Intervention 3 Increase adaptation finance through leverage and innovation
Aim: To mobilize and scale the resources needed across Glasgow City Region to implement the interventions in this Strategy.
Background: To implement planned adaptation options for Glasgow City Region, urgent mobilization of additional finance is crucial. This will require a scale up of funds from the public sector, the leverage of existing public funds to crowd in private sector investments, and innovation in financing structures to deploy and raise further private sector finance. The challenge: Financing adaptation requires Glasgow City Region to overcome several barriers. Many adaptation investments are in public goods that do not generate an income stream for investors. There is also a challenge to reconcile short-term investment in adaptation versus the long-term benefits it will deliver. To overcome these challenges to adaptation finance, it is essential to consider how to strategically use available public resources, as well as to design new financial models for adaptation that includes a wider set of partners. Doing so can attract private sector finance by leveraging public sector funds, through innovative financing structures and instruments. For example, there are opportunities to use public funds to de-risk private sector investments using insurance and guarantee products. Platforms to facilitate such innovation for transformative finance are lacking and need further development. Priority areas for investment include those areas which risk locking in climate risk for the long-term, such as in the infrastructure and built environment sectors, nature-based solutions (where there is the potential for multiple benefits), and other areas where adaptation can provide both private and public goods. Where are we now? Much work is underway globally on green finance, including with Scottish Government, SEPA and NatureScot, but little has focused on adaptation. At present, most funding of adaptation in Glasgow City Region and Scotland is grant based, with limited funds flowing into adaptation outside of flood risk management. However, there are some initiatives looking to develop new financing instruments and structures that consider ways to attract private sector investments. As Scotland’s largest region, as well as a hub for insurance services, Glasgow City Region is well placed to further expand these initiatives to explore the role of transformative finance for adaptation.
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