ANNEX
ANNEX
Annex 1: Climate Finance Tracking Methodology
Simplified Description of the MDB Climate Finance Tracking Methodology
• Define the project’s context of vulnerability to climate change.
Since 2011, MDBs have jointly reported on climate finance using a harmonized methodology for tracking both adapta- tion and mitigation projects. The OPEC Fund has integrated this standardized approach into its own reporting framework.
• Explicitly state the intent to address this vulnerability.
• Clearly link specific project activities to the identified vulnerability.
Key definitions and principles
The MDB methodology for tracking adaptation finance is context-specific, location-specific and conservative. It only includes components, sub-components or elements of pro- jects that directly contribute to or promote adaptation. Key points include: • Scope of Reporting: Adaptation finance might not cap- ture activities that contribute to resilience, but are dif- ficult to quantify or are not associated with direct costs (e.g., siting assets outside flood-prone areas). 57
• According to the UNFCCC, “adaptation involves adjust- ments in ecological, social or economic systems in re- sponse to actual or expected climatic stimuli and their effects. It includes changes in processes, practices and structures to moderate potential damages or benefit from opportunities associated with climate change.”
• Mitigation: Climate change mitigation involves limiting or preventing greenhouse gas emissions and enhancing activities that remove these gases from the atmosphere.
• Project Value: Adaptation finance captures only the value of activities specifically addressing climate vul- nerabilities, not the entire project value.
• Resilience: Climate resilience refers to the ability to an- ticipate, prepare for and respond to hazardous events, trends or disturbances related to climate change. Im- proving resilience involves assessing how climate change will alter climate-related risks and taking steps to cope with these risks.
• Action Coverage: Reported adaptation finance in- cludes support for actions aimed at mitigating cli- mate risks, including extreme weather and slow-onset events, as well as financing post-disaster recovery and reconstruction. • Methodology Update: The MDBs updated their joint methodology for tracking adaptation finance in November 2022 to reflect advances in understanding adaptation and resilience activities.
Climate Change Adaptation Finance 56
Adaptation finance aims to reduce risks or vulnerabilities posed by climate change and enhance climate resilience. For a project to qualify as contributing to adaptation finance it must:
56 https://thedocs.worldbank.org/en/doc/20cd787e947dbf44598741469538a4ab-0020012022/original/20220242-mdbs-joint-methodology-climate-change-adaptation- finance-en.pdf
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