Methodological Guide for Designing an Adaptive Cash Transfer

By Rosaly Byrd

Channeling Climate Finance into Cash Transfer Systems to Build Resilience

Social protection policies and their instruments (such as cash transfers) have historically had only social and economic dimensions, not taking environmental or climate related aspects into consideration. Yet as climate change is increasingly impacting the most vulnerable communities, especially in the Sahel and Horn of Africa, there is a need to rethink and redesign such programs. FAO’s 2016 State of Food and Agriculture also acknowledges that social protection programs will need to play “an important role” in managing climate risks and reducing vulnerability. Connecting the dots between climate resilience and social protection is a first step in preventing millions of individuals from falling through the cracks of development, particularly in a changing climate.

The UNDP World Centre for Sustainable Development (RIO+ Centre) has worked to integrate climate finance and cash transfer systems, producing a methodological guide for channeling climate finance into cash transfer systems to build resilience.  As a follow-up to the RIO+ Centre’s publication on Social Protection for Sustainable Development, this methodological guide aims to provide sustainable development practitioners and stakeholders with information on the process and tools used to design an Adaptive Cash Transfer (ACT) to foster the resilience of the vulnerable to climate shocks.

What is an ACT?

Adaptive Cash Transfers (ACT) go beyond the scope and features of traditional cash transfer (CT) systems by integrating environmental criteria, conditions, and indicators into CTs, along with the usual social and economic indicators. ACT works to blend climate finance, adaptation funds in particular, into existing CTs or to-be designed ACT programmes, in order to protect poor households from climate shocks before they occur (through predictable transfers, building community assets, and other programs that help them cope) and by scaling up via their social safety net programs to respond to extreme events (droughts, floods, etc.) when they hit.

Why an ACT?

CTs have traditionally been socially-oriented, even though many times the recipients of these transfers often depend on natural resources for their survival and are put back when natural disasters and climatic shocks hit. As such, there is much potential for cash transfers to work to build adaptive capacity and strengthen resilience in vulnerable communities. Since environmental management, climate change adaptation, and resilience are inextricably connected, ACT can bolster local resilience and prevent more from falling back into poverty. By channeling climate finance through CTs, ACT intends to get climate finance to who it really needs to get to.

Moreover, blending climate finance into CTs and using these new socio-economic and environmental indicators can address some of the institutional and structural challenges associated with climate finance, such as monitoring, reviewing, and evaluating. More socio-economic indicators derived from CT eligibility qualifications and beneficiary registries, as well as data from different sources and government divisions will provide the necessary information that is currently lacking in efforts to monitor, report, and verify (MRV) climate finance, and in determining the effectiveness and impact of climate finance (i.e. M&E plans and impact assessments).

ACT aids in achieving the Sustainable Development Goals (SDGs) and works to prevent silo-based and fragmented implementation of the goals by linking sectors and programs that are related to social protection, climate change, sustainable natural resource management and disaster risk reduction.

The RIO+ Centre’s Methodological Guide for Designing an Adaptive Cash Transfer (ACT) is addressed to professionals working in social protection, climate change and disaster risk reduction who are interested in applying a re-orientation process towards channeling climate finance into cash transfer systems to build resilience against social, economic and environmental shocks. The guide was launched in late-November 2017 and was done in collaboration with African Risk Capacity and UNDP Regional Service Centre for Africa.