Description

As debt notes to commercial banks, Climate Adaptation Notes (CAN) aim to increase the flow of funding into water and wastewater adaptation projects by combining construction financing and post-construction refinancing phases into a single instrument.

Instrument category

Debt financing

Implementation status

Low - limited evidence available

Enabling conditions and success factors

• Private capital needs to be available in local debt capital markets.
• Adequate projects are needed.

Instrument benefits

• Combining short-term construction financing from commercial banks with long-term post-construction refinancing allows long-term funders to leverage the commercial banks’ construction project expertise, mitigating project performance risk and enabling investment in sectors previously seen as too risky by institutional investors.
• This new approach also reduces the time and cost involved in financing such projects.
• Approach enables climate adaptation projects to tap into institutional savings pools.

Challenges and risks to implementation

• Lack of adequate pipeline.
• New and innovative instrument that requires socialisation to be used.

References

Case studies

Climate adaptation notes for infrastructure-related adaptation projects in Sub-Saharan Africa