-
ported by beneficiaries.
The Third Small Towns
Water Supply and San-
Asian De-
itation Sector Project
velopment
(3STWSSSP) aimed at
Bank: Third
supporting the gov-
Small Town's
ADB: TST 2014001980 23,540,101 Loan ernment of Nepal (the
Water Supply
Government) in provid-
and Sanita-
ing water supply and
tion Sector
sanitation facilities and
Project
services to around 26
small towns in Nepal.
The key objective of
Internation-
ASHA projects is to
al Fund for
reduce vulnerability of
Agricultural
local communities to
Development:
IFAD: ASHA 2014000135 22,439,620 Grant climate related risks and
Adaptation
enable strengthening
for Smallhold-
of institutional environ-
ers in Hilly
ment for climate change
Areas Project
adaptation.
15
CLIMATE ADAPTATION FINANCE STUDY REPORTThe overall objective
European
of WAVE project is to
Union: Water,
reduce the multi-dimen-
Energy,
sional poverty and en-
Agricul-
hance resilience in the
ture: Village EU: WAVE 2016000463 22,116,550 Grant
Mid-West and Far West
Livelihoods
regions by improving
Enhancement
significantly the liveli-
in Mid Far
hoods and resilience of
West
marginal communities.
Project will enable com-
Climate
munities in mountainous
Investment
ecosystems that are
Funds: Build-
significantly vulnerable
ing Climate CIF:
2013000122 22,023,570 Grant to climate change im-
Resilience of BCRWME
pacts to have improved
Watersheds
access to and reliability
in Mountain
of watershed and water
Eco-regions
resources
Finland: Rural
The project is targated
Village Water
to improved health and
Resources Finland:
2014140831 17,078,510 Grant reduced multidimen-
Management RVWRMP
sional poverty within the
Project (III
project working area.
PHASE)
Asian Devel-
The overall objective
opment Bank:
of the projects is to
Bagmati
improve water security
River Basin
ADB: BRBIP 2014001895 14,954,360 Loan and resilience to po-
Improvement
tential climate change
Project- Addi-
impact in the Bagmati
tional Financ-
River Basin.
ing
United The project enable the
Kingdom: Government of Nepal
Nepal Cli- to implement Climate
mate Change Change Policy, 2011
Support UK: NCCSP 2011000334 15,372,640 Grant and develop and imple-
Programme ment necessary strat-
- Implementa- egies and most urgent
tion through and immediate adapta-
Government tion actions.
16
CLIMATE ADAPTATION FINANCE STUDY REPORTThe project aims to
strengthen local ca-
Adaptation
pacity to identify cli-
Fund: Adapt-
mate risks and design
ing to Climate
adaptive strategies,
induced
diversify livelihood and
Threats to
AF: Adapting strengthen food security
Food Pro- 2015000010 9,485,654 Grant
to CIT for climate vulnerable
duction and
poor in target areas
Food Security
and increase resilience
in the Karnali
of natural systems that
region of
support livelihoods to
Nepal
climate change induced
stresses.
Global En-
vironement
The project objective is
Facility: Eco-
to increases capacity
system-based
of communities living in
Adaptation
GEF: EbA for the Kathmandu Valley to
for Climate- 2017000206 6,884,000 Grant
CRD adapt to the negative ef-
resilient
fects of climate change
development
using Ecosystem-based
in the Kath-
Adaptation.
mandu Valley,
Nepal
Assessed climate-related commitments
768,665,314
(USD):
Total climate-related commitments 2013-2017
1,918,577,987
(USD):
Assessed finance as a percentage of national
40%
climate-related commitments:
4.2. Step 1 - Climate vulnerability context ect does not at all address the guiding question
TThis step was analysed to assess if the selected and the project cannot be considered adaptation
projects had performed vulnerability analyses and finance and 10 implies that the project fully ad-
whether the associated risks were clearly indicated dresses all aspects of the guiding question and is
in the project to address the relevant adaptation fully relevant for adaptation project.
needs. Figure 3 below consists of a list of 15 proj-
ects and their assessment scores based on project As seen in the Figure 3, not much difference is
document (PD) and observation assessment (OA) seen in the climate vulnerability context of the proj-
(See section 4.1. Brief Methodology for detail). ect as informed by evidence from both PD and OA.
The score (0-10) indicates rating of the analysis Of the 15 projects listed here, 10 are the largest
of climate vulnerability where 0 implies that proj- ones based on budget (where this report uses
17
CLIMATE ADAPTATION FINANCE STUDY REPORT“large projects” in the analysis to indicate large pattern, drought and water scarcity have been found
projects based on their budget) and the other 5 to be major risks in some of the project areas, while
are the complementary projects. increased rainfall resulting in slope failures have
been found to be another risks in other project ar-
Two large projects IFAD: ASHA and CIF: BCRWME eas. These risks are exacerbated by poverty, lack of
have high scores, ranging from 9-10 (Figure 3 be- basic needs and limited livelihood alternatives. Fou r
low) based on both PD and OA indicating these complementary projects - ADB: BRBIP, UK: NCCSP,
projects have clearly presented the context of vul- AF: Adapting to CIT and GEF: EbA for CRD have
nerability and impacts related to climate change scores ranging from 6-9 (Figure 3 below) based on
and climate variability and is also supported well by PD and OA. The lower score in OA for ADB: BRBIP
OA. Vulnerability assessment has been carried out (PD-7; OA-6) and UK: NCCSP (PD-8; OA-7) proj-
in these project’s areas and NAPA document forms ects indicate that there is slight difference in the
the basis for almost all the project’s vulnerability and vulnerability context described in the document and
risk assessments. Irregular and decrease in rainfall actual implementation on the ground.
Figure 3: Analysis of climate vulnerability context- summary of project ratings
Other 5 projects such as EU: EU-CARD, WB: EU CARD project has assessment rating of 4
Nepal livestock, ADB: TST, EU: WAVE and Finland: for PD and 0 for OA. Although, project document
RVWRMP have low score ranging from 0-4 because has marked climate change adaptation as the
the context of vulnerability and impacts related to significant objective, the same is not reflected
climate change and climate variability has not been by OA. According to observation assessment,
considered well in the project document which also the programme does not consider the context of
aligns with the response of the OA. For instance, risks, vulnerabilities and impacts related to climate
18
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