Investments in the climate resilience of communities in Africa, Asia and the Pacific have delivered local-level results for some 18 million people, with finance from key donors and developing country’s own resources channelled through national systems via the UN Capital Development Fund.

But that's just the beginning. Countries that are already working with UNCDF to strengthen community-level adaptation to climate change have agreed to build on and leverage UNCDF’s existing Trust Fund architecture and unique platform for deploying blended finance solutions, which bring together public and private capital.

The next step is to consider a dedicated pooled funding window that has the potential to strengthen existing climate finance delivery options at the local level, enabling more communities to adapt to the impacts of climate change – especially in the highest risk and most vulnerable regions.

Communities in many Least Developed Countries, Small Island Developing States and African nations are seeing hard-won development gains and progress towards the Sustainable Development Goals jeopardised by climate change. UNCDF, in partnership with UN partners and others, are supporting countries to strengthen resilience and achieve development targets in underserved communities around the world, especially at the sub-national level.

Local-level climate investments are critical to climate adaptation and must be scaled up and complemented by additional resources to address the enormity of the task at hand, particularly in high-risk markets. Existing funding channels also face the challenge of deploying resources fast enough to reach where they are most needed and in a predictable manner. UN Member States that are farthest behind and often the most vulnerable to climate change, have called for UNCDF’s increased involvement, particularly in mobilising private investments and derisking higher risk environments. To scale these efforts, UNCDF is creating incentives to mobilize private sector finance, especially in markets where traditional development finance players are challenged to support.

“We have to make use of every single platform that is out there in the financial architecture,” said Pradeep Kurukulasuriya, Executive Secretary of UNCDF, who took office earlier this year and is focused on using the agency’s mandate to maximise investment where development needs are greatest. “There is so much that needs to be done to unlock a variety of multi-dimensional constraints so that private finance can flow in the right direction.”

“UNCDF operates within constrained financial landscapes, and we are committed to using scarce public resources only for what works in terms of results and impact. UNCDF’s primary mode of operation - via the deployment of performance-based payments, via public financial management systems at the local level - accompanied by independent monitoring and verification, is critical to ensure that payments are made only once impact is realized, and not with hope that it may materialize in the future. It’s critical that we see results and reward their achievement; adaptation to climate change must be realized today, not tomorrow,” he added.

UNCDF has a unique finance mandate within the UN system that enables the blending and deployment of grants, loans and guarantees. As a donor-funded organization and with the absence of a credit rating - a rarity among development finance institutions that perform similar functions - UNCDF is uniquely able to absorb high risks.

“Where performance-based grants are deployed, it's critical that we leverage those resources to crowd-in other forms of finance that otherwise would have avoided these areas on account of their risk profiles. By deploying performance-based grants to local governments together with guarantees and/or loans to local businesses and infrastructure projects via financial intermediaries, or directly to small- and medium-sized enterprises, UNCDF is seeking to provide the foundations needed to develop and nurture the markets of tomorrow,” said Kurukulasuriya.

The establishment of the Local Climate Adaptive Living Facility (LoCAL) and the deployment of Performance-Based Climate Resilience Grants (PBCRGs) for localized adaptation to the impacts of climate change, together with complementary support to local businesses and farmers, enables UNCDF to deliver finance at the local level within five to six months - a game changer in the current architecture available for channelling climate finance.

UNCDF’s on-the-ground presence, through its partnership with the United Nations Development Programme (UNDP), will help rapidly scale-up investments in local public goods and explore opportunities to use blended finance and private sector engagement to generate additional resources for adaptation investments that deliver results for people and communities.

With the world’s largest climate action event, COP29, fast approaching in Baku, Azerbaijan, the UN Climate Change Executive Secretary has called for a ‘quantum leap’ in climate finance and has appealed to finance ministers, business leaders, investors, and development bankers to find the trillions of dollars needed to tackle the climate crisis and prioritize the needs of developing countries.

UNCDF designed LoCAL to channel finance to communities for locally led adaptation where the impacts of climate change are most acute and needs are often the greatest, especially among least developed countries and highly vulnerable small island developing states.

To date, UNCDF, has deployed over US$ 200 million to the subnational level using country systems and linking performance to additional finance to encourage capacity building for long-term growth. UNCDF has worked with countries to refine and augment the efficacy of its’ signature PBCRGs, the basis of an international standard and best practice for climate finance delivery (ISO 14093). Countries using PBCRGs to finance adaptation actions have committed to strengthen recognition and funding for the standard at Baku. PBCRGs and the standard are the essence of the LoCAL Facility, which is an official Non-Market Approach under Article 6.8 of the Paris Agreement.

The European Union is the largest single donor and supporter of the UNCDF’s PBCRG approach to climate finance delivery, contributing some US$ 80 million to LoCAL operations since 2014, with Sweden contributing US$ 58 million and Belgium US$ 19 million. Denmark, New Zealand, Switzerland, Norway and Luxembourg contributed between US$ 4 and 9 million each over the same period.

As of December 2023, local governments with a total population of 18.04 million people have benefited from climate resilient public goods such as improved roads and bridges or new and improved water supplies, paid for with finances channelled through UNCDF’s LoCAL Facility since 2014 and providing the foundations for long-term and sustainable adaptation investment.

Government representatives from 19 countries implementing or designing community-focused climate adaptation initiatives using UNCDF’s LoCAL Facility, alongside key donors, agreed to consider proposals for the Trust Fund at their 11th Annual LoCAL Board on 6 September, which took place in-person and online in Bonn, Germany. Following the expiration of a 14-day post-event consultation period, the decision document from that event is now final.

“We’re at the forefront of a lot of natural disasters,” said Schmoi Mclean, Principal Director (acting), Climate Change Division, Ministry of Economic Growth and Job Creation in Jamaica, referencing recent hurricane Beryl that decimated agricultural production on the island. “To have climate finance dedicated to building the capacities of local communities and municipal corporations is very important to us in Jamaica.”