Come Rain or Shine: Integrating Climate Risk Management into African Development Bank Operations

Submitted by Caroline Lumosi | published 12th May 2014 | last updated 10th Jun 2014


Executive Summary

Climate Change and African development

Climate change is real and is happening now, with further changes inevitable. While mitigation of greenhouse gas emissions is crucial to limit long-term climate change, most of the changes projected for the coming decades cannot be avoided. Therefore, in the short to medium term, adaptation is the only option to manage the impacts of climate change and maximize development outcomes.

Africa is especially vulnerable to climate change. Agriculture and food security, water resources, public  health, coastal infrastructure and resources, and peace on the continent are all under increasing threat. Current climate variability and weather extremes – such as floods, droughts and storms – already severely affect economic performance. And the poor are paying the highest price, because their livelihoods are most affected, and they have fewer resources to help them adapt.

Climate change also has implications for the African Development Bank (AfDB). The risks from a changing climate threaten the AfDB’s mission of achieving sustainable poverty alleviation and economic development in Africa, through impacts on regional member countries’ economic performance. They also pose a direct threat to the AfDB’s own investment portfolio.

Climate Risk Management

Many of the most effective measures to adapt to future climate change coincide with those that reduce vulnerability to current climate risks. This principle lies behind climate risk management, which integrates management of current climate variability Many of the most effective measures to adapt to future climate change coincide with those that reduce vulnerability to current climate risks. This principle lies behind climate risk management, which integrates management of current climate variability

The AfDB is building experience and partnerships for addressing climate risks, most notably through the Climate Information for Development – Africa (ClimDev Africa) programme and the Climate Adaptation for Rural Livelihoods and Agriculture (CARLA) project in Malawi. The AfDB is working with the African Union and the United Nations Economic Commission for Africa to implement the ClimDev programme, which aims to improve the availability and use of climate information and services in support of sustainable development and achievement of the Millennium Development Goals (MDGs). CARLA is a Global Environment Facility (GEF)-funded project which aims to ‘climate-proof ’ a smallholders’ crop production and marketing project.

A Climate Risk Management Strategy for the African Development Bank

  • Climate risk management as part of due diligence in AfDB projects and country/sector planning

Climate risks directly affect AfDB operations. These risks should be addressed in project preparation processes and appraisals in a similar way to other risks: systematic analysis and incorporation into project 
design and decision-making. To do this, climate risk management must be integrated into: (i) the project cycle; (ii) Country Strategy Papers and country programming cycles; and (iii) sector and other thematic economic studies for climate-sensitive sectors. Eventually, a large share of the AfDB’s operations will include systematic climate risk management, as part of its regular planning and due diligence.

  • Support for climate risk management by regional member countries

The main entry point for regional member country support is the AfDB’s own country operations. The AfDB should identify high-risk investment cases, where external resources can be found for climate risk management add-ons. These cases can be used as a trigger for broader climate risk improvements in regional member countries. The aim is for climate issues to be integrated into national, sub-national, local and sectoral development planning and decision-making processes. Such AfDB support may include advocacy, advisory services on climate risk management, knowledge generation and dissemination, technical assistance, and programme and project financing A key challenge facing the AfDB in developing and implementing the Strategy is that current funding available for adaptation in developing countries does not even come close to the scale of the resources needed. This means that the AfDB should advocate for new and additional streams of funding to address rising climate risks, but also focus on the most effective ways to enhance climate risk management with the limited resources available. In order to achieve that effectiveness, the AfDB will need to develop strategic partnerships to create synergies in its support to regional member countries and to optimize climate risk management in its own operations. 

 

Suggested citation

van Aalst, M., Hellmuth, M. and Ponzi, D. (2007) Come Rain or Shine: Integrating Climate Risk Management into African Development Bank Operations. Working Paper No 89. African Development
Bank, Tunis