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.
Low - limited evidence available
Enabling conditions and success factors
- Private capital needs to be available in local debt capital markets.
- Adequate projects are needed.
- 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.
Climate adaptation notes for infrastructure-related adaptation projects in Sub-Saharan AfricaView case study