CF_D10 D2.3 Report containing methodology to build investment strategy

Funded by the European Union. Views and opinions expressed are however those of the author(s) only and do not necessarily reflect those of the European Union or CINEA. Neither the European Union nor the granting authority can be held responsible for them. Confidential D2.3 Report containing methodology to build investment strategy Valentina De Cicco Salvatore Cimino Richard Taylor Kit England Giulia Galluccio Corrado Topi Chiara Trozzo Anastasia Maga 1 www.climatefit-heu.eu Table of Contents 1 Introduction ................................................................................................................................................................................................................................ 2 2 Other projects ........................................................................................................................................................................................................................... 3 2.1 P2R .......................................................................................................................................................................................................................................... 3 2.2 REGILIENCE..................................................................................................................................................................................................................... 4 2.3 PIISA ...................................................................................................................................................................................................................................... 5 2.4 SOTERIA ............................................................................................................................................................................................................................. 5 3 Key challenges and enablers from the Adaptation Investment Landscape .........................................................................6 3.1 Adaptation Finance Barriers ...............................................................................................................................................................................6 3.2 Adaptation Finance Enablers ............................................................................................................................................................................6 3.3 International Best Practices ................................................................................................................................................................................6 4 Process overview .................................................................................................................................................................................................................. 7 4.1 Role of the Local Resilience Taskforce..................................................................................................................................................... 8 4.2 How the guidance was produced ................................................................................................................................................................. 8 5 Phase 1: develop your investment strategy ..................................................................................................................................................... 9 5.1 Assess and prioritise climate risks and sectors ................................................................................................................................14 5.2 Get overview of context PAs operates in ............................................................................................................................................. 19 5.3 Identify enabling conditions to overcome barriers ....................................................................................................................... 22 5.4 Longlist of adaptation options, i.e. initial set ....................................................................................................................................... 26 5.5 Estimate high level costs and benefits................................................................................................................................................... 32 5.6 Identify the financing gap ................................................................................................................................................................................. 36 5.7 Define time horizon of investment ............................................................................................................................................................. 39 5.8 Identify the range of possible financial sources and instruments .....................................................................................41 5.9 Match types of adaptation options with financial entities/instruments ...................................................................... 48 5.10 Governance and resources ...................................................................................................................................................................... 52 6 Phase 2: Develop your Investment Plan .......................................................................................................................................................... 54 Annex – Additional resources for investment strategies .............................................................................................................................. 55 2 www.climatefit-heu.eu 1 Introduction Please note that the introductory part of the document is part of an ongoing effort and will be expanded and supplemented by the taskforce with further updates in the coming months, according to the development of the rest of the chapters and the ongoing work on terminology consistency. Current effort is dedicated to the review of the glossary; therefore minor changes may appear which will cascade through the document. Considering the needs of Public Authorities (PAs) to receive guidance and build capacity on how to mobilize finance for climate adaptation, the aim of this document within CLIMATEFIT is to describe the methodologies to be used by PAs for developing pipelines of investable projects across adaptation action. While it is designed as a tool to provide help and guidance to PAs across Europe tackling adaptation financing issues, for the purpose of the CLIMATEFIT project, facilitators are intended as the primary users of this document. Facilitators are the identified project partners in charge of supporting the CLIMATEFIT case studies in their transformational journey to climate resilience, tailoring and applying the methodology. In particular, in the case of the 4 leader territories, facilitators are supported by the fast-track mechanism to help them progress quickly in the process. The overall goal is co-designing 20 innovative Investment Strategies (IS), allowing to identify sources of finance, and developing 10 credible and scalable investment plans (IP) to help better negotiate and articulate financing streams and define investment concepts (IC). The outputs of this project are primarily directed towards PAs leadership (e.g. mayors) and FIEs, including financial analysts, in order to align their interests, financial needs financial resources. This document is therefore tailored to PAs; all concepts and methodologies are introduced and explained in a level of detail that allow them, as well as other organisations involved in climate adaptation planning and implementation, to independently apply them in practice. Given the common practice among Public Authorities (PAs) to adopt a single comprehensive document that often encompasses both the strategic and operational dimensions—blurring the lines between investment strategies and investment plans—within the CLIMATEFIT project, the Work Packages (WP2, WP3, and WP4), which are responsible for guiding and implementing the full process from strategy definition to the development of bankable project pipelines, have decided to establish a joint taskforce. The aim is to produce a unified manual that supports PAs in their planning efforts. This integrated approach promotes a smooth and flexible transition across the different phases of the process, while accommodating the varying levels of advancement among PAs and facilitating a coherent progression from strategy to planning. The document therefore covers the key phases identified in Figure 1. Figure 1 Definition of key stages to develop pipelines of bankable projects. Source: CLIMATEFIT glossary The document encompasses the following deliverables, part of WP2, WP3 and WP4 (see Figure 2): 3 www.climatefit-heu.eu • Chapter 4.1: Investment Strategies Methodology [D2.3 by CMCC] • Chapter 6: Investment Plans methodology [D3.1 by SEI OX] • Chapter Error! Reference source not found.: Incentive Mechanisms [D3.2 by SEI HQ]). Figure 2 WPs tasks. Source: CLIMATEFIT Using the results of WP1 and workshops in T2.1 and T2.2 and capitalizing on the analysis provided in the Financing Landscape, the investment strategy methodology aims at translating local adaptation strategy into investment strategies. It provides a pragmatic and hands-on guidance to prioritise investment within adaptation strategies and projects that should consider in their design and implementation climate change risks and impacts. The methodology will help facilitators and PAs identify and articulate funding and financing sources (e.g., grants including EU funding instruments, national, regional and local budgets, loans and guarantees, private investments) and FIEs to finance pipelines of projects, also considering innovative strategies for mobilising financing for climate resilience. The investment strategy serves as a map, in the path from adaption strategies towards bankable adaptation projects. It provides the PA with knowledge on investment and financial opportunities, which will then be selected and packaged into the investment plan. To be complemented with a summary of the purpose of each stage, and its relationship to the project design and development process The process is built over the main stages of investment strategy and investment plan, with a number of modules for each of them. It has been designed to provide a ‘gold standard’ of project development. However, it is acknowledged that in many cases, certain steps will not be required, or there will be limited resources available for project development. Therefore, the guidance is structured with individual modules, which should all reviewed and by discussing with stakeholders a decision needs to be made on which modules are important and therefore should be included. Each of them contains a range of approaches, from light touch to in-depth to allow flexibility to fit the different context and needs. 2 Other projects 2.1 P2R P2R’s (Pathways 2 Resilience) focus is providing an adaptation finance process that is aligned with a transformational adaptation planning cycle, known as the Regional Resilience Journey. It highlights how adaptation finance generating investment strategies for adaptation pathways – broad trajectories of resilience against particular risks or in sectors, over a long time period (e.g. 100 years for Sea Level Rise). This involves looking at the regional context, baseline climate costs, Regions then develop a strategic approach to diversifying and scaling sources and instruments, before then developing their pathways, and then the near-term actions in their pathway as part of an action plan. 4 www.climatefit-heu.eu Figure 3 The Adaptation Investment Cycle phases supporting the Regional Resilience Journey. Source: P2R Whilst much of this will be helpful framing for CLIMATEFIT, Pathways2Resilience has a different focus from CLIMATEFIT in several ways: • Scale – The scale of the P2R approach is the regional scale – it focuses on the package of activities regions need to finance in a Climate Resilience Strategy and Action Plan. • Scope • Time period – Pathways2Resilience is focused on developing Investment Strategies for the entire pathway of a region. Whilst these will vary by sector or hazard, in general they are long term (for example to mid/end of the century), comprising multiple packages of adaptation options. • Focus on transformational adaptation • The later stages of focus on actions in the action plan cross over with CLIMATEFIT, in that they require an assessment of whether the projects meet the economic and financial appraisal criteria of the funders, To support their work P2R has developed a catalogue of financial sources and instruments • Which of those sources are accessible to CLIMATEFIT PAs? In theory, all sources and instruments are available or usable by regions in CLIMATEFIT. However, P2R is currently developing a guidance tool to help regions select sources and instruments depending on financing needs and other local / relevant criteria. • Which of the financial instruments are theoretical and which have proven record? 2.2 REGILIENCE Regilience (Regional Pathways to Climate Resilience) is a European project that aims at sharing the most promising cross-sectoral adaptation solutions, supporting cities and regions across Europe to become more resilient to climate change. The project is committed to support the European Green Deal and the EU Mission “Adaptation to Climate Change” by fostering the adoption of regional climate resilience development pathways. It develops, compiles, shares and promotes tools and scientific knowledge to support European regions in identifying and addressing their climate-related risks. It works closely with other sister projects, such as ARSINOE, 5 www.climatefit-heu.eu IMPETUS and TransformAr to foster the capacity of 7 focus regions to manage the unavoidable impacts of climate change. Regilience’s work encompasses the design and implementation of a broad range of communication and dissemination activities within the target groups, the enabling actors and the broader community. More specifically it aims at: • Understanding and addressing local and regional needs, • Connecting people and ideas, • Building local and regional capacity. • Strengthening resilience in 7 focus regions • Engaging with citizens and fostering their awareness • Collaborating with other projects Among the different tools and resources developed by the project, the Funding Opportunities Guide is a funding tool to raise awareness of available financial on European and national level dedicated to support regional climate resilience. It provides information on how to seek and attract funding, detailing European and national funding sources for adaptation. The tool can help PAs to provide answers to the following questions: • Which of those funding opportunities are not tapped by CLIMATEFIT PAs yet? • Which of those funding opportunities can be used as leverage for attracting private financing? 2.3 PIISA PIISA (Piloting Innovation Insurance Solutions for Adaptation) is a 3-year Research and Innovation Action funded under the Horizon Europe programme, which will co-develop climate resilient insurance portfolios and develop solutions for sharing climate-related risk and losses data. The project focuses on sectors like agriculture, forestry, cities and citizens’ well-being, tackling a host of climate enhanced hazards such as floods, droughts, forest fires, biotic risks, and various types of storms. The final aim is to develop and deploy a range of insurance innovations to cover at least 50% of losses attributable to climate change effects in Europe. The project hopes to support households, firms, and public authorities to set up adaptation and create adaptation promoting conditions. 2.4 SOTERIA Soteria (Solutions Testing for Regions through Insurance for Climate Adaptation) embodies a comprehensive and co-creative approach aimed at addressing the pressing challenges posed by climate change through innovative insurance strategies. The project is dedicated to advancing insurance solutions for climate change adaptation across diverse European regions and communities, with the aim of increasing Europe’s resilience and preparedness to face the unavoidable consequences of climate change. The mission encompasses three tracks: • Documenting best practices about data utilisation, emerging insurance models, and robust enabling frameworks. • Testing innovative solutions, taking them from research levels to demonstration and testing. Some of them will be taken up to the level of pre-commercial procurement in at least three cases. • Communities of Practice: placing emphasis on fostering communities of practice and insurance dialogues, to analyse the role of public modernisation and how to develop affordable insurance schemes that leave no one behind. The Communities of Practice will also support other regions interested in designing and/or adopting innovative insurance solutions. 6 www.climatefit-heu.eu 3 Key challenges and enablers from the Adaptation Investment Landscape Idea to summarise the barriers and enablers before going into detail with the development of the different stages. To be decided whether to keep here and further developed, or to be disregarded at this point of the document because in the IS phase there is the specific module on barriers and enablers. 3.1 Adaptation Finance Barriers CLIMATEFIT has used the findings from D1.1 (the Adaptation Investment Landscape) to help inform the design of its Investment Strategy and Plan methodologies. The main barriers are summarised below: • The main barrier for both PAs and Financing and Investment Entities (FIEs) is the lack of knowledge and expertise • Also identified that the challenge of quantifying economic or monetary benefits of adaptation • Regional differences in knowledge of climate risk and adaptation • Conflicting priorities (i.e. beyond adaptation) • A lack of capacity in PAs and staff constraints to apply for funding, as well as siloed governance • Lack of regulation • Limited visions of adaptation. An important finding of the study was that there was a mismatch between PAs and FIEs. PAs and FIEs may experience some similar and some different barriers, but they are two different worlds when considering the objectives that PAs and FIEs have regarding climate financing – with public bodies being driven by policy frameworks, and the investments not being attractive to private sector financiers. 3.2 Adaptation Finance Enablers CLIMATEFIT has used the findings from D1.1 (the Adaptation Investment Landscape) to help inform the design of its Investment Strategy and Plan methodologies. The main barriers are summarised below: Here you can find a list of Adaptation Finance enablers: - Supportive policy and regulatory environment – National strategies and legal frameworks must integrate adaptation to guide and attract investments. - Strong institutional frameworks and capacity – Institutions need clear mandates, resources, and coordination mechanisms to manage adaptation finance effectively. - Climate knowledge co-production and use – Decisions should be based on localized, userinformed climate data and risk assessments. - Financial planning and allocation tools – Mainstreaming adaptation into public budgeting and investment planning ensures consistent resource allocation. - Multi-stakeholder partnerships – Collaboration among public, private, and community actors boosts innovation and leverages funding. - Improved access to finance – Streamlining access to climate funds and promoting blended finance mechanisms is key to increasing financial flows. Therefore, all these enablers create a robust ecosystem for financing climate adaptation, especially for public authorities and local actors. 3.3 International Best Practices Additionally, the 20 international best practices helped identify eleven general key success factors of innovative Adaptation Funding and Financing Solutions (AFFS) and six conditions to transfer the researched AFFS to other territories, including the EU. 7 www.climatefit-heu.eu Figure 4 Enabling factors from CLIMATEFIT 20 international best practices. Source: CLIMATEFIT D1.1 The eleven key success factors are: 1. stakeholder involvement (collaborations between public and private partners, collaborations between public partners, community support), 2. legal compliance, 3. political support, 4. public resources, 5. private resources, 6. de-risking mechanisms, 7. a business case, 8. accountability/transparency/reporting, 9. financial incentives, 10. combining multiple sources/instruments, 11. having a long-term strategy or sustainable finance strategy, and 12. flexibility. The transferability conditions are public resources, (re)payment capacity, objectives and governance structure, outreach and awareness, public or private champions, and using established or tested models or mechanisms. 4 Process overview CLIMATEFIT is proposing a four-stage methodology, aligned with the project development cycle. This involves the development of the Adaptation Investment Landscape (AIL), the Investment Strategies (IS), the Investment Plans (IP) and Investment Concepts (IC). Table 1 Process overview Project stage Adaptation Investment Landscape Outline design Detailed design Procurement and Delivery Economic appraisal Longlist of options Shortlist appraisal – detailed Cost Benefit Analysis (CBA) Financial appraisal and commercialis ation Investment Strategies Investment Plan - Structuring of financial model Investment Concepts 8 www.climatefit-heu.eu 4.1 Role of the Local Resilience Taskforce Local Resilience Taskforces (LRTs) are platforms to engage multiple stakeholders in social innovation processes contributing to improving the funding and financing of climate adaptation solutions. They provide a structure for regional and local stakeholders’ engagement, laying the ground for social innovation approaches, adopted through the chronological steps of the project, from adaptation strategies, through adaptation plans to adaptation cases. The format of LRTs is also needed to apply the catalytic and systemic approach of resilience investment promoted by CLIMATEFIT and enables to boost the aggregation of several small [climate adaptation] project and make them more bankable. LRTs are the place where the codesign and collaborative planning of investment strategies (ISs), investment plans (IPs) and investment cases (ICs) will happen. According to the difference in maturity of adaptation finance matters within the PAs at each stage of the CLIMATEFIT methodology process, the LRT format and members are expected to evolve over time. LRTs gather multiple stakeholders directly concerned by climate adaptation planning, funding and financing, and are characterised by the following features: - Local and context dependent: LRTs are rooted in the local adaptation, legislative, and financial contexts and they aim to overcome barriers at the local level, taking into consideration also the political or legal constraints and existing collaborations with specific local entities. - Multi-stakeholder groups with delimited membership: within CLIMATEFIT, LRTs are initiated by PAs supported by their facilitators, who are ones identifying and involving relevant stakeholders, defining the primary objectives, and coordinating the administrative matters. Stakeholders are engaged gradually, following the LRT engagement strategy. - Encourage a collaborative approach of innovation: LRTs represent the arena where representatives from different entities (PAs, FIEs, companies, technical partners) adopt a social innovation approach. They interact, debate, and discuss to enhance their respective capacities/maturities, to guide internal decision-making processes toward the collective planning and design of investment strategies, investment plans and investment cases, for the successful concretisation of investment cases to co-develop and test adaptation solutions. - Flexible and evolutive implementation: being experimental arenas, they are evolutive and their implementation will inform models and guidelines for replicability across European territories. Within the LRTs, stakeholder engagement can take multiple forms, covering multiple activities allowing the participation of stakeholders into decision making. These range from more passive to more active activities and roles: information, consultation, dialogue, partnership and co-creation, With respect to the process of creation of investment strategies and plans, the role of LRTs is envisaged as of support in the collective identification of pipelines of adaptation projects and of funding sources, in the collective estimation of needed resources and costs, and in the development and testing of the investment strategy and plan, as well the smooth translation of the former to the latter. 4.2 How the guidance was produced The investment strategy methodology has been developed by reviewing the existing literature and the previous work from CLIMATEFIT WP1, WP2 and WP6, capitalizing on the knowledge developed and on insights from the first level trainings. Inputs from the participants to the task have been considered as starting points to identify the topics and the common elements that needs to be addressed by the methodology. The methodology incorporates first feedback from facilitators and technical partners and will be further codeveloped with facilitators and PAs, validated and tested thanks to the fast-track mechanism implementation in the 4 leader territories. At this stage, after carrying out the IS piloting phase in the 4 project lead territories, we undertook a consultation and review of the overall process in order to capture main challenges and lesson learnt and 15 www.climatefit-heu.eu Template 1 to be filled in by PAs Risk Sector Severity (e.g. High/Medium/Low) Urgency (e.g. High/Medium/Low) Prioritised (Yes/No) 7.Key issues to consider PAs that already have developed adaptation strategies and/or plans, or that have performed climate risk assessments while developing other strategies, can start from those documents and extract the relevant data and information, selecting and prioritizing the areas for intervention. In case such work has not been already performed at the local level, PAs can start by resorting to adaptation strategies and plans developed at higher level (e.g., regional and national), to identify which risks are applicable to the specific territory and require adaptation interventions at local level. There are several methodologies, instruments and standards that can provide guidance, tools and frameworks to help PAs in performing assessment of climate risks and/or prioritizing sectors of intervention. At a minimum, information should be drawn from the work performed in WP1 to develop D1.1, eventually complemented with content from local and regional adaptation plans/strategies/climate risk assessment already in place. Once climate risks are identified, it is important to define the scope of the CLIMATEFIT adaptation investment strategy, by determining the urgency of interventions in the different areas/sectors and prioritizing accordingly. PAs need to identify the risks they want to address and within which sector or specific municipality areas. It is crucial to define at an early stage what PAs aim to finance in the context of the investment strategy by determining the prioritized risks and sectors of intervention, as from these selections it will depend which adaptation options will be selected and possible ways of financing them. 8. Further reading/ guidance and resources Resources: EUCRA methodology The European Climate Risk Assessment (EUCRA) applies the climate risk concept of the Intergovernmental Panel on Climate Change (IPCC) Sixth Assessment Report (AR6) and the risk assessment guidelines of ISO 31000 and ISO 14091 where feasible. Based on existing scientific evidence, a structured risk selection, analysis and evaluation was carried out. The risk selection identified major climate risks for Europe based on common criteria, then the risk analysis classified them according to severity over time, based on potential for severe consequences and finally the risk evaluation phase evaluated the urgency for EU action considering risk severity over time, confidence in the risk severity assessment and the temporal aspects of potential adaptation actions jointly with risk ownership, policy readiness and the policy horizon. 16 www.climatefit-heu.eu Figure 9 Structured risk assessment in EUCRA. Source: EEA The risk selection identified major climate risks for Europe by an initial screening of the relevant scientific literature, guided by the following criteria: • High magnitude of potential adverse consequences in the present or future • High likelihood of severe consequences • High irreversibility of consequences (e.g. due to crossing of tipping points) • High potential for cascading effects beyond system borders, geographically and sectors • Aggravating effect of climate change over time. The risk analysis focused on assessing the risk severity for each major climate risk according to four classes (limited, substantial, critical and catastrophic), which was guided by quantitative benchmarks referring to economic impacts, effects on people and other impacts (land, ecosystems and iconic heritage assets). Figure 10 Risk severity classes in EUCRA. Source: EEA The assessment of risk severity was performed for three different time periods: current (up to 2040), midcentury (2041-2060) and late century (2081-2100). For the late century two broad climate change scenarios are considered (low warming, up to 2°C, and high warming, 3-4°C). The risk severity assessment was complemented by an assessment of confidence (high, medium, low) informed by the type, amount, quality and consistency of evidence as well as the level of agreement. The policy analysis assessed the policy horizon, risk ownership and policy readiness according to broad categories. The policy horizon (short (up to 2040), medium (up to 2060), long (up to 2100) indicates the future time horizon that needs to be considered in current adaptation decisions related to a particular risk. It considers two aspects: lead time and decision horizon. The lead time describes how long it takes to plan 17 www.climatefit-heu.eu and implement effective adaptation actions. The decision horizon describes the lock-in potential of current decisions related to climate-sensitive systems. Risk ownership describes where the lead responsibility to manage a major climate risk lies between the European level and Member State level. Policy readiness denotes to what extent a climate risk is being recognised and managed in Europe. The risk urgency evaluation determined the urgency and type of policy action according to 5 categories: urgent action needed, more action needed, further investigation, sustain current action, watching brief. Risk urgency evaluation algorithmically done based on outputs of the risk analysis and indicative policy analysis. The key element is a risk urgency matrix that considers risk severity, confidence policy readiness. EUCRA has followed a systematic risk assessment process that has identified and assessed 36 major climate risks for Europe, grouped into five broad clusters: ecosystems, food, health, infrastructure, and economy and finance (see Figure below). Almost all of the selected major risks can reach critical or even catastrophic levels during this century. In addition, the assessment identified three major climate risks specific to the EU outermost regions. More than half (21 out of the 36) major climate risks for Europe identified in this report need more action now, with eight of them being particularly urgent. Urgent action is needed for risks from all policy clusters, indicating that policies need to increase in ambition, scope and implementation. Many climate risks are characterised by long policy horizons, meaning that risk levels projected for the second half of this century are relevant to current adaptation decisions. Long policy horizons can be caused by long lead times for planning and implementing effective adaptation actions, such as in the case of complex coastal protection infrastructure. They can also be related to long decision horizons: current decisions can create lock-ins with long-term implications, such as for infrastructure built or forests planted today. In the case of long lead times or decision horizons, even climate risks that are not currently at critical levels could require urgent action to prevent very severe impacts in the future 18 www.climatefit-heu.eu Figure 11 Urgency categories and main risks in EUCRA. Source: EEA 19 www.climatefit-heu.eu 5.2 Get overview of context PAs operates in 1. Purpose of the module The purpose of this module is to produce an overview of the regulatory framework and the context of the PA, starting by looking at the European level, and then analysing the national, regional and municipal level. It is important to understand which are the frameworks, regulations and policies that impact adaptation and investment decisions, as the investment strategy should be aligned. 2. Inputs and prerequisites Understanding the sustainability scenario, conducting a context analysis, and identifying policy and regulatory mechanisms that are territorially relevant. It also includes an assessment of the political and regulatory landscape, in order to evaluate how PAs align with the broader context. This module is inherently connected to all other modules, as both the overall and local contexts are cross-cutting factors that shape, influence, and constrain all PA activities and strategic choices. 3. Skills and Expertise required Knowledge of the regulatory framework, policy priorities, existing strategies and plan, from higher to local level. In addition, understanding of how the PA is structured in terms of departments, their activities and responsibilities. For technical support, below you can find a methodology helpful to understand the main adaptation policies. 4.Activities and efforts Efforts include the search for and review of documents and frameworks from the European to the local to level to ensure alignment, making also use of resource such as the Country Profiles platform, and the review of the organisational structure of the PA and roles of the departments. 5.Stakeholders to involve and the role of the LRTs • Climate department • Financial department • City manager • Regional development agency 6. Outputs from the module Comprehension of the regulatory and policy framework related to adaptation aspects. 7. Key issues to consider A good starting point (and minimum requirement) is the result of deliverables D1.1 (especially Chapter 4) and D6.1 (Chapter 2.1), in which an overview of adaptation finance in the EU and of the adaptation policy context is provided, together with information on the specific territories. It is important to identify the existing documents and strategies, and ongoing projects and initiatives at local or national level that are related or contain elements of climate adaptation, which need to be considered and could be used as reference. Examples of such documents are sustainable development strategies, recovery and resilience plans, climate action plans, local budget cycles, infrastructure development or remodelling strategies, transport strategies, green infrastructure strategies, integrated investment strategies. 20 www.climatefit-heu.eu Adaptation financing strategies must be aligned with other financial plans, integrating them with the broader financial landscape. Alignment with policy and investment priorities can also strengthen the political support and encourage broader adoption of adaptation measures across department (IISD 2023). At the same time, from the point of view of investors, such alignment can provide reassurance and encourage buy-in. Furthermore, as there are different mechanisms of transfer of power across and within different territories, it is key to have a clear understanding of the institutional arrangements, in particular the distribution of power on climate finance decisions between the national, regional, and municipal scale government, and the governance at the national level and how these translate at regional and municipal level. Local conditions and legal constraints need to be taken into consideration: what PAs have the authority and legal power to decide and implement, identifying constraints both in terms of projects and administration of budgets. As an example, the fiscal power of local authorities varies greatly among European countries in terms of the types of taxes they can impose and of the discretion in the allocation of the revenues’ streams. Another example is the authorization from central governments to issue different types of financial instruments. Template 2 Scheme to be adapted by each PA, to identify the relevant regulations and documents at the different levels containing adaptation elements Within administrations themselves, there should be communication and sharing of knowledge and experiences, to break the silo approach. Adaptation challenges and adaptation finance should not be faced department by department but trough a unified approach. PAs should take stock of and evaluate their past experiences in terms of project implementation, funding and financing, across different sectors and departments, and capture already existing relationships with the private sector. The goal is to have a 21 www.climatefit-heu.eu comprehensive overview, identify potential actors to involve, methods that are currently being employed or that have been successfully implemented in the past and that can be replicated. A useful exercise is the mapping of the different departments within the PA that are already involved in adaptation or could potentially be involved, to start identifying relevant actors. This could be done by structuring an organisational chart or in a tabular form. Template 3 Example of organisational chart, to be adapted and filled in by PAs 8. Further reading/ guidance and resources Resources: ClimateADAPT Country Profiles This interactive platform showcases the status of national adaptation actions reported for European countries. For each of them, information on national circumstances, legal policy frameworks, strategic plans, good practices and subnational context are presented, along with links to the public documentation. Figure 12 Screenshot from Country Profiles platform. Source: ClimateADAPT 22 www.climatefit-heu.eu 5.3 Identify enabling conditions to overcome barriers 1. Purpose of the module As barriers to climate adaptation planning and finance can be highly context specific, this module aims at identifying the specific barriers PAs experience in their territories and defining actions to overcome them. 2.Inputs and prerequisites Comprehension of potential barriers that can affect PAs, by personal knowledge or internal discussions. This module is from a broad perspective connected with all the other modules, as the identification of barriers and actions to push past them is beneficial for the development of the investment strategy in general and might enlarge the spectrum of possibilities available to PAs. 3. Skills and Expertise required Understanding of the main types of barriers to adaptation finance and of those directly affecting the PAs. Understanding potential solutions and remedial actions. 4.Activities and efforts Efforts can include the review and expansion of work conducted in D1.1 and T2.1, consultations with internal departments and external stakeholder involved in the adaptation finance and implementation. In addition to discussions with internal and external stakeholders, the objective is to understand and identify the enabling factors and barriers, as well as local adaptation initiatives — especially regarding financing mechanisms — through the consultation of studies and papers at the national, local, and European levels. 5. Stakeholders to involve and the role of the LRTs • Climate department • Financial department • City manager • Regional development agency • NGOs • Local associations • FIEs • Climate agencies 6. Outputs from the module Identifying barriers, remedial actions and actors involved. At a minimum, the barriers identified in WP1 and set out in in D1.1. should be outlined, identifying potential remedial actions. Template 4 to be filled in by PAs Barrier Remedial Action Actors involved in the solution It is also important to consider the different effects of remedial actions, that could address multiple barriers at the same time. There does not need to be a one-to-one correspondence between barriers and remedial actions. 23 www.climatefit-heu.eu 7. Key issues to consider CLIMATEFIT D1.1 already provides a set of barriers from the point of view of the PAs, coming from the literature review and from interviews, but it is also useful to understand other potential barriers coming from the PAs consultations. Barriers coming from the literature (Moser et al., 2019) are categorized in 5 thematic items: • Establishing climate change risks as a matter of concern: o Conflict of interest, Climate risks are ignored because of expenditures, lost revenues and the absence of great near-term benefits due to the long-term nature of climate change. o Low priority. Lack of knowledge and interest in climate change from the PA. o Lack of champions and leadership. Lack of leadership from decision makers and chiefs of staff on climate change. o Disproportionate burden. Current issues such as education, housing, infrastructure are more pressing vulnerabilities. • Establishing adaptation funding needs, costs and benefits: o Inappropriate funding scale. Climate risks do not respect jurisdictional boundaries, potentially creating a mismatch between potential solutions and the authority of the PA. This barrier also entails the question or responsibility and accountability for climate change impacts. o Siloed governance. Disconnection between departments, creating unclear responsibilities, leadership, and accountability. o Inability to make the economic case. Inability to assess the need for action, challenge of valuing risks and benefits, ability to valuate monetary and nonmonetary value. • Proving the fiscal standing of the PA (adaptation funding seeker): o Chronic underfunding. Dependency on grants because of inability to effectively raise tax. • Identifying and accessing adaptation funding sources: o Lack of capacity and staff constraints to apply to fundings. Limited staff limits the capacity to apply to fundings. The PA does not have dedicated personnel focused on adaptation. o Discontinuous funding: short term projects for adaptation, in contrast with very long-term funding plans needed for climate change. o Aversion to innovation. Deviation from traditional projects not always welcomed by the bureaucracy. • Having or building capacity to research, use, and administer adaptation funds: o Funding biases: perception that there is only limited funding for adaptation implementation and planning. o Lack of knowledge about sources: difficulty to find relevant funding sources for adaptation. o Restrictions, conditions, eligibility criteria. Difficulties in meeting eligibility criteria for grants. o Lack of capacity of the PA to administer received funds. Interviews conducted in the territories highlighted the presence of the following barriers: 24 www.climatefit-heu.eu Figure 13 Results of interviews within CLIMATEFIT territories. Source: CLIMATEFIT Task 2.1 Workshop CLIMATEFIT D1.1 also identified some key enablers of adaptation finance from the literature: • Regulatory reform (industry, fiscal, financial, market and monetary) coupled with regulatory certainty, to address market fragmentation and reduce perceptions of high risk and uncertainty. • Expanding the actor space, thinking beyond current incumbents and creating diversity in adaptation innovation by involving a range of different investors and partners and actively including the private sector. • Private public partnership, blended finance, and de-risking of capital to overcome the trust deficit and mobilise additional finance. • Levelling up adaptation, with scholars, policymakers, and practitioners progressing uniformly adaptation and mitigation. • Bankable project pipelines improvements, increasing also the knowledge, skills, and capacity of both investors and governments. Within the 20 international best practices analysed in CLIMATEFIT D1.1, barriers identified refer to insufficient public resources due to budget constraints and priorities in other sectors, to the lack of long-term (financial) strategies, to limits imposed by the legal frameworks and to the lack of resources and incentives of private landowners. The following factors have been explicitly identified as enablers of successful development of the projects: 31 www.climatefit-heu.eu Figure 18 Screenshots from Green Deal Going Local Handbook for France. Source: European Committee of the Regions 32 www.climatefit-heu.eu 5.5 Estimate high level costs and benefits 1.Purpose of the module This module consists in starting a high-level estimation of costs and benefits for the defined longlist of adaptation options including externalities, revenues, and co-benefits, since their magnitudes and characteristics are important factors to consider for the step of selection of financing sources and instruments. This is because any investment proposition needs to articulate costs and how the returns will work, even if at a high level. Returns are normally made through user charges, fees or other income streams to repay the interest and capital. Furthermore, it is also important to identify and distinguish the social benefits (e.g. community well-being and quality of life), environmental benefits (e.g. sustainability of ecosystems) and economic benefits (e.g. cost savings, economic growth and prosperity of business, individuals and communities) of adaptation options, as well as who are the beneficiaries. This module should aim at obtaining an initial and general idea of the magnitude of cost and benefits, while a more detailed and fully-fledged cost benefit analysis will be conducted in the investment plan phase. In an optimal situation, these magnitudes should be quantified as much as possible, however the challenges of this step are acknowledged. Definitions Costs of adaptation: The cost of adaptation is the total expenditure dedicated to adaptation. Sometimes the cost of adaptation is defined as the total investment needs, which refers to the level of investment required to implement all the measures described in a given adaptation plan (national, subnational, sectoral or other). Actual spending consists of the expenditure mobilised for adaptation measures and tracked and categorised accordingly by governments, either annually or cumulatively since the beginning of the planning period. Planned expenditure is those budgets that governments have already committed to mobilising to comply with the adaptation plan but have not yet disbursed. EEA (2023) Assessing the costs and benefits of climate change adaptation Benefits of adaptation: The benefits of adaptation are commonly assessed by calculating avoided losses, i.e. considering the avoided direct and indirect damage to infrastructure and assets and the avoided deaths and well-being losses. They can also capture the effects on the local economy and the ancillary impacts of adaptation. These include reducing future risks, improving the productivity of unaffected resources and people, boosting innovation by seeking solutions amid new challenges, increasing the environmental benefits and improving ecosystem services. EEA (2023) Assessing the costs and benefits of climate change adaptation 2. Inputs and prerequisites This module is highly dependent on the module about the longlist of adaptation options and will in turn serve as input for the modules on the identification of the financing gap and on the time horizon of investment. 3. Skills and Expertise required Knowledge of cost and benefits of implementing adaptation options or contacts with internal and external stakeholders and experts who directly work on implementation of projects. Understanding of who are the beneficiaries of adaptation options and what could be the potential revenue streams. 4. Activities and efforts Efforts include consultations with technical departments and experts in the implementation of adaptation options and review of documentation on existing similar options. 33 www.climatefit-heu.eu 5. Stakeholders to involve and the role of the LRTs • Climate department • Technical departments (e.g., mobility, urban planning, green management, etc.) • Financial department • Local associations • External contractors 6. Outputs from the module The output of this phase is to carry out a cost-benefit analysis of the identified adaptation options. To support this process, the table below should be completed, associating each climate risk with its corresponding location, relevant adaptation option or project. This structured mapping will help provide a high-level estimation of expected costs, potential benefits, and the main beneficiaries. As a minimum, cost estimations should be categorized into broad classes—for example: small-scale options (below X €), medium-scale (between X and Y €), and large-scale (above Y €). In more advanced contexts, more precise cost ranges or actual figures should be provided, when available. Benefits should be assessed across three key dimensions: social, economic, and environmental, with a highlevel evaluation of the positive impacts in each category. If the longlist includes a high number of adaptation options (e.g. more than 20), and it is not feasible to estimate costs and benefits for all, a prioritization exercise should be conducted. However, care must be taken to ensure that all climate risks and relevant sectors identified in the first module are covered, and that the full range of adaptation solution types—such as Nature-based Solutions (NbS), organizational measures, and grey infrastructure—is adequately represented. Template 6 Database of costs and benefits to be filled in by PAs Risk Location Adaptation option or Adaptation project Costs Benefits Beneficiaries 7.Key issues to consider In this module only a high level approach to assess the order of magnitude of costs and benefits can be sufficient, while a more quantitative assessment and detailed analysis shall be conducted during the investment plan phase: this is why it is enough to understand the main adaptation costs regarding the adaptation options and projects and the potential benefits, as a starting point for the whole analysis that will be developed in the investment plan phase . Since there is not a standardized and unique catalogue of this kind of information at European level, PAs should try to gather them from different sources and, if it is possible, share the different sources in which the Cost-Benefit Analysis information where found. As a general approach for this step data on costs and benefits can be obtained by organizing tailored roundtables and/or workshops with stakeholders and practitioners in climate change adaptation from the different PA departments. Thanks to their expertise and network they may already have data and information from previous and ongoing projects, initiatives, actions, and strategies within their domain. During these activities the longlist of the selected adaptation options will be circulated to allow the stakeholders to start assessing and gather the cost data needs. Such effort could be carried out in this manner, following the diagram presented in Figure 19: 34 www.climatefit-heu.eu • If the information is available within the PA thanks to the practitioners’ expertise or can be retrieved through their network, then the data can be directly used • If information is not internally available, costs and benefits can also be collected by looking at other projects implementing the same kind of adaptation option and performing literature reviews. This could be done preferably by looking for projects implemented in areas close to the local territory of each PA, so that in principle data should be more easily transferable. Alternatively, PAs can geographically expand their research make use of case studies and best practices collected at the European level. • If it is not possible to collect data on the selected adaptation option, similar options can also be used as proxy in this phase. The same approach of starting from locally implemented project should be followed, resorting to wider geographical areas if more information is needed. Furthermore, since there may be high variability among different studies and projects because of the context specificity, putting together information from a variety of sources can also help to increase reliability. • The information collected should be adapted as much as possible and rescaled, adjusting it according to the specific characteristics of the project and the territory (e.g. magnitude of the intervention, price level in case the information is obtained from another country). To this end, interactions and feedback loops among the different departments can also help in validating the information collected and obtain a more reliable estimate. Figure 19 Process to obtain a first overview of costs and benefits of adaptation options. Source: CLIMATEFIT Since conducting an extensive review of many different measures would be too resourceand timeconsuming, it is important that the search is really targeted to the risks and longlisted options identified in the previous steps of the methodology. Collected data need to refer to the adaptation options themselves and not for example to the implementation of an entire project. At this stage, estimates could also be presented as ranges following a high-level approach, with identification of more precise costs and benefits to be performed in the Investment Plan phase. Finally, a common database could be constructed and filled in as work progresses. The idea is to gather and categorize (according to the risk addressed and the location of the intervention) all information collected by PAs on costs and benefits of adaptation options, so that the database becomes a knowledge-sharing platform available to everyone and from which PAs themselves can build on. 8. Further reading/ guidance and resources Resources: Climate-ADAPT case study explorer The catalogue showcases many implemented adaptation options and initiatives, providing also information on costs and benefits. Users can identify the more relevant cases by filtering according to adaptation sectors, climate change impacts, key type measures and adaptation approaches. The case studies can be also accessed through the ClimateADAPT resource catalogue. 35 www.climatefit-heu.eu Figure 20 Screenshot from Case Study Explorer. Source: ClimateADAPT 36 www.climatefit-heu.eu 5.6 Identify the financing gap 1. Purpose of the module This module consists in comparing the broad estimate of the aggregated, total costs and benefits with the resources that the PAs have already available and their planned expenditure. The difference determines the gap that will need to be filled with additional resources, either from public sources or private ones. Definitions Adaptation finance gap: The difference between the estimated costs of meeting a given adaptation target and the amount of finance available. Term commonly referring to national, continental, or global finance gaps. It can be applied to the local level. (CLIMATEFIT glossary) Adaptation funding gap: The difference between the available capital for a given adaptation initiative or project and what is required to fully cover the costs of the same. Term commonly referring to subnational finance gaps and used interchangeably with adaptation finance gap. (CLIMATEFIT glossary) 2. Inputs and prerequisites This module is highly dependent on the module about the high-level estimation of costs and benefits and will in turn be instrumental for the development of the modules on the time horizon of investment and the identification of potential range of financing sources and instruments. 3.Skills and Expertise required Knowledge of financial processes in general, and if in particular there are some related to climate adaptation. Knowledge of budget allocation within the PA and across the different departments, especially budget allocated for climate aspects, for example annual budget or initiatives in pipeline. If it is possible, will be useful to map and share specific adaptation projects and the relative costs. Some CLIMATEFIT partners have already defined budget allocations for specific adaptation options and have broken them down into individual adaptation projects. This allows for a more precise estimation of specific costs and financial needs. Additionally, there may be private sector or business-led initiatives that regularly finance adaptation actions. These actors could play a key role in supporting the funding of adaptation measures, potentially contributing significantly to the overall investment strategy. 4. Activities and efforts Efforts include consultations with and information retrieval from the financial department, review of allocation of funds and budget across the different units/departments. 5. Stakeholders to involve and the role of the LRTs • Financial department • Budget units • Technical departments (e.g., mobility, urban planning, green management, etc.) • City manager • Specific units or departments focused on Sustainability 6. Outputs from the module Identification of the quantitative difference (if possible) or at least a tentative estimation between the available resources (including budget allocated from the municipality for climate adaptation initiatives and possible other private initiatives) and the real need of the investments. If the budget does not cover the entire investment budget, the municipality will need investment to fill the gap. 37 www.climatefit-heu.eu 7. Key issues to consider Within the PA, the different lines of budget that could be used for adaptation purposes should be identified across the different departments, through exchanges of information. In this module, the involvement of the finance department is crucial. PAs can cross reference information on the budget with the longlisted adaptation options and their estimated costs and benefits and investigate different channels (Table 2). Table 2 Channels to be investigate within PAs Channels Specific funds and streams for adaptation measures already earmarked Consultation with the specific departments who would be in charge of the implementation of the options Consultation with the financial unit Identification of already existing agreements with private entities Tracking public expenditure on climate change adaptation is important for providing a baseline for identifying the financing gap, and for helping territories to prioritise and plan. Current expenditure on adaptation in the CLIMATEFIT territories is not well documented. Cost-benefit analyses, vulnerability or feasibility studies, and impact assessments, when conducted, are usually outsourced by PAs (CLIMATEFIT D1.1). When planning climate adaptation investments, public authorities face the challenge of allocating resources efficiently to maximize benefits and minimize costs. A highly effective approach is to break down adaptation options into adaptation projects, individual activities or operational components. This disaggregated view allows for more precise assessment of both the costs and the benefits associated with each specific action, making it easier to identify the most impactful and sustainable measures. It also enhances the adaptability of the strategy to local needs and improves transparency and communication with stakeholders throughout the planning and decision-making process. 8. Further reading/ guidance and resources Resources Tracking Adaptation Finance, CPI (2019) Tracking Adaptation Finance: Advancing Methods to Capture Finance Flows in the Landscape. The report proposes methods to identify and track streams of adaptation finance. In the context of the investment strategy, this document and especially the table identifying the keywords by sector can be useful to identify workstreams and activities within PAs’ departments that involve aspects of adaptation finance and whose resources may be therefore tagged for adaptation. 38 www.climatefit-heu.eu Figure 21 Part of table on keyword list by sector for illustrative purpose. See full table in CPI document. Source: CPI COST BENEFIT ANALYSIS OF CLIMATE ADAPTATION OPTIONS SUPPORTED BY THE ADAPT PLAN PROJECT - A Cost Benefit Analysis of Climate Adaptation Options, UNDP The report applies a comprehensive Cost-Benefit Analysis (CBA) to evaluate the socio-economic viability of a proposed investment project, using the methodology recommended by the European Commission's guidelines for major investment projects (specifically, 2014/C 209/01). This approach moves beyond assessing the financial feasibility of the project alone, aiming instead to understand its long-term value to society as a whole. The analysis begins by establishing a clear comparison between two scenarios: one with the implementation of the project, and one without it (the so-called "do-nothing" or baseline scenario). This comparative framework helps to isolate the direct impacts of the project. The report then quantifies all the relevant economic costs and benefits. Costs include capital expenditures, as well as ongoing operational and maintenance expenses. On the benefit side, the analysis considers tangible advantages such as time savings, reduced environmental impacts (e.g., lower emissions), operational efficiencies, and improvements to quality of life or public safety. To ensure comparability over time, all future costs and benefits are discounted to their present value, using a discount rate of 4% as recommended for Italy by EU guidance. This allows for the calculation of several key indicators, such as: • Economic Net Present Value (ENPV): the overall net benefit of the project, • Economic Internal Rate of Return (EIRR): the rate at which benefits equal costs, • Benefit-Cost Ratio (B/C ratio): the proportion of benefits to costs. Finally, the report conducts both a sensitivity analysis (to test how changes in key variables affect the results) and a risk analysis (to identify potential uncertainties and how they might influence the project's performance). 39 www.climatefit-heu.eu 5.7 Define time horizon of investment 1.Purpose of the module The outcome of this module should be a high-level allocation of the investment needs into the different time horizons, in order to obtain a general timeline. In other words, this means distinguishing the level of investment needed over different time periods. 2. Inputs and prerequisites This module is highly dependent on the modules about the high-level estimation of costs and benefits and the one on the financing gap. In turn, it will serve to complete the modules on the identification of potential financing sources and instruments and the preliminary matchmaking. 3.Skills and Expertise required Knowledge about the timescale of implementation of adaptation options and the time horizon for their financing. 4. Activities and efforts Efforts include the review of the timescale for the implementation of and the investment needs for climate adaptation options, consulting with financial and technical departments. 5. Stakeholders to involve and the role of the LRTs • Financial department • Budget units • Technical departments (e.g., mobility, urban planning, green management, etc.) • Development agencies • City manager 6. Outputs from the module The output of the module is to identify the investment time horizon by allocating actions across the short, medium, and long term. The allocation of investments across these timeframes will be determined by Public Authorities (PAs) based on their investment needs and strategic objectives, aligned with the selected adaptation actions and projects. This process will be supported by the integration of the table below, which helps contextualize and structure the investment horizon. Template 7 to be filled in by PAs Adaptation option or Adaptation project Short term (1-5 years) Medium term (5-10 years) Long term (> 10 years) The table above is just a potential example of short, medium and long term regarding the time horizon of investment. Generally, there’s not a framework that indicates a specific time horizon of investment, instead there are some voluntary recommendations that can help the analysis. For example, the TCFD (Taskforce on Climate-related Financial Disclosure, now integrated in IFRS S2) ask to give a “description of what they consider to be the relevant short-, medium-, and long term time horizons, taking into consideration the useful life of the organization’s assets or infrastructure and the fact that climate-related issues often manifest themselves over the medium and longer terms”: the time horizons have to be aligned with the expectations, the needs and the projects of the specific municipality. 40 www.climatefit-heu.eu Another interesting reference can be the Corporate Sustainability Reporting Directive (CSRD) that substitutes the Non-financial declaration: “in line with the provisions of the ESRS (CSRD) standards, the organization defines the time horizons as follows: short term (0–3 years), medium term (3–10 years), long term (over 10 years), consistently with the useful life horizon of its assets and corporate strategic plans.” However, if a municipality decides to choose specific time horizon, the rule is to comply with the regulatory scenario or explain why they decide to go ahead with another option. Il most of the cases, the municipality have to decide the best investment time horizon, aligned with the adaptation initiatives in pipeline. 7. Key issues to consider Starting from the identified adaptation options and investment needs, create a sort of timeline to distinguish between short/medium/long term to have a clear overview of the magnitude of investments needed in each phase. This module also connects to module 1 on prioritising risks and sectors, and module 4 on longlisting adaptation options by looking in more detail at priorities for investment options and their shortlisting to create portfolios later on. It also helps in placing options in provisional order for implementation in the investment plan phase. Generally, municipalities incur costs without immediate returns when investing in climate adaptation. Benefits typically emerge in the medium term, although this varies depending on the type of project. For instance, targeted adaptation measures—such as depaving or the construction of flood protection walls— can yield results relatively quickly, as they are straightforward to implement and highly effective. In contrast, larger-scale initiatives like urban regeneration or the creation of green spaces often require more time, resources, and coordination, with benefits typically materializing over the medium to long term. All of this will enable a stronger alignment with the Investment Planning phase foreseen in WP3. 8. Further reading/ guidance and resources Resources: Guidance for applying the Enabling Resilience Investment Framework (CSIRO 2022) and P2R The guidance describes a process of generating and then screening options based on simple criteria (providing guiding questions to help the assessment such as timeframe, and interdependencies on other activities) and then prioritising and placing them in a provisional order for implementation (i.e. sequencing). In a next step, options are sorted into foundational and enabling options (learning, capacity building, or other institutional options); other options are funnelled into a phase 2 to build investment cases for funding and financing of infrastructure or assets. P2R guidance similarly includes a step where options are prioritised and sequenced. One consideration is the timeframe of when the options need to be implemented and paid for (based on timing of risks), and of when benefits (including financial returns but also non-financial such as the value of information) are expected. P2R adopts the portfolio or ‘building block’ approach which categorises early actions into low/no regrets, climate smart design and adaptive planning (updated in the UK’s CCRA3 Technical Report (2021) section 2.3). This framing focuses on the most urgent risks and the uncertainty of climate change. CSIRO guidance and P2R use an ‘adaptation pathways’ approach to prioritise and sequence options into portfolios. Adaptation pathways are defined by the IPCC 2021) as “a series of adaptation choices involving trade-offs between short-term and long-term goals and values. These are processes of deliberation to identify solutions that are meaningful to people in the context of their daily lives and to avoid potential maladaptation”. P2R recommends developing investment strategies for each pathway (one pathway is developed for each priority area or sector in connection to the region’s strategic objectives. Adaptation pathways are developed as part of the adaptation planning process. 47 www.climatefit-heu.eu Figure 29 Mapping of sources, actors and instruments. Source: Glasgow resource mobilisation plan OECD Climate Adaptation Investment Framework For the decision and prioritisation of financial instruments, PAs should make use of both existing financial instruments they are familiar with and explore new, potentially innovative instruments that can be aligned with identified adaptation options and specific adaptation projects. For example, the OECD (2024) proposes a structured framework to guide governments in identifying and prioritizing financial instruments for climate adaptation. Central to this approach is the translation of adaptation priorities—often established through National Adaptation Plans—into robust financing strategies, such as adaptation investment plans. The framework emphasizes the strategic use of public tools (e.g., direct expenditure, procurement, PPPs), private mechanisms (e.g., green bonds, equity), and blended finance. Prioritization is guided by context-specific criteria including climate impact potential, socio-economic returns, scalability, and alignment with national policy goals. In this framework is provided a set of diagnostic questions designed to evaluate enabling conditions and match financial instruments with sectoral needs and risk profiles, thereby promoting an evidence-based, systemic selection process. 48 www.climatefit-heu.eu 5.9 Match types of adaptation options with financial entities/instruments 1. Purpose of the module All the work performed in the previous modules and the information collected should be put together to obtain a broad overview of the longlisted options and the identified funding/financing possibilities. 2. Inputs and prerequisites Overall, this module builds on all the precedent modules, and it can be considered in some sense the final module of the investment strategy, which draws together all the efforts. 3. Skills and Expertise required Knowledge of financial sources and instruments, knowledge of adaptation options. Ability to make connections and merge the information collected, considering both general and context specific aspects. 4. Activities and efforts Efforts include the review of the information collected and the consideration of characteristics of adaptation options, projects and investments, weighting the different possibilities and combinations also with the help of the resources presented below. 5. Stakeholders to involve and the role of the LRTs • Climate department • Financial department • City manager • Consultants 6. Outputs from the module The priority is to carry out matchmaking between adaptation options or projects and relevant financing sources and instruments. This process will be supported by the table below. Template 9 to be filled in by PAs Adaptation option or Adaptation project Financing sources Instruments 7. Key issues to consider The creation and use of an investment compass as the one showed below may be useful, since it connects information on investment landscape, FIES, adaptation needs and interventions, all very specific to the national and local context. Inputs to personalise this compass can come from the adaptation investment landscape of CLIMATEFI D1.1, the previous modules of the investment strategy and the CLIMATEFIT D1.1 best practices database. 49 www.climatefit-heu.eu Template 10 Generalized investment compass, to be filled in by PAs and modified according to their specificities The high-level and preliminary matching should happen considering the characteristics of the financial sources and instruments (Section 6.8), the economic and financial indicators, and the characteristics of the adaptation options themselves (Sections 6.4 to 6.7), such as the size, costs and financing gap, the potential cash flows or revenues that the project could generate and the time horizon, Projects may also be bundled together, creating a package that may be more attractive for potential FIEs: for example, adaptation options able to generate revenues may be bundled with options that cannot, or different smaller options maybe be gathered to reach a critical size. At the same time, also different financing sources and instruments can be used for the same project, for example to cover different implementation phases. Some practical examples showing how different financial instruments have been used to finance climate adaptation projects are collected in the CLIMATEFIT D1.1 best practices database, as well as in the P2R catalogue of sources and instruments (case studies section). 8. Further reading/ guidance and resources Resources Net Zero Cities Finance Guidance Tool The tool helps cities in finding the best funding sources for their projects. By filling out a questionnaire, PAs can outline their financial needs and filter through a range of financing options that match their specific requirements. Climate Finance Decision Making Tree The framework defines a series of questions that the PAs need to consider to evaluate various financing possibilities, on the basis of the characteristics of the planned project and of the PA itself. Furthermore, each proposed financing tool proposed is described with advantages and disadvantages. Error! Hyperlink reference not valid. Effective climate adaptation finance depends on the strategic alignment of specific adaptation projects with suitable financial instruments. The OECD (2024) highlights that the clearer and more concrete the adaptation initiative—whether infrastructural, ecological, or social—the easier it becomes to match it with an appropriate financing source. Financial tools vary in their risk appetite, return expectations, and eligibility criteria; thus, projects with defined outcomes, timelines, and co-benefits are more likely to attract support. For instance, highly concessional funding may suit non-revenue-generating social adaptation measures, whereas revenue-linked infrastructure projects may be matched with green bonds or blended finance schemes. The Climate Adaptation Investment Framework underscores that a structured pipeline of adaptation projects is essential to engage both public and private capital efficiently, 50 www.climatefit-heu.eu ensuring that funding mechanisms are tailored to the scale, nature, and expected impact of each intervention Error! Hyperlink reference not valid. Successful climate adaptation financing hinges on the ability to align specific adaptation projects with the most appropriate financial instruments. As highlighted by both the OECD (2024) and Adaptation Scotland (2024), this “matchmaking” process requires a clear understanding of project characteristics—such as scale, risk profile, and potential returns—and how these align with the requirements of different funding sources. Public grants may suit community-based or non-revenue-generating initiatives, while revenuelinked or cost-saving projects may attract private or blended finance. The more concrete and welldefined the adaptation project—complete with measurable outcomes and co-benefits—the greater the likelihood of securing suitable financing. This reinforces the need for structured project pipelines and finance-ready business cases as essential tools to bridge adaptation needs and available capital. Glasgow Resource Mobilisation Plan Matching adaptation interventions with sources of finance. Even if not fully aligned with the module, it can be used as inspiration by Pas. 51 www.climatefit-heu.eu Figure 30 Matching of adaptation interventions with sources of finance. Source: Glasgow resource mobilisation plan 52 www.climatefit-heu.eu 5.10 Governance and resources 1.Purpose of the module This module aims at identifying all the relevant actors/entities to be involved in the development of the investment strategy. It is key, throughout all the modules, to include both Pas internal actors (e.g. different departments) and external actors, reflecting on the role of each of them and taking into account the different governance mechanisms as well as the role of LRTs. 2. Inputs and prerequisites This module is highly connected with all the other modules of the investment strategy, acting as an overarching component that helps pinpointing the important and appropriate contributors for each of them. 3. Skills and Expertise required Understanding of how the PA is internally structured in terms of departments, their activities and responsibilities. Knowledge of the external stakeholders, their interests and activities carried out. 4. Activities and efforts Efforts include exchanges and consultations with the stakeholders (internal and external) to identify roles, capacities and assign responsibilities, also by reviewing and potentially extending the analysis of the organisational structure of the PA. 5. Stakeholders to involve and the role of the LRTs • Climate department • Financial department • Planning department • Technical departments • City manager 6. Outputs from the module The output of this final module is to identify the actors and contributors that need to be involved in the future development of the investment strategy, with a breakdown by individual module. Template 11 to be filled in by PAs Modules Internal actors Contribution - internal External actors Contribution - external 1 Assessment and prioritisation of climate risks and sectors 2 Context overview 3 Barriers and enabling conditions 4 Longlist initial set of adaptation options 5 High level estimation of costs and benefits 6 Identification of financing gap 7 Time horizon of investment 8 Range of possible financing sources and instruments 9 Matchmaking between types of adaptation projects and potential FIEs/instruments 53 www.climatefit-heu.eu 7. Key issues to consider The development of the investment strategy in PAs should not be carried out through singular approaches of the involved partners but a choral effort. It is important to recognise that not a single actor/department can carry out all the modules. There should be allocation of tasks and shared responsibility among the different departments, according to their competences, the resources available and avoiding silo approaches. Governance mechanisms should be put in place to ensure active participation. Different types of profile are important, such as technical units, units responsible for climate adaptation, financial departments and decision makers. Considering the importance of the human factor, for each of the modules of the investment strategy it can be useful to identify the different actors to involve and determine their role, contributions and responsibilities, to obtain a clear overview. Once all the elements of the investment strategy are brought together and agreed among participants, the way forward will consist in proceeding with the development of the more detailed investment plan, in order to start filling in the financing gap. 8. Further reading/ guidance and resources Resources Stakeholder Engagement: A Good Practice Handbook for Companies Doing Business in Emerging Markets The document published by the IFC (International Finance Corporation) addresses precisely the issue of managing stakeholder engagement in projects, especially in emerging markets. Here is a summary of its main contents. The objective of the document is toprovide practical guidelines for effectively involving stakeholders (stakeholders) in corporate projects, in order to improve social and environmental sustainability, reduce risks and build trust relationships. Stakeholder Engagement: A Road Map to Meaningful Engagement (Fundación SERES) This guide provides a practical framework for organizations—including public authorities—to develop effective stakeholder engagement strategies. It outlines key phases such as stakeholder identification, prioritization, dialogue planning, and long-term relationship building. The document emphasizes the strategic value of engagement in decision-making, risk management, and sustainable development. 54 www.climatefit-heu.eu 6 Phase 2: Develop your Investment Plan The section related to the development of the Investment Plan phase will be developed in detailed under Deliverable 3.1. Funded by the European Union. Views and opinions expressed are however those of the author(s) only and do not necessarily reflect those of the European Union or CINEA. Neither the European Union nor the granting authority can be held responsible for them. Confidential Annex – Additional resources for investment strategies Module 1: Assess and prioritise climate risks and sectors ISO standards (3100, 14091, 14092) ClimateADAPT RAST – Step 2 EU Mission Adaptation to climate change - Guide to climate risk assessment Climaax CRA Handbook A changing climate for development, Climate Ready Clyde and Adaptation Scotland (Sniffer), Lindsay, R. S., England, K. and Beswick, A. (2019) Principles of Climate Risk Management for Climate Proofing Projects, Paul Watkiss, Robert Wilby, and Charles Andrew Rodgers (2020) ISO standards ISO 31000 standard on risk management - Guidelines ISO 14091 on adaptation to climate change - Guidelines on vulnerability, impacts and risk assessment ISO 14092 on adaptation to climate change - Requirements and guidance on adaptation planning for local governments and communities ClimateADAPT RAST - Step 2 2.1 Defining the core elements: choose guiding principles (e.g. just resilience), the methodology for technical risk analysis and the governance (e.g. ownership of data, communication of results and stakeholder engagement). The methodology depends on local conditions (available resources, data, stakeholder involvement, potential risks, desired outputs) and it should align with national procedures and assessments. Aim of the methodology: • Define the assessment's scope, objectives, timeframe, climate change scenarios and geographical coverage. The specific people, sectors and regions to be assessed should be clearly outlined. • Identify past and current risks. • Anticipate future risks and opportunities resulting from climate change. • Evaluate identified risks. It is essential to involve all stakeholders (experts, local actors, sector representatives, citizens, vulnerable groups) and determine how they will be engaged to ensures relevance, effectiveness and inclusion. 2.2 Identifying risks: consider vulnerability and broader impacts. • Collect local data on climate risk: systematic inventory of risks on past climate, records of data for multiple hazards, information on exposure and vulnerability (based on local geographical and socio-economic features) and assessments at higher level, national or continental. • Understand and consider vulnerability: identify vulnerable areas and most socially vulnerable groups (e.g. population density or age structure) with their needs, both in terms of general sensitivity to climate impacts and exposure of assets, also to prioritize adaptation efforts. • Consider trans-regional and cascading impacts: collaboration is essential among local or regional authorities and neighbouring jurisdictions, as well as among sectors, to address shared risks and navigating different political, legal and institutional contexts. 2.3 Assessing climate risks: combine datasets on hazards, exposure and vulnerability, under current and future climatic and socio-economic conditions. Select multiple future climate scenarios to account for a range of possibilities (e.g., 'worst case', 'best case', 'mid-range') and consider factors like spatial scale, baseline period, projection timeline, the emission scenario and socio-economic scenario. Assessing climate risks likelihood helps in defining priority areas and establish adaptation objectives. 2.4 Defining key risks and adaptation objectives: identify priority areas based on the severity of impacts (who and what is most at risk), focusing on risks in the short, medium and/or long term, considering whether impacts are already occurring now and set to worsen due to climatic or non-climatic drivers, determining if critical infrastructure or with long lifespans are at risk. 56 www.climatefit-heu.eu EU Mission Adaptation to climate change - Guide to climate risk assessment Guidance and examples in the form of matrices and tables. Action 1. Preparing the ground: consider climate risk assessment scope in relation to regional or local authority’s powers, methodological approach and its alignment with existing risk management processes, stakeholders involvement to ensure assessment’s relevance, importance and legitimacy. Action 2. Assessing climate vulnerabilities: identify and rate adaptive capacity of people, ecosystems, assets, and services and their (direct and indirect) sensitivities to climate-related hazards. Vulnerabilities ratings are obtained combining ratings of sensitivities and adaptive capacities. Action 3. Identifying future scenarios: choose future scenarios to understand the extent to which climaterelated hazards may change. Important to select more than one scenario to take account of uncertainties and identify near-term (2021-2040), medium-term (2041-2060) and/or long-term (2081-2100) scenarios. It may make most sense to use the same projections used by your national adaptation strategy or plan. Action 4. Assessing future potential climate-related impacts: identify and rate the exposure to future climate-related hazards for each scenario. Ratings of potential climate-related impacts are obtained combining the ratings of vulnerabilities and exposure. Action 5. Assessing climate risks (and opportunities): rate the likelihood of future potential climate-related impacts and combine them with the ratings of their magnitude to determine high climate risks and opportunities to focus on when subsequently identifying adaptation options. Action 6. Communicating uncertainties: consider and communicate uncertainties related to data and knowledge used to determine the sensitivities, adaptive capacities, future scenarios, exposure to climaterelated hazards, the likelihood of climate-related impacts, and the timing and spatial distribution of climate risks (and opportunities). Climaax CRA Handbook 4-year Horizon Europe (2023-2026) project that provides financial, analytical, and practical support for regional climate risk assessments, contributing to harmonization and consolidation of climate risk assessment (CRA) practices by providing guidance, tools and datasets. It includes a standardized framework and a toolbox which hosts data, models and utilities and provides access to European and global open data archives integrated with local data and procedures. Highlights of the CLIMAAX Framework and Toolbox: • Relevant steps that are encouraged to be followed for a CRA with the possibility of including quantitative and qualitative aspects for maximizing output quality. • Stakeholder engagement processes • Selection of hazards that have substantial societal impact and will be affected by climate change. • Selection of indicators for meteorological or hydrological hazards and societal or ecological impacts that can be used for designing and monitoring adaptation and risk management strategies. • Use of climate and socio-economic scenarios relevant for impacts and risks that needs to be accounted for by regions and communities for adaptation/risk management strategies. Figure 31 Climaax CRA Framework. Source: Climaax The framework is composed of 5 participatory steps and ensures social justice and equity. Scoping phase: define objectives, set the context, identify stakeholders and assign risk ownership. 63 www.climatefit-heu.eu As mentioned, for now there is not a unified catalogue/database with this type of information. However, the ongoing (2024-2027) Horizon Europe project “Study on the macro-economic impacts of the climate transition” aims, among other objectives, at quantifying the investment needs for adaptation to climate change across all EU Member States, identifying adaptation measures and their costing. Module 6: Identify the financing gap Mainstreaming, accessing and institutionalising finance for climate change adaptation, OPM (2017) Mainstreaming, accessing and institutionalizing finance for climate change adaptation OPM Report “Mainstreaming, accessing and institutionalising finance for climate change adaptation” provides an overview and comparison of approaches to tracking expenditures, including budgetary analyses, public expenditure reviews and budget tagging systems. It illustrates both objectives-based and benefits-based approaches for estimating the climate change relevance of projects. They work by flagging budget codes that are relevant to CCA/M on a government financial management IT system to show the full public expenditure. Green budgeting approaches, including green budget tagging, can also support developing a baseline of expenditure as an input to establishing adaptation funding needs, costs, and benefits. Green budget tagging is used to help track existing and planned adaptation expenditure. While the approach has emerged in national context, they are also applicable to regions (OECD, 2022a). Several cities are participating in the C40 Climate Budgeting Programme for example. Module 8: Identify the range of possible financial sources and instruments Net Zero Cities “City climate finance: landscape, barriers and best practices” (2022) Regilience Funding Opportunities repository NAP Global Network Inventory of innovative financial instruments for climate change adaptation G20/OECD Report on approaches for financing and investing in climate-resilient infrastructure Financial Instruments Library - Cities Climate Finance Leadership Alliance Covenant of Mayors Financing Opportunities and Innovative Financing Schemes Net Zero Cities “City climate finance: landscape, barriers and best practices” (2022). Additional types of financing opportunities from the private sector are described in this report. Debt financing instruments include those transactions in which investors lend money with the promise that the principal together with interest will be returned on the maturity of the bonds. • Green investment loans: loans used to finance or re-finance eligible Green Projects, which must align with the 4 core components of the Green Loan Principles (use of proceeds, process for project evaluation and selection, management of proceeds, reporting) and should provide clear environmental benefits, assessed and quantified, measured and reported to deter greenwashing. • Municipal bonds: debt securities issued by a state, municipality, or governing bodies usually to raise capital for its infrastructure projects. Bonds are primary issued by the municipalities themselves and can then be traded in secondary markets. They are associated with low risk and often tax exempted, and therefore can be especially attractive to investors. • Pooling municipal debt: a specifically authorized bank purchases municipal bonds issued by local governments, pools and then issues them in the market. • Mini bonds: municipal bonds with a lower unit price, marketed directly to individuals without an underwriter serving as broker-dealer. The Municipality assigns a firm to process the sale transaction, maintain the records and execute maturity payments. Mini bonds connect the taxpayers to the public projects, thus engaging citizens, increasing citizens’ access to municipal bonds, increasing the perceived equity of tax-exempt financing, and increasing social capital while funding capital projects. However, the role of mini bonds is often limited in scale as they are limited number of local investors and due to the high marketing costs. There are also Institutional investors, such as insurance companies, commercial banks, pension funds, mutual funds, hedge funds and sovereign wealth funds, who buy, sell and manage stocks, bonds, and other investment securities on behalf of its clients, customers, members, or shareholders. The focus is on long 64 www.climatefit-heu.eu term and high-risk investments, they can finance projects that meet their financial criteria (Risk-return-ratio). The municipality has access to large capital and therefore needs to bundle its projects for financing. Relatively high transaction costs. Equity financing include transactions in which investors buy a portion of equity in the listed public company or a non-listed entity in the form of shares. The company does not have repayment obligation but is obliged to share profits. Equity financing is usually used to finance high risk projects that are usually not financed by debt instruments. • Private equity: investment in a company or an entity not publicly listed or traded with the intent to take total control of the company after the buyout, with the aim to streamline operations, increase revenues and sell it at a profit. Usually, multiple investors’ assets are pooled and generate large capitals for investments. With the successful mainstreaming of ESG investing, private equity fund managers are compelled to produce new innovative products to meet the increasing demand for private equity in the ESG space. Private equity firms use both equity and debt in their investment. Private equity can play an important role in PPP infrastructure renewal projects. • Venture capital funds entrepreneurs, start-ups and young businesses with high growth potential who lack access to debt instruments, by pooling resources from a few investors who are offered substantial portions of the company on limited partnerships basis against their investment. They usually provide funding to innovative, high risk, niche projects, and can be a tool to spur innovation. • Green equity: process of investing equity capital in projects ensuring environmental sustainability. By providing both financial and environmental returns, it may be appealing to a wide target audience. Investors with a greater financial risk appetite may find it appealing if the environmental impact is significant, measurable and pre-determined. Other innovative instruments: • Carbon finance: financial instruments and mechanisms such as carbon credits, carbon offsets, and carbon taxes, that support projects aimed at reducing greenhouse gas emissions and abating or avoiding emissions of carbon. It is a way to obtain funding for low-carbon projects or innovative, high-risk, and niche initiatives that otherwise may not have access to traditional financing. Measuring, Reporting, and Verification (MRV) is an essential element to provide transparency and accountability, ensuring that the emissions reductions claimed are real, measurable, and additional. However, the high level of technicalities and the challenges around capacity to implement an effective governance structure can act as a barrier to accessing carbon finance. • Energy Performance Contracting (EPC): an Energy Saving Company (ESCo) implements an energy efficiency or a renewable energy project and the energy savings or the energy produced funds the initial investment. The ESCo is reimbursed according to its demonstrated delivery of energy savings. When facilities lack capital, skills, manpower or technology information, EPC is the preferred option for infrastructure investments. • Fee based financing: a private entity undertakes the project, including sourcing of financing, on behalf of the municipality for a mutually agreed fee. This can also be a vendor finance, where the private entity provides financing to private end users for investing in their products. • Energy Efficiency Obligation Scheme (EEOs): the private entity achieves cost savings by reducing energy consumption, which are used to finance the investment. Entities are required to meet quantitative energy saving target by investing in eligible end-use energy-efficiency measures. A monitoring mechanism is set up to administer, verify and reports the savings. • On-bill financing: municipalities borrow directly from utility companies and make repayment via energy bills. It is easy to set up and implemented for small-medium investments, saving also on administrative costs, but estimated savings should be able to repay the loan. • Green mortgage: loan with lower interest rates to invest in energy-efficient certified buildings and refurbishment. Borrowers benefit from lower repayment instalments, lower energy bills, higher property value, and a reduced carbon footprint. It can be an important tool to promote retrofitting of private households and business establishments. • Crowdfunding: model based on lending or reward in which investors support specific projects by freely pledging. Public entities can freely decide on the return on investments and benefit from community participation, but they owe responsibility to many small investors and assumes the risk they do not stick around for the full funding phase. 65 www.climatefit-heu.eu • Public-private partnerships (PPPs): long-term agreements between a public authority and one or more private entities to implement projects against payments by the contracting authority or users. They are used to improve efficiency and effectiveness of local public service delivery. Regilience Funding Opportunities repository Specifically on funding, the repository summarises information on European and national opportunities, with the aim to help the identification of potential funding sources. For each type of funding opportunity, it provides information on the geographical areas they are applicable to, the types of instruments granted, on the entities that could exploit them, the sectors and the typical budget size. NAP Global Network Inventory of innovative financial instruments for climate change adaptation The inventory is intended to inform governments, project developers, and financiers about a range of financial instruments that have been used, or potentially could be used, to finance the implementation of climate change adaptation measures, enabling access to financial resources from financial institutions, private investors, institutional investors (such as pension funds), impact investors, foundations, and other philanthropists, and may be blended with traditional sources of financing. It provides a description of different kinds of instruments at different stages of development, from more mature ones that are already widely established, to emerging and pilot instruments, also identifying the sectors in which they could potentially be implement and illustrating examples of how they have been used. Financial Instruments Library - Cities Climate Finance Leadership Alliance The library presents different financial instruments available for urban climate projects, allowing to select those relevant for adaptation climate objective only or for mitigation and adaptation. G20/OECD Report on approaches for financing and investing in climate-resilient infrastructure The report identifies approaches that can be taken to advance financing for climate-resilient infrastructure, recognizing that enhancing climate resilience is critical to achieve sustainable development. Specifically, on enhancing access to finance, a set of potential financing instruments that could be employed for climate adaptation are listed, as well as case studies and examples. Figure 36 Some examples of adaptation and resilience financing stack. Source G20/OECD Furthermore, the following recommendations are provided, keeping in mind that the specificities of each local context should be accounted for: • Financial instruments like green and sustainability bonds can be leveraged to support financing of climate resilient infrastructure. At the same time, innovative instruments like catastrophe (“cat”) 66 www.climatefit-heu.eu bonds, outcome-based instruments, risk guarantees, and climate resilient debt clauses can attract investments. • Blended finance mechanisms with climate-oriented objectives can be effective in supporting the development of climate resilient infrastructure. • Public facilities with clear climate mandates (e.g. infrastructure-focussed banks, development banks, dedicated funds) can provide pathways to attract private sector financing. • Tax incentives can be used by governments to encourage greater climate risk reduction and adaptation measures. • Allowances from different mechanisms like emission trading could secure funding towards climate resilience. Covenant of Mayors Financing Opportunities and Innovative Financing Schemes The Financing Opportunities tool provides information on several funding programmes and alternative financing instruments, together with inspiring examples. The leaflet on Innovative Financing Schemes describes schemes used by local authorities to finance adaptation projects and support citizens and companies, providing also case studies and recommendations. Module 9: Match types of adaptation options with financial entities/instruments Financial Instruments case studies - Cities Climate Finance Leadership Alliance Financial Instruments case studies - Cities Climate Finance Leadership Alliance The repository of case studies provides examples of successful financial instruments implementations in urban climate projects. Funded by the European Union. Views and opinions expressed are however those of the author(s) only and do not necessarily reflect those of the European Union or CINEA. Neither the European Union nor the granting authority can be held responsible for them. Confidential The CLIMATEFIT project aims to support EU territories in their just and transformational journey toward climate resilience by bridging the finance gap, providing critical insight and building the capacities of (i) Public Authorities (PAs) to identify, orchestrate and attract various public and private financing sources and (ii) Financing & Investment Entities (FIEs) to identify and access resilient investment opportunities. CLIMATFIT opens a significant opportunity to foster innovative resilience investments in vulnerable EU territories and to boost competitiveness and EU leadership in a growing market. The project will build on a deep understanding of existing initiatives to sustain systemic and catalytic resilience investments by engaging its Technical Partners, PAs and FIEs in the co-creation of twenty innovative investment strategies, ten concrete and scalable investment plans and four bankable transformational investment cases, increasing the bankability of resilient project pipelines across a diversity of scales, financing gaps, contexts, barriers to financing, climate risks and vulnerabilities, biogeographical regions, adaptive capacities and maturity regarding climate change represented from its twenty case studies grouped in three clusters: Northwestern, Eastern and Southern.