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Adaptation Finance Window

While there is a massive funding gap for both climate mitigation and adaptation, the adaptation landscape is especially daunting. Estimated adaptation needs are currently five to ten times greater than international adaptation finance flows, and the gap continues to widen, with less than 10 percent of total climate finance flows going toward adaptation. Private sector investment in adaptation faces many barriers and market failures that hinder progress, including high cost of capital, substantial project risks, and data challenges.  

In support of the President’s Emergency Plan for Adaptation and Resilience (PREPARE), USAID has opened an Adaptation Finance Window under the Climate Finance for Development Accelerator (CFDA). Given the significant barriers to private sector investment in adaptation, the Adaptation Finance Window aims to de-risk the development and scaling of companies and investment vehicles that mobilize private finance for climate adaptation. Grants awarded through the Adaptation Finance Window will support innovative products, projects, and funds that address climate adaptation priorities in the emerging and frontier markets where USAID works. 

The first call for proposals under the Adaptation Finance Window, Addendum 001 under CFDA’s Annual Program Statement (APS), sought private sector enterprises focused on two areas: 1) parametric and other insurance mechanisms to protect farmers and businesses against extreme weather events and climate impact, and 2) solutions to manage and maintain water amidst climate extremes. The proposal deadline for Addendum 001 closed on October 20th, 2023. For reference, please see Addendum 001 and the APS here.

On December 4, 2023, CFDA issued Addendum 002 to the Adaptation Finance Window. Through Addendum 002, CFDA is soliciting concepts from investment managers seeking both grants and credit guarantees to support the launch of innovative funds or investment vehicles that will deliver significant outcomes for climate adaptation.

Key points:

  • CFDA anticipates issuing up to 1-3 grant award(s)
  • In addition to USAID grant award(s), a coalition of Nordic partners may provide up to $100 million in credit risk guarantees that will help mobilize additional private financing into the selected adaptation funds 
  • Anticipated eligibility criteria for applicants: 
    • An experienced private sector fund manager, developer, or other investor with a demonstrated track record of raising and deploying capital, as well as successfully exiting investments (first time fund managers are not eligible)
    • Developing a climate adaptation investment fund or instrument to be deployed in two or more OECD DAC countries 
    • Legally registered organization maximizing private capital mobilization through the fund or instrument

View Addendum 002 here.

The Adaptation Finance Window is an activity under USAID’s Climate Finance for Development Accelerator (CFDA), a $250 million initiative designed to mobilize $2.5 billion in public and private climate actions and investments by 2030. To receive updates and partnership opportunities regarding the Adaptation Finance Window, please join the Climate Finance Investment Network (CFIN) or reach out to CFDA at info@CFDAccelerator.com.

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The Climate Finance Investment Network brings together a diverse set of finance seekers, finance providers, and other ecosystem actors from a variety of sectors and markets to cultivate partnerships, learning, and increased investment in climate solutions.

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