The concept of EbA is still relatively new to Vietnam. For many institutions in the country, EbA is still a new topic. EbA measures are only slowly being included in Vietnam’s climate change policy and society, despite their potential contribution to climate change adaptation and biodiversity conservation. Additionally, EbA measures are often a part of larger cross-sectoral projects, e.g. in infrastructure, agriculture or biodiversity, which makes it more difficult to integrate and mainstream them within traditional sectoral policy planning approaches in Vietnam.
In addition, financing options, both national and international, for such measures remain unclear. International climate finance has a significantly stronger focus on mitigation measures. According to the Climate Policy Initiative, in 2014, 91% of total climate finance flows (USD 302 billion) were provided for mitigation measures, mainly for investment in renewables. Conversely, the share of funds for adaptation was rather small – only USD 25 billion. Nevertheless, existing international funds and the Green Climate Fund can offer multiple options and resources for climate-related activities, including EbA. With a complex architecture of international climate finance institutions, further analysis is needed to understand which international sources are of the most relevance for financing CC Adaptation and EbA in Vietnam and how to successfully access them.
In this context, GIZ and ISPONRE conducted a study called “Mapping out and analysing financing options for Ecosystem-based Adaptation (EbA) in Vietnam” with the help from a Germany-based Adelphi consulting company. This study provides a comprehensive panorama of possible relevant EbA financing options for Vietnam as well as advises useful recommendations for administrative, institutional, and legal frameworks of Vietnam to attract more funding for implementation for EbA measures, both domestically and internationally. Central points from the report are gathered on this page.
Vietnam’s national climate change strategies and budgets do not prioritise EbA. Although understanding and awareness of EbA and its potential for Vietnam is growing, focus on EbA in Vietnamese national strategies or priorities is still poor. In other words, policy makers and wider audience have not yet sufficiently engaged with EbA as a relevant climate change adaptation approach. The lack of specific laws highlighting EbA impedes budget allocation for EbA on the national and provincial levels. With current budgeting procedures, the state budget can only be spent for those activities and approaches mentioned in national policy and legislation. This lack of official recognition means that there is little public funding available for EbA. Changing legislation is a long term process, which can take up to several years. However, without progress on the national policy level, it will be difficult to move from pilot/single projects to using the EbA approach on a bigger scale. Therefore, steps need to be taken to build decision makers’ understanding of the benefits of EbA.
Options to use national and provincial budgets to co-finance EbA projects. There are different ways to fund EbA in a national budget. One option is through environmental protection expenditure. However, environmental protection currently only accounts for 1% of the total expenditure and is mainly used to finance “hard’ environmental infrastructure projects (such as dams and dykes). In addition, other national funds such as the Vietnam Environmental Protection Fund and the Vietnam Forest Protection and Development Fund can serve as additional co-funding sources in the future. However, in order to tap these sources, more political commitment and a stronger legal basis are needed for EbA activities.
There are multiple international options to finance EbA activities in Vietnam. Existing international funds and the Green Climate Fund offer multiple options for climate-related activities, including EbA. Below are the eight most relevant sources of financing for EbA projects in Vietnam.
Options for Private Sector Engagement
The options of attracting private finance in addition to (or as a substitute for) donor funding is widely discussed. Adaptation measures are often integrated into larger mainstream projects and there is no reliable data source to track private project-level investment. This makes it difficult at this stage to identify cases or good practices on how to involve private investors in EbA.
International financial institutions such as the International Finance Corporation IFC, the World Bank’s private sector hand, the Asian Development Bank (ADB), and bilateral development organisations work closely with private actors. However, this is mainly on mitigation or infrastructure related projects. Proving the business case for adaptation, taking into account current mechanisms of local markets, or projects that integrate ecosystem-based approaches into transportation (as in the ADB Cambodia transport project), infrastructure, water management, or agriculture can be a way to engage the private sector.
Climate change funds like the Special Climate Change Fund (SCCF) and the Least Developed Countries Fund (LDCF) have experience with projects that engage private actors through awareness raising, capacity building, changing regulations, public-private partnerships or providing tailored financial incentives. Some examples include:
- Raising awareness and capacity building. An LDCF project in Cape Verde focused on raising awareness about climate change risks and vulnerabilities in the water sector for both policymakers and the private sector. It also included adaptation options for investments in water capture, storage and distribution. In Sierra Leone, a LDCF / SCCF project conducted capacity building measures for water engineers from public and private companies on how to manage climate related risks and design and maintain climate-resilient infrastructure (Biagini and Miller 2013). As EbA is a relatively new concept in Vietnam, raising awareness and building up an understanding of EbA should cover not only the public but also private sector, which will help to put this approach on both the public and business agenda.
- Integrating adaptation into CSR strategies. A GIZ project in Peru supported the Peruvian National Water Authority to involve the private sector in preserving the river basins that supply water to Lima. The project worked with private companies, encouraging them to protect water resources, ensure water quality, and pursue reforestation and waste water treatment projects as part of their corporate social responsibility.
- Enabling policies and institutional infrastructure. In Zimbabwe, the government, with support from the SCCF, developed and introduced regulatory and fiscal incentives, which encourage the private sector and rural households to pursue measures for climate risk reduction. Another project in Liberia supported the implementation of regulations that require companies to take into account CC considerations in their coastal development activities (Biagini and Miller 2013).
- Setting up a dialogue and public-private partnerships. Bonizella Biaginia and Alan Miller describe in an article how an LDCF project in Sierra Leone financed the establishment of a Public Private Sector Forum to facilitate policies, enable private investment and entrepreneurship in water sector. The forum helped to design and build, with private sector participation, climate-resilient community-based water harvesting, storage and distribution systems.
- Creating new niches for private actors. In Tajikistan, SCCF supported marketing campaigns, crop certification, start-ups, small and medium-sized enterprises and micro-finance institutions to promote and commercialize climate resilient products.
- Strengthen regional partnerships. A stronger involvement of the private sector is also one of the subjects of the regional GIZ-supported project Collaborative Partnership on Mediterranean Forests (CPMF) in the MENA region (Middle East-North Africa). The project aims to adapt forest policy framework conditions to respond to climate change in the MENA region and preserve the supply of goods and services. The contribution of forests to a green economy, poverty alleviation and their role in food security are key objectives of the initiative. To mobilize additional external financial resources for the sustainable management of Mediterranean forests, the role of innovative financing mechanisms as part of a stronger corporate social responsibility is of importance.
- Microfinance products for EbA. A United Nations Environment Programme project focusing on microfinance solutions for EbA in Colombia and Peru works with five local Microfinance Institutions assisting them with developing and introducing specific microfinance products tailored to EbA activities in rural areas of the North Andean Region. It also includes capacity building of Microfinance Institutions and raising awareness of available EbA options.
Further capacity building of national stakeholders and institutions is needed to mainstream the EbA approach and enhance access to international climate finance sources. These include first of all building up knowledge on the EbA approach and how it can be integrated into national strategies and budgeting. Second, an active dialogue with international donors is needed to understand their perspectives and priorities with regard to EbA. Finally, the Vietnamese government should select and enhance the capacity of a national candidate institution for direct access to the Green Climate Fund and other international funds. Applying the GIZ Climate Finance Readiness approach, the following key recommendations can be given:
- Raising awareness and understanding on EbA among national and provincial policy decision makers
- Building up a way towards mainstreaming the EbA approach into national strategies, policies and plans
- Link EbA/climate change adaptation to the question of national climate finance coordination
- Finding sustainable public (co-)funding mechanisms for EbA measures
- Improving the understanding of the international finance architecture and funding options among national policymakers
- Setting up an EbA dialogue with international financing institutions and national stakeholders
- Building up national institutional capacities for direct access to the Green Climate Fund and other adaptation funds
- Making EbA a visible part of the national budget
- Engaging the private sector and policy makers in a discussion on EbA
- Supporting the development of enabling policy incentives for private sector engagement in EbA activities