Bridging the Gap in Disaster Risk Financing through Integrating Physical and Financial Resilience Disaster and Climate Adaptation Financing Framework 2025 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: +1-202-473-1000; Internet: www.worldbank.org Some rights reserved. This work is a product of the staff of The World Bank and the Global Facility for Disaster Reduction and Recovery (GFDRR). The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy, com- pleteness, or currency of the data included in this work and does not assume responsibility for any errors, omissions, or discrepancies in the information, or liability with respect to the use of or failure to use the information, methods, processes, or conclusions set forth. 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The risk of claims resulting from such infringements rests solely with you. If you wish to reuse a component of the work, it is your responsibility to determine whether permission is needed for that reuse and to obtain permission from the copyright owner. Examples of components can include, but are not limited to, tables, figures, or images. All queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; email: pubrights@worldbank.org Design and layout: ULTRA Designs, Inc. Cover photo: Row of solid concrete prefabricated townhouses in Thailand. Credit: fotolism_thai Table of Contents 4 Acknowledgments 5 Abbreviations & Acronyms 6 Executive Summary 6 I. Context and Challenge: Disasters as Fiscal Threats 7 II. The Opportunity: A Proactive Solution Through DCAFF 8 III. Bridging Critical Gaps: Enhancing Physical and Financial Resilience 8 IV. What Strategic Adoption of DCAFF Looks Like: A Practical Roadmap 11 V. From Reaction to Resilience: Disasters Are Unavoidable, but the Resulting Fiscal Crises Are Not 13 CHAPTER 1 Introduction 16 CHAPTER 2 Using International Experiences to Design DCAFF 16 2.1 Overview of Case Studies 18 2.2 Evaluation Criteria 18 2.3 Case Studies Analysis 21 2.4 Findings and Lessons Learned from Case Studies 25 CHAPTER 3 DCAFF: Integrating Physical and Financial Resilience 26 3.1  DCAFF Phased Implementation Process and Aligned Pillars 30 CHAPTER 4 Applications of DCAFF: From Diagnostics to Delivery 30 4.1 Dominica: Applying Pillar 1–Readiness Assessment and Roadmap Development 32 4.2 Dominica: Applying Pillar 2–Analytics to Inform Resilient Investment 33 4.3 Dominica: Applying Pillar 3 – Forging Partnerships for Action 34 4.4 Maharashtra, India: Applying Pillar 4–Developing Tailored Financial Solutions 35 4.5 Republic of the Marshall Islands: Applying Pillar 5–Capacity Building and Knowledge Exchange 36 CONCLUSION 36 5.1 Why Integration and Ecosystem Matter 37 5.2 Looking Ahead 39 References 41 Appendices 42 APPENDIX A Summary Table of Case Studies 43 APPENDIX B Detailed Tables of the Comparison of Institutional Arrangements and Financing Products Between International Programs 48 APPENDIX C Detailed Discussion on Findings and Lessons Learned from Case Studies 53 APPENDIX D Saint Lucia’s “Act to Adapt” Competition and Home Risk Assessment Tool 55 APPENDIX E Country Diagnostic Tool and its Application in Saint Lucia and Dominica 57 APPENDIX F Parametric Insurance Product for Housing Resilience 3 Acknowledgments A team led by Rashmin Gunasekera, Mirtha Escobar and Mary Boyer (Disaster Climate Risk Management (IDURM), World Bank) conducted the analysis that informed this report. The team comprises Kerri Cox, Alessandra Richter, Vincent Boland and Harriette Stone of IDURM’s Global Program for Disaster Risk Financing, with valuable early-stage inputs from Climate and Housing Adaptation Specialist Priscilla Phelps. The team gratefully acknowledges the contributions and guidance of peer reviewers Suranga Kahandawa (Senior Disaster Risk Management Specialist) and Samantha Cook (Senior Financial Sector Specialist), as well as the review and recommendations from Bramka Jafino (Disaster Risk Management Specialist) and Diana Cubas (Senior Disaster Risk Management Consultant). Joshua Macabuag (Disaster Risk Engineer Consultant), Jose Antonio Torres (Disaster Risk Engineer Consultant) and Re:Focus Partners (re:focuspartners.com) advised and led development of the insurance product tool described in the report, and Build Change (buildchange.org) contributed valuable information for the complementary cost-benefit analysis tools. The team wishes to thank Dr. Kyra Paul (Former Permanent Secretary, Ministry of Housing and Urban Development) and Dr. Genora Joseph (Former Senior Engineer) of the Commonwealth of Dominica for their support during the development of the Disaster and Climate Adaptation Financing Framework (DCAFF) and the implementation of training and knowledge exchange activities in-country. The team also wishes to thank Elad Shenfield (Senior Disaster Risk Management Specialist), Jared Mercadante (Senior Disaster Risk Management Specialist), the Saint Lucia Project Coordination Unit and staff of the Saint Lucia Development Bank for contributing to the review and analysis of the pilot Saint Lucia Climate Adaptation Financing Facility. A special thank you to Niels Holm Nielsen (Practice Manager, Disaster Climate Risk Management, IDURM, World Bank) for guidance throughout the development of the DCAFF and to Yoko Koboyashi (Senior External Affairs Officer, IDURM) and Erika Vargas (Senior Knowledge Management Officer, IDURM) for their continued support for the publication and dissemination of DCAFF knowledge materials. 4 Abbreviations & Acronyms BRP Business Recovery Program BPVVRS Structural Reinforcement Bond Program CAFF Climate Adaptation Financing Facility CBA Cost-Benefit Analysis DCAFF Disaster and Climate Adaptation Financing Framework DOE Department of Environment FI Financial Institution GCF Green Climate Fund GDB Grenada Development Bank GEF Global Environment Facility HFHI Habitat for Humanity International IDB Inter-American Development Bank LAC Latin American and the Caribbean MFI Microfinance institution MSME Micro, small, and medium-sized enterprises NDFD National Development Foundation of Dominica Limited NGO Nongovernmental organization RLP Revolving Loan Program SIRF Sustainable Island Resources Framework SLDB Saint Lucia Development Bank TA Technical Assistance 5 Executive Summary I. Context and Challenge: Disasters as Fiscal Threats Disasters are no longer isolated shocks; they are recurring fiscal liabilities. Between 2000 and 2024, developing countries experienced over 7,200 disasters, resulting in approx- imately 1.25 million deaths, affecting more than 4.6 billion people, and generating an esti- mated US$1.48 trillion in economic losses—nearly one-third of all global disaster-related losses (United Nations Office for Disaster Risk Reduction 2020; Centre for Research on the Epidemiology of Disasters 2021–2024). The damage disproportionately affected vulnerable countries with weak construction standards, limited access to resources, and insufficient institutional capacity. In the Caribbean and Pacific, individual events like Hurricane Maria (Dominica, 2017) and Cyclone Pam (Vanuatu, 2015) resulted in losses that exceeded 200 percent and 60 percent of national GDP, respectively. Housing, infrastructure, and agriculture tend to suffer the greatest damage, leaving national economies reeling for years. For finance ministries, these shocks present a structural economic challenge. In the ab- sence of adequate pre-disaster planning, governments are often forced to divert resources from development priorities, increase public borrowing, or depend on slow and uncertain external aid. This reactive approach constrains fiscal space, disrupts investment cycles, and delays recovery. In some cases, like Saint Vincent and the Grenadines following Hurricane Beryl in 2024, disaster-related losses equaled 22 percent of GDP, causing immense strain on government functions. However, so far, physical and financial resilience investments in countries have moved in parallel rather than in coordination with each other. Despite invest- ments in physical risk reduction and climate adaptation measures taking place, their resul- tant increased financial resilience benefits are not being adequately captured nor optimally leveraged. This also means that disaster-related financial protection gaps1 of countries are also not being reduced efficiently. These realities call for a paradigm shift in how disaster risks are managed, particularly from a fiscal perspective. This report on the Disaster and Climate Adaptation Financing Framework (DCAFF) underscores that sustainable solutions must integrate physical risk re- duction with financial preparedness such that they not only complement each other but also reinforce each other. Without this dual focus, disaster-related liabilities will continue to de- rail long-term development goals. The report also stresses the importance of strengthening the ecosystem that supports implementation of disaster and climate resilience solutions. Activities and instruments cannot be launched in silos, without appropriate policies to guide 1 The finance gap between the costs expected to be incurred from crises and the finance arranged in advance to meet those costs when they occur (High-Level Panel on Closing the Crisis Protection Gap, 2025). 6 Executive Summary actions, partnerships to mobilize uptake, and educational and capacity-building initiatives to change thinking and galvanize action. Proactive approaches, such as those piloted in Dominica, Maharashtra, and Saint Lucia, show that when countries adopt structured frame- works like DCAFF, they can improve the efficiency of public spending, reduce long-term loss- es, and attract concessional and private financing for resilience. II. The Opportunity: A Proactive Solution Through DCAFF DCAFF, developed by the World Bank and the Global Facility for Disaster Reduction and Recovery, provides a comprehensive yet adaptable approach to proactively execute re- silience efforts before disasters strike. By addressing both physical risk (structural) and financial vulnerabilities, and buttressing the ecosystem that enables implementation, DCAFF enables countries to prepare for and mitigate disaster impacts more effectively. Through its five-pillar structure, the framework offers tailored technical, financial, and analytical support to design and implement disaster risk reduction and climate adaptation initiatives (figure ES1). Figure ES.1  Snapshot of the DCAFF Results Framework DCAFF Pillars Activities Outputs Outcomes Pillar 1.  Conduct a Country Disaster Risk and  Country Disaster and Climate Phase 1 Assessments Climate Finance Diagnostic. Finance Diagnostic  Develop a roadmap of recommended  Strategic Roadmap  Enabling ecosystem for steps for project implementation. disaster and climate adaptation financing. Pillar 2. Develop analytical products for  CBA for structural housing  Stronger institutional Analytics, strengthening the link between retrofits capacities. tools & DRR and DRF.  CBA of equity and wellbeing resources  Improved resilience of  Home Risk Assessment App homes & businesses. Pillar 3. Partnership development  Sustainable financing Promote international and local Partnerships, strategy mechanisms for long-term partnerships. collaborations disaster and climate adaptation efforts. Phase 2  Loan facility options / Pillar 4. Design and pilot disaster and climate revolving funds  Improved collaborations Financing adaptation financing mechanisms.  Parametric insurance across private & public products products sectors. Pillar 5.  Develop capacity building for FIs,  Training and knowledge Capacity public sector, contractors, beneficia- sharing events building and ries, etc.  Outreach initiatives communication  Develop communication strategies  Communication strategies and outreach initiatives. Source: World Bank, developed by DCAFF team. 7 Executive Summary Importantly, DCAFF is not a one-size-fits-all model—it supports phased or modular adoption based on each country’s context, priorities, and level of readiness. III. Bridging Critical Gaps: Enhancing Physical and Financial Resilience DCAFF bridges critical gaps that often hinder resilience efforts:  It strengthens physical resilience by supporting structural improvements in homes, businesses, and infrastructure, and using data-driven tools like cost-ben- efit analyses (CBAs) to prioritize investments. This ensures that interventions are technically sound and economically justified.  It enhances financial resilience by designing financing tools that ensure funds are available when needed, ranging from concessional loans to insurance prod- ucts and guarantees. These tools reduce reliance on reactive aid and enable faster recovery. In doing so, DCAFF not only safeguards assets but also supports liveli- hoods, encourages private sector engagement, and promotes long-term sustain- able development in the face of increasing climate and disaster risks.  It develops the supporting ecosystem by assessing existing policies, public and private sector partners, and market readiness and by identifying any gaps that need to be targeted before and during project implementation. DCAFF ensures that the structures necessary for effective execution are either in place or will be addressed during project implementation. I.  IV. What Strategic Adoption of DCAFF Looks Like: A Practical Roadmap DCAFF is designed for phased implementation; however, its flexible framework allows it to be tailored to a country’s needs, either through implementing the activities associated with the five pillars or specific activities aligned with national priorities and gaps. PILLAR 1 Assessments: Diagnosing Risks and Institutional Readiness Goal: Evaluate the country’s ecosystem for disaster and climate financing. Activities:  Conduct a Country Disaster and Climate Finance Diagnostic using the DCAFF tool.  Identify institutional, policy, and financing gaps.  Develop a roadmap for recommended analytics, instruments, partnerships, and ca- pacity-building opportunities. 8 Executive Summary Outputs: Strategic roadmap for short-, medium-, and long-term actions. Example: In Dominica, this step identified strong institutional commitment and opportunities to scale private sector lending for resilient housing. PILLAR 2 Analytics and Tools: Informing Decisions and Investments Goal: Enable robust policy frameworks, shape thinking, and inform decisions at various levels. Activities:  Develop analytical tools (for example, CBA for resilient housing).  Develop or update relevant policies, strategies, or plans (for example, building regulations). Outputs: Results and recommendations from analytical tools, such as CBA for structural housing retrofits, CBA of equity and well-being, and the DCAFF Home Risk Assessment Tool. Developed or updated policy frameworks. Example: In Dominica, a CBA of the housing stock was conducted to provide guidance on cost-effective adaptation investments that could further build resilience against hurricane impacts. PILLAR 3 Partnerships: Catalyzing Public and Private Collaboration Goal: Develop local and international partnerships, and foster public-private collaboration. Activities:  Develop stakeholder engagement plans.  Partner with banks, credit unions, nongovernmental organizations (NGOs), engi- neers, and green suppliers.  Develop collaboration platforms to promote local and international partnerships. Outputs: Partnerships mapped, DCAFF roadmap developed, and development strategy es- tablished for stakeholder platforms and formalized collaborations. Example: In Dominica, this pillar supported the development of a Disaster Resilience and Financing Symposium for the Housing Sector, which convened representatives from key sec- tors to deliberate on the country’s next steps for financing housing resilience. 9 Executive Summary PILLAR 4. Financing Instruments: Developing Tailored Financial Solutions Goal: Turn risk information and CBAs into financial solutions. Activities:  Design tailored financing instruments, such as risk reduction loans and rebates for households and micro, small, and medium-sized enterprises (MSMEs), insur- ance-linked products or premium subsidies, and blended finance structures with banks and lending institutions.  Pilot loan or insurance products with clear eligibility and monitoring mechanisms.  Implement tools such as disbursement systems and inclusive selection processes. Outputs: Financing instruments designed and piloted. Example: Maharashtra, India is integrating a DCAFF-designed component that incentivizes MSMEs to climate-proof their structures. PILLAR 5. Capacity Building and Communication: Building Knowledge for Action Goal: Ensure uptake and sustainability. Activities:  Train lenders, engineers, government staff, and borrowers.  Develop communication plans and outreach strategies.  Monitor and evaluate implementation outcomes. Outputs: Training and knowledge-sharing events, communication plans, and outreach initiatives. Example: Saint Lucia’s “Act to Adapt” campaign taught secondary school students to assess and mitigate risks at home using a web-based tool. SCALE, INSTITUTIONALIZE, AND ATTRACT INVESTMENT Following the implementation of the DCAFF pillars, the focus will be on scaling, institutional- izing, and attracting investment. This involves using lessons learned and performance data to expand programs, integrate DCAFF activities into government budgeting and investment planning, and leverage tools and results to access climate finance and development grants. 10 Executive Summary V. From Reaction to Resilience: Disasters Are Unavoidable, but the Resulting Fiscal Crises Are Not While no country can eliminate the threat of natural hazards, the economic fallout from these events can be dramatically reduced through strategic planning and proactive fi- nancing. DCAFF equips countries to move away from reactive, crisis-driven spending to- ward an anticipatory model of investment in resilience. By combining risk assessments, CBAs, tailored financial instruments, and public-private partnerships, DCAFF provides gov- ernments with a flexible, evidence-based framework for action. DCAFF empowers countries by helping them to unlock concessional financing, design smart subsidies and insurance products, and mobilize private capital by enabling households and MSMEs to coinvest in resilience upgrades. Perhaps most importantly, DCAFF ensures that these efforts translate into long-term protection for people and economies. In places like Dominica, DCAFF analysis showed how value for money propositions of different housing retrofit packages could significantly reduce average annual losses for the housing sector. At the same time, programs like Saint Lucia’s Climate Adaptation Financing Facility (CAFF) proved that with the right financing mechanisms, local actors are eager to take ownership of their own risk reduction. By closing the gaps between physical and financial resilience, DCAFF helps governments build sys- tems that are not just reactive but strategically resilient, economically sound, and socially inclusive. 11 Sustainable solutions must integrate physical risk reduction with financial preparedness such that they not only complement each other but also reinforce each other. DCAFF - 2025 People analyzing financial data with graphs and charts. Photo: courtneyk. Chapter 1 Introduction D eveloping countries are increasingly vulnerable to natural hazards, which cause extensive human, economic, and infrastructural damage. Between 2000 and 2024, over 7,200 disasters in these countries resulted in 1.25 million deaths, affected more than 4.6 billion people, and caused an estimated US$1.48 trillion in economic losses—ac- counting for nearly one-third of global disaster-related losses (United Nations Office for Disaster Risk Reduction, 2020) (Centre for Research on the Epidemiology of Disasters, 2021; 2022; 2023; 2024). Small Island Developing States are especially at risk. Hurricane Maria (2017) caused dam- age equivalent to 226 percent of GDP in Dominica (World Bank, 2018). Cyclone Pam (2015) led to damages equivalent of 64 percent of GDP in Vanuatu (Deo, et al., 2023), and Hurricane Beryl (2024) caused damages equivalent of 22 percent of GDP in Saint Vincent and the Grenadines (World Bank, 2024a) and 16.5 percent in Grenada (World Bank, 2024b). Across 64 major disasters analyzed between 2015 and 2024, residential and nonresidential build- ings accounted for 61 percent of total damage (World Bank, 2025).Rebuilding infrastructure, restoring homes, and supporting livelihoods requires swift and well-funded responses. Yet many countries face critical gaps in financing, institutional capacity, and planning, often re- lying on reactive, external support. A more integrated and proactive approach is needed. Building resilience must go beyond standalone physical risk reduction, financial instruments, or post-disaster recovery. It re- quires a comprehensive system that brings together physical risk reduction and financial solutions. Crucially, in addition to financing investments in physical risk reduction, disas- ter risk financing strategies and instruments must be embedded within environments and ecosystems that support planning, policy alignment, resilient infrastructure investment, and private sector engagement. Financial tools such as insurance, contingent credits, and re- covery loans must be connected to real-world actions that reduce exposure and structural vulnerability, especially in housing and small businesses. To address these challenges, the World Bank’s Global Unit for Disaster and Climate Risk Management (IDURM) and the Global Facility for Disaster Reduction and Recovery have developed the DCAFF. The framework underscores the importance of integrating physical risk reduction efforts with financial solutions. It also offers a flexible, responsible strategy for assessing and enhancing ecosystems for building resilience, ensuring that physical and financial resilience efforts are effectively supported by policies, regulations, and institutional frameworks that maximize their potential impact. It helps countries move from fragment- ed, reactive responses toward a more proactive, comprehensive approach to disaster resil- ience. Table 1.1 provides more detail and examples of the tool’s application. 13 Chapter 1 Introduction Table 1.1  Dimension Focus DCAFF Actions/Tools Example Applications DCAFF Bridging the Gaps: Physical Strengthening • Supporting structural improvements Dominica: Housing retrofit Physical Resilience, Financial Resilience buildings, infra- (homes, businesses, public infra- analysis using CBA tools Resilience, and structure, and sys- structure) and retrofit plans Enabling Ecosystems tems to withstand • CBA of interventions disasters • Building code integration, implemen- tation, and capacity building Financial Ensuring timely • Concessional loans and grants Saint Lucia: Loans and Resilience and adequate • Insurance (e.g., parametric products) grants for resilient invest- financial resourc- • Guarantees and risk transfer mech- ments es are available anisms before and after • Disaster/climate financing products disasters for MSMEs and households Ecosystem Establishing and • Assessing disaster risk financing Dominica: Training- Strengthen- strengthening pol- (DRF) and climate financing initia- for-trainers workshop for ing icy frameworks, tives engineers and contrac- partnerships, and • Policy development support tors; housing symposium capacities critical • Training and capacity building (con- for financial institutions, for execution tractors, engineers, homeowners) public sector, academia, • Public education and communica- NGOs, etc. tion strategies Source: World Bank, developed by DCAFF team. Traditional DRF strategies focus on mainstream financial instruments (for example, bud- getary reallocations, contingent lines of credit, insurance, bonds, and so on) for risk re- tention and risk transfer. As highlighted in figure 1, DCAFF enhances these strategies by including preparedness measures and financial instruments such as household and busi- ness recovery loans, credits, and guarantees, expanding beyond re/insurance. This then pro- vides a more comprehensive financial protection strategy by optimizing a wider set of DRF instruments, which increases the capacity of national and local governments, homeowners, businesses, agricultural producers, and low-income populations to respond more quickly and resiliently to disasters. Figure 1.1  DCAFF integrated with the Traditional Disaster Risk Financing Layering Approach Low Frequency / High Severity Catastrophe bonds Insurance and DCAFF reinsurance Transfer framework Parametric insurance (includes insurances, loans) Post disaster emergency loans High Frequency / Contingent loans Low Severity Households/businesses Retention recovery loans Budgetary reallocations Preparedness Relief Recovery Reconstruction Source: World Bank, developed by DCAFF team 14 Chapter 1 Introduction This report introduces the DCAFF approach and presents the evidence base supporting its design. Chapter 2 analyzes six international case studies on climate adaptation financ- ing instruments and identifies key lessons that helped in designing the DCAFF approach. Chapter 3 presents the DCAFF approach, its five pillars, and implementation tools. Chapter 4 highlights pilot applications in the Commonwealth of Dominica, Maharashtra (India), and the Republic of the Marshall Islands. Finally, Chapter 5 outlines conclusions and next steps for scaling and implementation. 15 Chapter 2 Using International Experiences to Design DCAFF 2.1 Overview of Case Studies This chapter examines six international programs that informed the design of the DCAFF approach. These case studies focus on climate resilience and housing improvements for low- and middle-income households and MSMEs. The case studies, spanning countries and regions, illustrate how innovative financing mechanisms have been used to strengthen physical and financial resilience in diverse development contexts. Most of the examples focus on Latin America and the Caribbean (LAC) due to the region’s pioneering role in devel- oping innovative climate adaptation financing solutions, particularly when addressing the unique challenges faced by Small Island Developing States. By analyzing what has worked across these cases, valuable lessons can be learned on program design, financial instru- ment selection, and implementation and monitoring systems. Of the six programs analyzed, four were supported by international organizations through on-lending financing or technical assistance, one was implemented by the private sector, and one was led by the public sector. The programs include the following:  The Saint Lucia Climate Adaptation Financing Facility (CAFF) was a US$5 mil- lion pilot facility implemented by the Saint Lucia Development Bank (SLDB) to help households—particularly lower- and middle-income—and small businesses finance climate adaptation and mitigation projects. It offered affordable loans and grants through two key programs: the original CAFF, which targeted homeowners and busi- nesses, and the Business Recovery Program (BRP), introduced during the COVID-19 pandemic to provide a blend of loans and grants to MSMEs. Funded by the Strategic Climate Fund under the Climate Investment Funds, the CAFF was implemented through the Disaster Vulnerability Reduction Project, a World Bank-financed initia- tive carried out by the Government of Saint Lucia from 2017 to 2023 (World Bank, 2014). Further information on the results and key insights of the Saint Lucia CAFF is presented at the end of this chapter.  The Revolving Loan Programme (RLP) for Adaptation is a pilot project implemented by the Department of Environment (DOE) Sustainable Island Resources Framework (SIRF) Fund2 under the Climate Change Adaptation Window in Antigua and Barbuda during 2017 and 2023 (Department of Environment of Antigua and Barbuda, 2024). 2 The SIRF Fund is a national fund established by the Environmental Protection and Management Act (2015). It is a self-sustaining, nonprofit entity that serves as a mechanism to increase access to environmental, climate mitigation, and adaptation funding from domestic and international sources. During the first years of implemen- tation (“start-up” phase), the DOE has been supporting the Fund’s operation. The Fund is divided into five funding windows: mitigation, adaptation, risk management, biodiversity and genetic resources, and research and devel- opment (Department of Environment Antigua and Barbuda, 2022). More information at: https://environment. gov.ag/sirf# 16 Chapter 2 Using International Experiences to Design DCAFF This program piloted a revolving fund that provided highly concessional, noncollat- eralized loans to low-income homeowners and MSMEs for implementing adapta- tion measures on their properties, aligned with the building code (Department of Environment of Antigua and Barbuda, 2023). The RLP was designed and piloted with funding from the Adaptation Fund, the Green Climate Fund (GCF), and the Global Environment Facility (GEF) through the Special Climate Change Fund.  The EcoMicro program is a US$17 million facility that provides technical assis- tance (TA) to microfinance institutions (MFIs) in LAC (EcoMicro Program, 2022). Operated by the Inter-American Development Bank (IDB) Lab and funded by Global Affairs Canada and the Nordic Development Fund, the facility supports MFIs in designing and piloting green financial products for low-income households and MSMEs, developing internal greening policies, and managing climate risks in their portfolios. Since 2011, the program has implemented 30 projects in 20 LAC coun- tries, benefiting 32,028 end users (EcoMicro Program, 2022). Two specific projects were analyzed for this case study: one implemented by the Grenada Development Bank3 (GDB) and the other by the National Development Foundation of Dominica Limited (NDFD).4  The MicroBuild Fund is a US$100 million, 10-year housing financing facility that supplies debt capital and technical expertise to MFIs to provide housing loan products for low-income customers (Habitat for Humanity, 2024). In 10 years, the fund has supported 59 MFIs in 33 countries, benefiting more than one million people (Habitat for Humanity, 2025). The MicroBuild Fund is managed by Habitat for Humanity International (HFHI). Triple Jump, Omidyar Network, and the MetLife Foundation serve as partners and co-owners of the fund, and the U.S. International Development Finance Corporation (DFC) provided investment capital.  Patrimonio Hoy is a program implemented by CEMEX, the largest cement com- pany in Mexico. This program aims to provide low-income families with access to financing, architectural advice, and building materials for progressive construction and housing improvements. It is based on collaborative community networks in- volving many stakeholders (CEMEX, 2025).  The Structural Reinforcement Bond Program (BPVVRS, the Spanish-language acronym), is a financial product managed by the Mi Vivienda Fund, a Peruvian state-owned enterprise. The BPVVRS is a subsidy granted to households living in poverty for structural reinforcement of homes located in areas vulnerable to seis- mic risk or built in fragile conditions (Fondo Mi Vivienda, 2025). A detailed summary of each program, including key results and takeaways, is provided in appendix A. 3 The GDB is the leading provider of development financing in Grenada. The GDB is a state-owned financial institu- tion, and the government is its primary shareholder. The GDB’s assets come from a combination of sources, in- cluding equity, deposits, loans, investments, and grants/donations. The GDB aims to foster the economic growth of Grenada by offering financial and technical support in various sectors, including agriculture, fisheries, tourism, industry, housing, small business development, and human resource development. 4 The NDFD is a company limited by guarantee mandated to serve MSMEs in the Commonwealth of Dominica. The NDFD provides financial assistance, training, and technical assistance for small businesses. 17 Chapter 2 Using International Experiences to Design DCAFF 2.2 Evaluation Criteria The programs were analyzed using evaluation criteria developed to address key opera- tional questions for adopting and adapting the DCAFF approach in project settings. The criteria are organized under two themes: institutional arrangements, which examine the foundational elements needed to create an enabling environment for disaster and climate adaptation financing; and financing product characteristics, which focus on the design and implementation of financial mechanisms (see table 2.2.1). These criteria support a compre- hensive assessment and highlight innovative processes and tools that can be adapted to other contexts. Table 2.2.1  Institutional arrangements criteria Financing products characteristics criteria Summary of criteria considered in the case studies analysis 1. Program purpose: climate resilience, hous- 1. Type of products: credit, subsidies, TA, blended ing improvements mechanisms 2. Type of support: TA, grants, debt capital, etc. 2. Financing parameters: loan size, interest rate, repayment period 3. Funding amount: funding for on-lending, funding for TA, etc. 3. Borrowers/beneficiaries profile: homeowners, MSMEs, low and middle-income borrowers 4. Funding sources: international organizations or funds, private sector, public sector 4. Selection processes: only financial consider- ations, incorporating other assessments and 5. TA for institutional strengthening: type of innovative tools TA provided to FIs and other relevant stake- holders 5. Use of funds: specific mitigation and adaptation measures, home improvements 6. Partnerships: international, national, local 6. Incentives: low interest, subsidies, grants, TA, discounts on green technology, etc. 7. Monitoring mechanisms: systems to ensure that financial resources are allocated to their intended purposes 8. Disbursement mechanisms: strategies to ensure compliance with established targets 9. Outreach, marketing, and communication strategies Source: World Bank, developed by DCAFF team. 2.3 Case Studies Analysis The following tables summarize key insights from the case study analysis using the de- fined criteria. Table 2.3.1 compares institutional arrangements across programs, highlight- ing variations in program structure, partnership engagement approaches, and capacity-build- ing efforts. Table 2.3.2 focuses on the design and implementation of financing mechanisms, including financing parameters, borrower profiles, incentive structures, and strategies for monitoring and outreach. Task teams and government clients exploring design options for housing finance projects can use these examples for the purposes of operationalizing the DCAFF approach. Additional details from the analysis are provided in appendix B. 18 Chapter 2 Using International Experiences to Design DCAFF Table 2.3.1  Comparison of institutional arrangements across international programs Country, program Type of support to Description TA for institutional Partnerships name, and Executing financial institution (FI), strengthening agency funding sources, and amounts Saint Lucia: Saint Lucia Support: Debt capital for Pilot facility that provided • Market assessments • Local Chamber of CAFF on-lending and TA loans to lower- and middle-in- • Training SLDB staff on Commerce provided come households and small climate adaptation training to busi- Executing agency: Total funds: US$5 million businesses to finance specific • Guidance from subject nesses SLDB On-lending: ~US$4.2 million climate adaptation and mitiga- matter experts on • Associations of TA: ~US$0.8 million tion projects adaptation projects, engineers and Funding sources: Climate outreach strategies, risk architects Investment Funds through management proce- • Ministry of Educa- World Bank project dures, centralized core tion and Organi- banking system sation of Eastern • Engineering analyses Caribbean States of slope stabilization on public education projects program and Home • Marketing and outreach Risk Assessment activities Tool Antigua and Barbuda: Support: Grants for on-lend- Piloted a revolving fund that • Operationalization of Three donors part- The SIRF Fund RLP for ing and TA provided highly concessional, revolving loan program. nered to increase Adaptation noncollateralized loans to • Key tools (e.g., loan financing for the Total funds: US$7 million low-income homeowners and tracking, monitoring and program. Executing agency: DOE, On-lending: ~US$6.3 million MSMEs for implementing evaluation, and commu- SIRF Fund TA: ~US$0.59 million adaptation measures on their nication strategies) Funding sources: GCF, GEF, properties aligned with the • Training SIRF Fund RLP Adaptation Fund building code staff for implementing financing products Latin America and the Support: TA Facility that provides TA to • Market assessments Local green technolo- Caribbean: EcoMicro MFIs for designing and piloting • Design and piloting of gy suppliers to provide Total funds: US$17 million program green financial products for green financial products incentives facility low-income households and • Development of climate Executing agency: IDB Mobilization of funds TA: US$0.4 million for each MSMEs, developing internal risk assessment tools, Lab from green funds such FI greening policies, and manag- greening policies for as GCF Cases Analyzed: GDB, ing climate risks in FIs FIs, and digital solutions Funding sources: Nordic Grenada; NDFD, Dom- to improve FIs and Development Fund, Global inica MSMEs Affairs Canada Global: MicroBuild Fund Support: Debt capital for Housing financing facility • Design of loan products Fund managed by on-lending and TA that supplies debt capital and • Training MFIs in man- many organizations: Executing agency: HFHI technical expertise to MFIs to agement and marketing an NGO, an impact Total funds: US$100 million provide housing loan products • Construction advice investment group, a On-lending: ~US$90 million for low-income customers provided directly to the social venture, and a TA: ~US$10 million borrowers foundation Funding sources: HFHI, U.S. International Development Finance Corporation, Triple Jump, Omidyar Network, MetLife Foundation Mexico: Patrimonio Hoy Total amount: US$400 Private sector initiative that N/A Community-based Executing agency: million provides low-income families organizations; Local CEMEX Funding sources: Corporate with access to financing, architects, construc- funds from CEMEX construction materials, and ar- tion workers; Local chitectural advice for housing material suppliers; improvements. International organi- zations 19 Chapter 2 Using International Experiences to Design DCAFF Table 2.3.1  Comparison of institutional arrangements across international programs (cont.) Country, program Type of support to Description TA for institutional Partnerships name, and Executing financial institution (FI), strengthening agency funding sources, and amounts Peru: BPVVRS Total amount: US$28 million Public sector program that N/A N/A provides a subsidy to house- Executing agency: Mi Funding sources: Transfer holds living in poverty to Vivienda Fund from the Ministry of Econo- strengthen homes located my and Finance in seismic-fragile vulnerable areas. Source: World Bank, developed by DCAFF team. Table 2.3.2  Comparison of financial services offered by the international programs Country, program Type of financing Borrowers / Financing Incentives Key strategies for name, and product beneficiaries parameters implementation executing agency profile Saint Lucia: Saint CAFF: Loans for Middle-income Loan size: US$1,000 Concessional • Disbursement dependent on Lucia CAFF climate resiliency homeowners and to US$56,000 interest rates inspections via site visits. interventions in MSMEs • Risk management strategies Executing agency: Interest rate: 4.5% to Advice on project homes, businesses • Outreach initiatives such as SLDB 7.5% design, special and agriculture townhall meetings, commu- deals on green Repayment period: nity-based expos and Act BRP: Loans and technologies, Up to 10 years to Adapt Secondary School grants for building business continu- Competition climate resiliency ity training, and • Home risk assessment app and business conti- These terms varied grants nuity and recovery by sector from COVID-19 Antigua and Barbuda: Highly concession- Homeowners Loan size: From Below-market • Borrower selection process SIRF Fund RLP for al, noncollateralized and business- US$14,000 to interest rate and included multi-indicator Adaptation loans for building es located in US$35,000 long repayment approach to assess financial, adaptation mea- Cashew Hill, periods social, and climate vulnera- Interest rate: 2% to sures, aligned with McKinnon, and bilities 4% Executing agency: the building code the surrounding • A technical expert committee DOE SIRF Fund watershed Repayment period: conducts site verification and Up to 20 years engineering assessments. Unbankable • Monitoring, verification, and individuals with a reporting systems source of income • Results-based disbursement mechanisms • Mobilization of community leaders to raise awareness of potential borrowers Grenada: EcoMicro Loans for climate Existing home Loan size: For mit- Discounts from • Climate Risk Assessment program adaptation and miti- mortgage igation loans, up to local supplier Tool used in borrower selec- gation purposes customers, new US$150,000; and for partners on mate- tion process customers, and adaptation loans, up rials and installa- • Local green technology Executing agency: MSMEs to US$3,700 tion services partnerships GDB • Virtual training for benefi- Interest rate: 5% to ciaries 6%. • Effective communication Repayment period: channels between loan offi- Up to 30 years cers and borrowers 20 Chapter 2 Using International Experiences to Design DCAFF Country, program Type of financing Borrowers / Financing Incentives Key strategies for name, and product beneficiaries parameters implementation executing agency profile Dominica: EcoMicro Loans for climate Low-income Loan size: US$3,700 Discounts from • Database of qualified design- program adaptation and miti- homeown- to US$11,100 local supplier ers, suppliers, and installers gation purposes ers, farmers, partners on mate- for each technology Interest rate: 5% to fisherfolks, and rials and installa- • Loan monitoring information 11%. Executing agency: MSMEs tion services system NDFD Repayment period: • Digital solutions to improve From 1 to 7 years resilience of FIs and MSMEs Mexico: Patrimonio Credit for the Low-income Loan size: US$350 to No-cost technical • Technical adviser oversight Hoy purchase of building families US$1,200 advice, materials to ensure materials are used materials to up- delivery, on-time properly Interest rate: Around grade homes payment dis- • Financing product includes 1.5% Executing agency: counts, referral technical architectural advice CEMEX Repayment peri- programs, and • Local promoters advertise od: Weekly small raffles products in local markets payments up to 70 and sales weeks Peru: BPVVRS Subsidies for struc- Extreme poor or Subsidies of about Subsidies • Funds are transferred to tural reinforcement poor homeown- US$4,100 technical entities approved to of homes located in ers. Homes in implement the interventions Executing agency: Mi areas vulnerable to high seismic risk after verifying compliance Vivienda Fund seismic risk or built areas or in fragile • Peru’s Ministry of Housing, in fragile conditions condition Construction, and Sanitation verifies project execution through site inspections. Source: World Bank, developed by DCAFF team. 2.4 Findings and Lessons Learned from Case Studies Several cross-cutting lessons emerged from the comparative analysis that are critical for the DCAFF approach. The case studies show that success hinges on strong institutional foundations, such as alignment with national policies, early assessments of FIs’ capacity, and targeted technical assistance. Moreover, integrating financing mechanisms into broad- er climate initiatives and fostering multistakeholder collaboration enhances both scale and sustainability. On the product side, tailored financial instruments, well-structured incentives, robust risk management, and inclusive outreach strategies are essential for maximizing up- take and long-term impact. Table 2.4.1 summarizes these key lessons, while appendix C provides a more detailed discussion, offering context, examples, and insights from the case studies to illustrate their relevance and practical application. 21 Chapter 2 Using International Experiences to Design DCAFF Table 2.4.1  Summary of findings and lessons derived from the analysis of case studies Findings and Lessons Recommendations Institutional Arrangements 1. An enabling policy environ- • Integrate disaster and climate financing initiatives into a robust policy ment is essential framework. • Engage policymakers across sectors. • Conduct readiness analyses to assess national capacities. 2. Integration and collaboration • Incorporate green financial facilities into broader umbrella programs to enhance impact facilitate the mobilization of financial resources, increase the scope of analytics, and enable knowledge sharing. 3. FIs must demonstrate com- • Conduct early assessments of FI’s commitment, liquidity, and capacities. mitment and capacities • Explore mechanisms to select participating FIs (e.g., conducting com- petitive processes) 4. Support mechanisms should • Allow flexibility and adapt the type of support that will be provided to be tailored to FIs needs FIs depending on their need. E.g., only TA, grants for on-lending and TA, debt-capital for on-lending and TA. 5. Tailored TA for various • Create a TA approach considering targeted support for various relevant stakeholders are crucial stakeholders, such as FIs, governments, beneficiaries, construction professionals, and suppliers. 6. Partnerships can enhance • Promote diverse and strategic collaborations with international and lo- the effectiveness of financ- cal stakeholders to mobilize resources, foster innovation, and enhance ing initiatives sustainability. • Develop well-defined stakeholder engagement plans. Financing Products 7. Financing products are • Conduct market assessments to align products with stakeholder Characteristics customized to address ben- needs, local supply chains, and market conditions. eficiary needs and market • Design tailored financing solutions for targeted beneficiaries. characteristics 8. Incentives to borrowers are • Design incentives, such as no-cost technical advice, subsidies, dis- key to influence borrower counts on resilience interventions and technologies, and training to decisions borrowers. • Design analytical tools to inform potential borrowers about the benefits of resilience financing mechanisms. 9. Innovative tools are crucial • Explore innovative borrower selection processes that include the evalu- to ensure accountability, ation of social, physical, and climate vulnerabilities aspects, in addition inclusivity, and impact to financing indicators. • Develop robust monitoring and evaluation systems. • Design disbursement mechanisms to ensure the appropriate use of funds. 10. Robust risk management • Design risk management strategies, such as property insurance, portfo- strategies are essential lio guarantees, and matching grants, from the feasibility stage. • Incorporate modeling of loan demand, identification of economic outcomes, and development of mitigation mechanisms into the design process. 11. Effective outreach, com- • Develop localized outreach, marketing strategies, and innovative initia- munication, and marketing tives. strategies increase demand • Raise public awareness before product rollouts. • Foster trust through effective communication channels. • Connect borrowers with suppliers for effective adoption. Source: World Bank, developed by DCAFF team. 22 Chapter 2 Using International Experiences to Design DCAFF IN FOCUS Box 2.4.1  The Saint Lucia Climate Adaptation Financing Facility: Key Elements and Results Background and challenge. As part of the Disaster Vulnerabil- States Commission, the Sir Arthur Lewis Community College, ity Reduction Project, a World Bank loan operation, the Saint the Chamber of Commerce, and local associations of engi- Lucia Climate Adaptation Financing Facility (CAFF) was estab- neers and architects also provided support for CAFF aware- lished to pilot innovative financing solutions for climate resil- ness and capacity-building initiatives. ience. With US$5 million in credit, the facility targeted house- holds and small businesses vulnerable to disaster and climate  Communications and capacity building. Throughout the impacts. A key challenge was to identify the mechanisms and CAFF’s implementation, the SLDB carried out communication incentives that could effectively encourage these groups to in- and marketing efforts to raise awareness about climate-re- vest in risk reduction measures, rather than relying solely on silient practices, the facility’s terms, and available support. post-disaster government support. Activities included townhall meetings, expos, and media out- reach. A standout initiative, Act to Adapt, engaged secondary Purpose. The CAFF aimed to expand access to climate fi- school students in assessing climate risks at home using a nance that would enable households and small businesses to web-based Home Risk Assessment Tool. Students identified proactively manage disaster and climate risks. By creating the risks—such as wind, flooding, water shortages—carbon foot- right enabling conditions, the facility sought to shift financial prints, and proposed adaptation measures. Participants were responsibility from the public to the private sector, empow- eligible for grants and other awards to implement their solu- ering individuals and enterprises to invest in resilience using tions. Additional details are provided in appendix D. their own or borrowed resources. Key results. The CAFF demonstrated that households and Financing facility. The CAFF, managed by the Saint Lucia De- small businesses were willing to borrow for risk reduction-re- velopment Bank (SLDB), offered affordable loans and grants lated activities. From its inception in 2017 through March through two programs: the original CAFF, focused on loans to 2023, the CAFF disbursed 384 loans totaling US$4.26 million, homeowners and businesses, and the Business Recovery Pro- averaging US$11,092 per loan. Forty-nine percent were hous- gram (BRP), launched during the COVID-19 pandemic to provide ing-related loans, 45 percent were for businesses within the micro, small, and medium-sized enterprises (MSMEs) with a mix services, tourism and manufacturing sectors, and 6 percent of loans and grants. Borrowers received additional incentives, were for the agriculture sector (See table B2.4.1.1). CAFF loan including project design advice, discounts on green technolo- parameters represented an amalgam of existing SLDB loan gies, and business continuity training in partnership with the parameters and project-specific parameters as agreed with Saint Lucia Chamber of Commerce, Industry, and Agriculture. the World Bank. Critical success factors. The following factors were essential Table B2.1.1.1  Saint Lucia CAFF Disbursements by Sector, to the CAFF’s effectiveness: 2017–March 2023 Sector Amount Amount Share Number Average Average  Technical assistance support. To design and implement in million in million of of loans loan size loan size the CAFF, the SLDB received substantial technical assistance. XCD USD lending in XCD in USD This included funding for marketing activities to raise public Housing 5.65 2.09 49% 323 17,492 6,478 awareness on climate adaptation measures, the hiring of a Services/ 5.2 1.93 45% 42 123,776 45,843 project manager, the upgrade of the SLDB’s core banking sys- Tourism/ tem, and training for management and staff on resilient con- Manufac- turing struction practices and slope stabilization. Agriculture 0.65 0.24 6% 19 34,284 12,698  Partnerships and collaborations. The CAFF was enhanced Total 11.5 4.26 100% 384 29,948 11,094 through support from multiple agencies. This included grant Source: Table developed by World Bank based on reporting data sub- funding from the Caribbean Centre for Renewable Energy and mitted by the SLDB. Energy Efficiency to supplement the SLDB’s lending program. Note: Data inclusive of CAFF original and BRP loans. XCD = Eastern Multiple actors, including the Climate Investment Funds, the Caribbean Dollar European Union Natural Disaster Risk Reduction Program, the Adaptation Fund, the Organisation of Eastern Caribbean 23 Chapter 2 Using International Experiences to Design DCAFF As shown in figure B2.1.1.1, CAFF lending for housing was marketing and communication efforts. Business lending in- strong throughout 2017-2022 and was positively impacted by creased with the introduction of the BRP in late 2020. Figure B2.1.1.1  Services/Tourism/Manufacturing Agriculture Housing 600,000 Saint Lucia CAFF Loan Approvals by Quarter and 500,000 Major CAFF Sector, 2017-2021 in USD marketing effort CAFF Approvals in USD launched Source: Developed by the 400,000 World Bank based on reporting Introduction of data submitted by the SLDB. 300,000 Business Recovery Program 200,000 100,000 0 Sep-17 Dec-17 Mar-18 Sep-18 Dec-18 Jun-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Sep-20 Dec-20 Mar-21 Sep-21 Dec-21 Mar-22 Sep-22 Dec-22 Jun-20 Jun-21 Jun-22 AVERAGE Jun-17 The CAFF loans were used for resilience interventions grouped Key takeaways. The Saint Lucia CAFF served as a successful in six categories.1 As shown in figure B2.1.1.2, through Decem- pilot in climate resilience lending, demonstrating that house- ber 2022 the largest number of loans approved were for water holds and small businesses are willing to borrow for climate resiliency, while energy resiliency had the highest loan value. adaptation and revealing preferred types of investments. Key The energy and water resiliency category, which financed a mix strengths included strong borrower demand, a diverse range of activities covered by the two categories, accounted for 19 of financed projects, and the SLDB’s growing capacity in cli- percent of loans by number and 10 percent by amount. mate-related lending. However, challenges remained, such as the need for ongoing training and absence of incentives—such as matching grants—to support lower-income borrowers. Table B2.1.1.2  % of Total Loans % of Total Loan Amt. Breakdown of approved CAFF 30% loans by climate resiliency 25% category, number of loans, and total dollar amount through 20% December 31, 2022 Source: Developed and submitted 15% by Government of Saint Lucia’s Project Coordination Unit. 10% 5% 0% Hurricane Flood/Landslide Energy Water Energy and Other Resiliency Resiliency Resiliency Resiliency Resiliency Water Resiliency Mix CAFF loan purposes were grouped in the following categories: (i) hurricane resiliency: repairs to or replacement of roofs, shatter-proof windows/ 1 doors, or structural reinforcements of buildings; (ii) flood/landslide resiliency: drainage improvements such as guttering, retaining walls, or other slope stabilization measures; (iii) energy resiliency: solar/other renewable energy installations or energy efficiency measures; (iv) water resiliency: rainwater harvesting systems, water conservation measures, or irrigation; (v) energy and water resiliency: solar water heaters or combinations of water and energy resiliency measures as described above; and (vi) other resiliency: any other mix of resiliency measures as defined above. 24 Chapter 3 DCAFF: Integrating Physical and Financial Resilience Successful programs must address both physical risk reduction and financial solutions within a strong enabling environment, as highlighted in chapter 2. This chapter introduc- es the DCAFF, a new approach developed to help countries systematically strengthen both dimensions of resilience. DCAFF supports World Bank teams and governments by aligning policy, investment, and institutional capacity—ensuring that physical risk reduction efforts are integrated with financial solutions in an ecosystem that allows for optimal sustainability and impact. At the core of DCAFF are five operational pillars that collectively guide a country’s end- to-end journey to build disaster and climate resilience. These pillars can be applied inde- pendently or through a recommended two-phase approach that begins with a diagnostic assessment and leads to the implementation of prioritized, tailored interventions. Figure 3.1 illustrates how these pillars are structured within the overall DCAFF process. Figure ES.1  DCAFF structure DCAFF Pillars Activities Outputs Outcomes Pillar 1.  Conduct a Country Disaster Risk and  Country Disaster and Climate Phase 1 Assessments Climate Finance Diagnostic. Finance Diagnostic  Develop a roadmap of recommended  Strategic Roadmap  Enabling ecosystem for steps for project implementation. disaster and climate adaptation financing. Pillar 2. Develop analytical products for  CBA for structural housing  Stronger institutional Analytics, strengthening the link between retrofits capacities. tools & DRR and DRF.  CBA of equity and wellbeing resources  Improved resilience of  Home Risk Assessment App homes & businesses. Pillar 3. Partnership development  Sustainable financing Promote international and local Partnerships, strategy mechanisms for long-term partnerships. collaborations disaster and climate adaptation efforts. Phase 2  Loan facility options / Pillar 4. Design and pilot disaster and climate revolving funds  Improved collaborations Financing adaptation financing mechanisms.  Parametric insurance across private & public products products sectors. Pillar 5.  Develop capacity building for FIs,  Training and knowledge Capacity public sector, contractors, beneficia- sharing events building and ries, etc.  Outreach initiatives communication  Develop communication strategies  Communication strategies and outreach initiatives. Source: World Bank, developed by DCAFF team. 25 Chapter 3 DCAFF: Integrating Physical and Financial Resilience 3.1 DCAFF Phased Implementation Process and Aligned Pillars This section describes each pillar and its role within phases 1 and 2 of the DCAFF ap- proach. Each pillar includes a set of activities that, together, address the critical institutional, financial, and operational components required to build long-term resilience. Phase 1: Diagnostic and roadmap development The first phase focuses on conducting assessments to identify recommended actions that will guide subsequent implementation. PILLAR 1 Assessments: Diagnosing Risks and Institutional Readiness The first DCAFF pillar aims to evaluate client countries’ experience and readiness to imple- ment disaster and climate finance initiatives. To achieve the objective, this pillar proposes the following activities:  A comprehensive assessment of the country’s institutional readiness, policy align- ment, and financing capacity, guided by the DCAFF Country Disaster and Climate Finance Diagnostic Tool. This assessment helps identify gaps that require technical or financial support, as well as opportunities across government, the private sector, and civil society. Appendix E highlights more elements of the diagnostic tool and includes examples of its application in Saint Lucia and Dominica.  Based on the diagnostic, DCAFF supports the development of a government-en- dorsed roadmap that outlines short-, medium-, and long-term priorities.  In contexts where a full diagnostic has already been completed, the DCAFF team can conduct targeted analyses, such as identifying structural vulnerabilities in hous- ing, assessing demand for financing among small businesses, or pinpointing barri- ers to the adoption of risk reduction measures. The main output of this pillar is a strategic roadmap that identifies key actions to address both physical and financial risks, helping to avoid duplication and ensure coherence with previous and ongoing initiatives. Phase 2. Implementation of prioritized actions The second phase focuses on implementing the roadmap, drawing on the full range of DCAFF tools and support laid out in pillars 2 through 5. 26 Chapter 3 DCAFF: Integrating Physical and Financial Resilience PILLAR 2 Analytics and tools: Informing Decisions and Investments This pillar aims to enable risk-informed governance, strengthen strategic planning, and im- prove the regulatory environment of client countries by equipping policy makers and stake- holders with tailored analytical tools and resources. To achieve this objective, DCAFF supports the development and application of analytical tools that assess the cost-effectiveness of risk reduction measures, guide public investment priorities, and enhance regulatory compliance. Three tools have been developed to date that can be adapted to different contexts and client needs:  CBA for structural housing retrofits. This tool uses a probabilistic risk modeling approach to assess the cost-effectiveness of retrofitting different building types by evaluating their physical vulnerability to natural hazards. It compares the benefits of mitigation or retrofit projects with implementation costs. While its primary focus is buildings, the tool can be adapted for other infrastructure and asset types as need- ed. The CBA’s application in Dominica is detailed in chapter 4.  CBA for equity and well-being. This tool, known as “Unbreakable”, translates asset damage into household welfare impacts, providing a comprehensive analysis of di- saster effects. It goes beyond physical asset losses to assess the broader impacts on household well-being and provides strategic recommendations to strengthen the financial design of adaptive social protection systems, enabling more effec- tive disaster response and resilience-building (Hallegatte, Vogt-Schilb, Bangalore, & Rozenberg, 2016).  Home Risk Assessment Tool. This tool helps users assess the climate risks of their homes by evaluating potential impacts from hydrometeorological hazards, water shortages, and carbon footprints. It guides individuals in developing an adaptation plan with targeted interventions to enhance structural resilience. The tool can be tailored for use by homeowners, business owners, students, or financial institutions, depending on country and project needs. Additional information is provided in ap- pendix D. Key outputs under this pillar include the findings from the application of existing tools, devel- opment or revision of policy and regulatory frameworks, and the creation of new analytical tools tailored to client country priorities. PILLAR 3 Partnerships: Catalyzing Public and Private Collaboration The objective of pillar 3 is to develop local and international partnerships and foster pub- lic-private collaboration that expands access to technical expertise, funding, and outreach capacity in support of disaster and climate resilience. 27 Chapter 3 DCAFF: Integrating Physical and Financial Resilience Activities under this pillar include:  Development of stakeholder engagement plans.  Development of collaboration platforms, such as workshops, symposia, and knowl- edge exchanges with relevant local and international stakeholders.  Facilitated collaboration among ministries, financial institutions, local businesses, civil society, construction associations, NGOs, and international partners. Key outputs include a partnership development strategy tailored to the country context, es- tablished stakeholder platforms and engagement mechanisms, and formalized collabora- tions with public and private sector actors at the local and international levels. PILLAR 4 Financing Instruments: Developing Tailored Financial Solutions This pillar aims to transform data into actionable solutions by supporting World Bank task teams and governments in designing, piloting, and implementing risk and climate adapta- tion financing instruments tailored to local needs. Activities encompass:  Design of customized financial instruments, including loans, insurance, contingent credit, and blended finance solutions for resilient housing and MSMEs. DCAFF has designed a parametric insurance product that can be tailored to client needs. Appendix F provides a detailed description of this product.  Linking of financial products to risk reduction measures and well-designed incen- tives to increase uptake and effectiveness.  Piloting of financial products.  Development of tools to facilitate financial product implementation, such as dis- bursement systems, inclusive selection processes, and monitoring and evaluation frameworks. The main outputs include the development and launch of financing instruments based on local context; design of operational disbursement and monitoring systems to track impact and effectiveness; and strengthened capacity among financial institutions and government counterparts to deliver climate adaptation finance. PILLAR 5 Capacity Building and Communication: Building Knowledge for Action Pillar 5 aims to ensure the uptake and long-term sustainability of climate adaptation financ- ing by strengthening institutional capacity, raising public awareness, and supporting behav- ior change among key stakeholders. To achieve this objective, this pillar encompasses the following activities:  Tailored training for government agencies, financial institutions, and communi- ty actors on disaster and climate adaptation concepts and resilient construction practices. 28 Chapter 3 DCAFF: Integrating Physical and Financial Resilience  Guidance on financial product rollout, borrower engagement strategies, and public awareness.  Communication strategies to educate target audiences and promote product adoption.  Monitoring and evaluation of implementation outcomes to inform continuous improvement. Key outputs include trained stakeholders with enhanced knowledge of resilience practices and financial products, as well as communication and outreach strategies that support be- havior change and product uptake. SCALE, INSTITUTIONALIZE, AND ATTRACT INVESTMENT DCAFF is designed to maintain flexibility throughout both phases—allowing countries to adapt the framework to their specific challenges and build long-term capacity for managing disaster and climate risks. Once the DCAFF pillars have been implemented, the focus will be on scaling, institutionalizing, and attracting investment. This involves using lessons learned and performance data to expand programs, integrate DCAFF into government budgeting and investment planning, and leverage tools and results to access climate finance and de- velopment grants. 29 Chapter 4 Applications of DCAFF: From Diagnostics to Delivery The central strength of the DCAFF approach lies in its flexibility and adaptability. Designed to be both comprehensive and practical, DCAFF can be tailored to support a range of needs—whether diagnostic analysis, capacity building, financial product design, or forging cross-sector partnerships. Its application is relevant across diverse contexts, from Small Island Developing States to large countries operating at national and subnational levels. This chapter highlights how DCAFF has been applied in various contexts, including in the Commonwealth of Dominica, the state of Maharashtra, India, and the Republic of the Marshall Islands, to demonstrate how financial instruments and physical resilience invest- ments can work together through enabling environments and institutional alignment. 4.1 Dominica: Applying Pillar 1–Readiness Assessment and Roadmap Development In Dominica, DCAFF began with a readiness assessment to evaluate institutional, finan- cial, and policy conditions for climate adaptation financing—particularly in the housing sector, which had undergone widespread reconstruction following Hurricane Maria in 2017. Using a hybrid methodology combining desk review and stakeholder interviews, the assess- ment found:  FIs were already engaged in climate-related lending, notably in renewable ener- gy and adaptation financing. For instance, the National Bank of Dominica and the Agricultural, Industrial and Development Bank offer climate-related loans primarily for renewable energy. In addition, the NDFD developed climate adaptation financing products in partnership with IDB Lab’s EcoMicro Program.  The government demonstrated strong leadership with a whole-of-government approach to resilience. Climate resilience policies have been developed and imple- mented across all ministries, agencies, and state-owned enterprises. The integra- tion of the Climate Resilience Execution Agency for Dominica into the Ministry of Finance reinforced institutional commitment.  The private sector showed high engagement, with growing awareness and motivation to reduce disaster vulnerability, particularly in the construction and housing sectors. These findings were validated and expanded during the Disaster Resilience and Financing Symposium for the Housing Sector (see section 4.3), culminating in a stakeholder-driven roadmap (see figure 4.1.1). 30 Chapter 4 Applications of DCAFF: From Diagnostics to Delivery The preliminary roadmap emphasized the need to:  Build capacity for resilient construction planning;  Enforce building code compliance;  Improve project management;  Design innovative financial instruments such as blended finance and insurance products;  Strengthen communication and awareness on the costs and benefits of resilience; and  Facilitate public-private collaboration. Figure 4.1.1  Indicative roadmap for resilient housing in Dominica Intended impact Increased resilience of housing in Dominica Intended outcomes Current gaps & barriers Recommended actions Awareness of opportunities from Raise awareness of resilient housing in financial and development partners all parts of society Increased adherence to codes, standards and regulations Access to information & data Improve data sharing Develop new or improve existing, Improved quality of planning, Lack of access to financial products design and construction inclusive financial that incentivise Gaps in financial products on offer resilient housing Improved and more inclusive Socio-cultural barriers (e.g. Kalinago Develop new, and improve existing financial products available for policy initiatives that enable and/or all that incentivise resilient access to credit) incentivise resilient housing. housing Legal and regulatory gaps Allocate resources to manage them, (e.g. planning & land tenure) Strengthened, more inclusive Capacity in planning department enabling policy environment Improve monitoring of projects Lack of monitoring of adherence to codes Improve training offer for technical professions (affordable, flexible, Technological resources relevant, inclusive) Lack of regulation of technical Develop and enforce a code of ethics, professions regulation and registration of technical professions Enabled by Financial Stronger partnerships, collaboration and resources Cross-stakeholder agreement communication between regulatory sector, on actions and timelines with public sector, academic institutions, communities, progress monitored regularly Political will & agreement financial industry, construction industry Source: World Bank based on Symposium discussions and outputs This roadmap laid the groundwork for Phase 2 of DCAFF implementation in Dominica and clarified roles and responsibilities across the government and partners. 31 Chapter 4 Applications of DCAFF: From Diagnostics to Delivery 4.2 Dominica: Applying Pillar 2–Analytics to Inform Resilient Investment The DCAFF team conducted a CBA of retrofit options for Dominica’s housing stock to provide guidance on cost-effective adaptation investments that could further build resil- ience against hurricane impacts. Retrofit and mitigation options were analyzed for various building types. Typical construction deficiencies and necessary retrofit measures were iden- tified for each building typology to improve resistance to strong winds and hurricanes. These retrofit measures were then grouped into packages (see figure 4.2.1) that could be executed progressively, improving resilience at various levels. Figure 4.2.1  Housing retrofit packages proposed in the Commonwealth of Dominica BASIC INTERMEDIATE ADVANCED Retrofit Package Retrofit Package Retrofit Package “building envelope” “Roof strengthening” “Load Path” • Improve roof covering; • Strengthen timber roof • Address issues with • Strengthen vents and elements; building configuration for in soffits; • Local repair of roof slabs; plane and out of plane • Strengthen gable end walls • Strengthen timber wall failure; and overhangs at gable end elements; • Strengthen all connections walls (if present); • Tie down appendages to ensure continuous load • Protect door and window path from roof to foundation openings Source: Build Change (2023). Cost-Benefit Analysis for Hurricane Retrofitting in Dominica. Key findings included:  Timber buildings were most vulnerable, while masonry houses with hip-shaped, lightweight roofs or reinforced roofs were the least vulnerable.  Over 80 percent of the housing stock could be retrofitted for hurricanes, with all retrofit packages significantly reducing annual average losses (see figure 4.2.2).  Advanced retrofits produced the highest savings and cost-benefit ratios, espe- cially in high-wind events.  All packages were economically viable, and there was value in progressing incre- mentally toward full retrofit levels. The results were shared through a train-the-trainer workshop with government agencies, physical planners, builders, and academia, helping build local capacity to apply resilience analytics in practice. The workshop was delivered in collaboration with Build Change and the Institute of Building Technology and Safety. This example illustrates how financial decisions—such as which homes to prioritize for subsidies or loans—must be grounded in physical risk data. It also underscores how ana- lytics can help bridge financial instruments and resilience outcomes. 32 Chapter 4 Applications of DCAFF: From Diagnostics to Delivery Figure 4.2.2  Non retrofit Basic Intermediate Advanced CBA Findings of Annual 3.0% Average Losses by Typology AAL as a % of the total replacement value After Retrofit 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Typology5b Typology5a Typology3 Typology1 Typology2 Typology4 Source: Build Change (2023). Cost-Benefit Analysis for Hurricane Retrofitting in Dominica. 4.3 Dominica: Applying Pillar 3 – Forging Partnerships for Action Following the diagnostic, the DCAFF team supported the Ministry of Housing and Urban Development in identifying key partnerships for advancing the housing resilience finance agenda in Dominica. One such partner, the Dominica Cooperative Societies League, later played a critical role in the organization of the Disaster Resilience and Financing Symposium for the Housing Sector. This symposium convened over 90 stakeholders across sectors— housing, finance, construction, insurance, academia, and civil society—and aimed to assess current resilience gaps, share international best practices, promote inclusive financial solu- tions, and align physical risk mitigation with financial preparedness. An exhibit of innovative financial and insurance products encouraged practical dialogue on bridging the divide between resilience goals and market instruments. One key outcome was a cross-sector commitment to developing a disaster risk financ- ing strategy for housing. The discussions also spurred action to address long-standing challenges, including noncompliance with building codes, lack of resilience standards, and limited access to financing for vulnerable households. The event concluded with the devel- opment of the aforementioned roadmap focused on stakeholder coordination and strength- ening partnerships, improved planning and policy frameworks, and the design of inclusive financial mechanisms to support resilient housing practices moving forward. 33 Chapter 4 Applications of DCAFF: From Diagnostics to Delivery 4.4 Maharashtra, India: Applying Pillar 4– Developing Tailored Financial Solutions The DCAFF supported the World Bank task team in designing a disaster and climate fi- nance approach for the state of Maharashtra, India, as part of the forthcoming Maharashtra Resilience Development Project, under preparation as of May 2025. A proposed compo- nent—Private Capital Mobilization for Risk Financing and Fiscal Resilience—draws on sever- al elements of the DCAFF framework, with a strong focus on developing financial solutions. The context and indicative structure of the project component are outlined as follows:  Background. Maharashtra faces increasing climate-related risks, particularly floods and droughts, which have surged seven- and six-fold respectively over the past five decades. These events—along with heavy rainfall and landslides—have caused sig- nificant human and economic losses, forcing the state to divert substantial funds toward emergency response and recovery. The frequency and spread of these events across multiple districts highlight the urgent need for integrated strategies to strengthen climate resilience.  Overview. The Maharashtra Resilience Development Project aims to enhance mul- tihazard risk management and institutional capacity for resilient development. The private capital mobilization component will support the design of disaster risk re- duction, mitigation, and risk transfer solutions—such as insurance and credit—for homeowners and MSMEs. These solutions aim to reduce the fiscal burden of natu- ral hazards on the state. Additional program activities will include climate-informed flood risk management, risk assessments, nature-based solutions, improved emer- gency preparedness, and strengthened knowledge management.  Component Structure: With the support of DCAFF, the Private Capital Mobilization for Risk Financing and Fiscal Resilience component will identify and implement cli- mate and disaster risk financing mechanisms aligned with the state’s objectives, enhancing the climate resilience of housing stock and MSMEs. Potential subcom- ponents may include: Æ Technical assessments and analytical tools. Conduct technical assessments and develop analytical tools to support state disaster risk reduction, adaptation, and financing policies and instruments for homeowners and MSMEs. Æ Design of disaster and climate adaptation financing instruments. Pilot a pro- gram to incentivize homeowners and MSMEs to invest in climate-proofing their homes and businesses and increase financial resilience through insurance. Initiatives could include partial rebates from commercial banks for structur- al improvements, grants from homeowner or business associations for cli- mate-proofing projects, or insurance premium subsidies for qualifying catastro- phe insurance products that cover property damage and business interruption caused by floods, landslides and earthquakes. Æ Capacity building and public education. Implement skills development activi- ties to facilitate a ready supply of qualified labor for climate-proofing activities. 34 Chapter 4 Applications of DCAFF: From Diagnostics to Delivery Enhance public knowledge of cost-effective structural improvements that can be financed to increase the resilience of homes and businesses. Results under this component would enable the state to mobilize private capital in sup- port of climate-proofing housing stock and making the MSMEs more financially resilient to climate change. 4.5 Republic of the Marshall Islands: Applying Pillar 5–Capacity Building and Knowledge Exchange In the Republic of the Marshall Islands, the government sought ways to mobilize private capital for climate resilience. At the request of the World Bank task team, the DCAFF team conducted a capacity-building workshop with the Ministry of Finance and Cabinet Office, focusing on lessons from Saint Lucia’s application of the CAFF program. Following the work- shop, the government indicated interest in partnering with local banks to design a housing resilience finance product and plans for a South-South exchange with the SLDB to deepen knowledge on blended finance and technical assessment. Additionally, at the 2024 Understanding Risk Forum in Japan, DCAFF co-hosted a session on Bridging the Gap Between Physical and Financial Resilience Solutions for Housing and Business Sectors with the governments of Dominica and Costa Rica and the Howden Group. The session focused on:  Learning from the governments’ experiences and challenges in developing a re- silient housing stock, with a focus on Dominica’s reconstruction experience post Hurricane Maria;  Highlighting private sector perspectives and initiatives that can bolster government efforts, with expert insights from the insurance industry;  Costa Rica’s experiences bringing together private and public sectors in disaster resilience programming; and  DCAFF’s approach and applications across countries. The session catalyzed new public-private dialogue and led to interest in a task force to ex- plore joint disaster risk reduction and financing solutions. 35 Conclusion Bridging the Resilience Gap Through DCAFF This report highlights international experiences and offers a practical framework through DCAFF for bridging the persistent divide between physical and financial resilience. It re- sponds to a central disaster risk challenge: financial instruments are too often developed in silos, disconnected from the physical risk reduction measures they are meant to enable. Its findings complement the World Bank’s Rising to the Challenge (2024d) report by offering a downstream, operational approach to implementing its recommendations. DCAFF sup- ports governments and task teams in aligning investments, harmonizing financial instru- ments with resilience outcomes, and fostering private sector engagement—creating more robust, inclusive ecosystems that reduce disaster impacts and enable sustainable, long- term development. 5.1 Why Integration and Ecosystem Matter Bridging the gap between physical and financial resilience is not only urgent—it is foun- dational to effective adaptation. Disaster and climate resilience interventions are most im- pactful and sustainable when physical and financial strategies are planned and executed together. However, integration alone is not enough. A strong enabling environment is what makes integration possible. Effective policies, insti- tutional coordination, analytical tools, communication strategies, and partnerships are not peripheral—they are the backbone of successful implementation. Without them, even the best-designed financial or structural interventions can fail to deliver impact. DCAFF explicitly focuses on strengthening these enabling conditions as part of its core design. Key takeaways from the application of DCAFF so far are:  Finance and resilience cannot be siloed. Financial instruments must be embedded in resilience ecosystems that include regulatory reforms, analytical tools, physical risk reduction initiatives, technical capacity, and public awareness.  Diagnostics and data shape effective solutions. Risk assessments and CBAs in- form where and how to deploy finance for maximum impact.  Partnerships drive delivery. From community banks to global reinsurers, cross-sec- tor collaboration is essential for scalable and inclusive solutions. Therefore, DCAFF’s field applications show that integrating financial and physical resil- ience through a structured, data-driven, and participatory approach can shift countries’ DRM approach from fragmented projects to coherent national strategies. These serve as 36 Conclusion Bridging the Resilience Gap Through DCAFF examples of how DCAFF can be applied and tailored to address countries’ unique needs and serve as blueprints for other countries seeking to unlock finance for resilient development. Five Recommendations for Task Teams and Stakeholders To operationalize this integrated, environment-enabled approach, DCAFF recommends the following:  Leverage advanced analytics for smarter, evidence-based decision-making. Tools like CBAs and Unbreakable should be employed to ensure investments are data-driven, targeted, and aligned with both risk reduction and financial resilience goals. Analytics better inform what is built and how it is financed.  Strengthen policies and institutions for effective delivery. Robust policy and regu- latory frameworks, updated building codes, and empowered institutions are prereq- uisites for meaningful resilience. Strong governance structures enable financial instruments and technical interventions to reinforce one another, delivering last- ing structural and fiscal benefits.  Mobilize the private sector as a co-creator of resilience. Financial resilience must extend beyond public financing. Private sector actors such as banks, insurers, and construction firms are essential partners in designing, financing, and implement- ing scalable solutions. Their engagement must be deliberate, strategic, and integrat- ed into broader resilience plans.  Design cost-efficient, scalable, and flexible technical solutions. Interventions must be practical, tailored to the context, and structured for long-term sustainability. This means adapting interventions to local market conditions and ensuring that re- silience-building efforts do not impose excessive financial burdens on governments or communities. Task teams should integrate grants and concessional lending and align financial incentives to ensure that initiatives remain financially sustainable while maximizing impact.  Increase uptake through strategic communication and outreach. The success of resilience-building interventions depends on demand from stakeholders. Strategic communication is essential to educating and raising awareness about available fi- nancial products and technical solutions. Governments and task teams should in- vest in outreach campaigns, capacity building, and transparent communications that empower communities and institutions to access and apply resilience financ- ing tools. 5.2 Looking Ahead A key strength of the DCAFF approach lies in its flexibility, enabling adaptation to the unique context of each country. The application of DCAFF in Dominica, Maharashtra, and other locales demonstrates the versatility and practical relevance of the DCAFF framework across varied geographies, institutional contexts, and development objectives. As the frame- work is applied in various settings, continuous feedback and analysis are essential to re- fining its design and enhancing its relevance. This iterative learning process ensures that DCAFF will remain responsive to evolving local needs and emerging challenges. 37 Conclusion Bridging the Resilience Gap Through DCAFF DCAFF provides a structure for World Bank task teams and governments to better align their physical and financial resilience, while avoiding fragmented, siloed approaches. By embedding technical analytics, policy reform, and stakeholder engagement into a unified strategy, DCAFF provides a pathway toward more coherent, cost-effective, and impactful resilience outcomes. Critically, it emphasizes that no intervention—financial or structural—can succeed with- out the right supporting environment. Policies, partnerships, communications, and ana- lytics are not secondary considerations; they are the enablers of scale, sustainability, and success (see figure 5.2.1). Figure 5.2.1  Environment Actions Outputs Outcomes Results Framework: Integration and Flow of Institutional DCAFF Elements strengthening Enabling policy environment: Financial Stronger institutional products: structures, improved National & Analytical tools resilience of homes subnational policies, Loans, grants, & businesses, planning parametric Improved instruments, risk insurance, collaborations financing strategies, subsidies across private & public asset Capacity building public sectors management Partnership development Source: World Bank, developed by DCAFF team. By focusing on integrating physical and financial resilience solutions as well as the en- abling environment, DCAFF equips countries and task teams to deliver innovative cross-sec- tor solutions and unlocks sustainable financing mechanisms that support long-term adap- tation efforts. 38 References Adaptation Fund. (2021). Mid-Term Evaluation of the Adaptation Fund Programme in Anti- gua: An integrated approach to physical adaptation and community resilience in An- tigua and Barbuda’s northwest McKinnon’s watershed. Available from: https://www. adaptation-fund.org/project/integrated-approach-physical-adaptation-community-resil- ience-antigua-barbudas-northwest-mckinnons-watershed/. CEMEX. (2025). Patrimonio Hoy. Available from: https://www.patrimoniohoy.com/. Centre for Research on the Epidemiology of Disasters (CRED). (2021). 2020: The non-COVID year in disasters. Centre for Research on the Epidemiology of Disasters. 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Available from: https://library. sprep.org/sites/default/files/2024-03/Economic-Assessment-Tropical-Cyclone-Haz- ards-Vanuatu.pdf. Department of Environment Antigua and Barbuda. (2022). SIRF Fund. Available from: https:// environment.gov.ag/sirf#. Department of Environment of Antigua and Barbuda. (2023). Evaluation Of The Department Of Environment’s (DOE) Revolving Loan Programme (RLP). Available from: https://envi- ronment.gov.ag/news-events#news/article/175. Department of Environment of Antigua and Barbuda. (2024). The Revolving Loan Programme. Available from: https://forms.gov.ag/environment/the-revolving-loand-programme/. EcoMicro Program. (2022). Annual Report. Making Climate Finance Work for MSMEs and Low-Income Households. Washington D.C.: Inter-American Development Bank. ​ El Peruano. (2018). Operational Regulations for the Bonus for the Protection of Homes Vul- nerable to Seismic Risks. Ministerial Resolution Nº 336-2018-VIVIENDA. Lima: El Peru- ano.  Fondo Mi Vivienda. (2025). Bono de Reforzamiento Estructural. Available from: https:// www.mivivienda.com.pe/PORTALWEB/promotores-constructores/pagina.aspx?id- page=411#:~:text=EL%20BONO%20DE%20REFORZAMIENTO%20ESTRUCTURAL,e- structural%20es%20de%2018%20m2. Green Max Capital Advisors and GFA Entec. (2022a). Final Evaluation Report. EcoMicro Pro- gram, Green Finance for MSMEs and low-income households in Dominica. 39 References Habitat for Humanity. (2024). MicroBuild Fund. Retrieved from Terwilliger Center for Innova- tion in Shelter: Available from: https://www.habitat.org/our-work/terwilliger-center-inno- vation-in-shelter/microbuild. Habitat for Humanity. (2025). MicroBuild Fund Annual Report: Year in Review FY24. Retrieved from Habitat for Humanity: Available from: https://www.habitat.org/sites/default/files/ documents/MicroBuild-Fund-AR-FY24.pdf. Hallegatte, S., Vogt-Schilb, A., Bangalore, M., & Rozenberg, J. (2016). Unbreakable: Building the Resilience of the Poor in the Face of Natural Disasters. 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Saint Lucia - Disaster Vulnerability Reduction Project. Available from: https://documents.worldbank.org/en/publication/documents-reports/documentde- tail/503571468301159147/saint-lucia-disaster-vulnerability-reduction-project. World Bank. (2018). World Bank Provides US$65 million for Dominica’s Post-Maria Re- construction. Press Release. Available from: https://www.worldbank.org/en/ news/press-release/2018/04/13/world-bank-provides-us65-million-for-domini- cas-post-maria-reconstruction#:~:text=WASHINGTON%2C%20April%2013%2C%20 2018%E2%80%94,houses%20destroyed%20by%20Hurricane%20Maria. World Bank. (2024a). Global Rapid Post-Disaster Damage Estimation (GRADE) Report: Hurricane Beryl 2024 - Saint Vincent and the Grenadines. Available from: https://relief- web.int/report/saint-vincent-and-grenadines/global-rapid-post-disaster-damage-es- timation-grade-report-hurricane-beryl-2024-saint-vincent-and-grenadines-report-ju- ly-26-2024. World Bank. (2024b). Global Rapid Post-Disaster Damage Estimation (GRADE) Report: Hurri- cane Beryl 2024 – Grenada. Available from: https://www.gfdrr.org/en/publication/glob- al-rapid-post-disaster-damage-estimation-grade-report-hurricane-beryl-2024-grenada. World Bank. (2024c). Rising to the Challenge: Success Stories and Strategies for Achieving Climate Adaptation and Resilience. Available from: https://www.worldbank.org/en/publi- cation/rising-to-the-challenge-climate-adaptation-resilience. World Bank. (2025). A Review of the Global Rapid Post-Disaster Damage Estimation (GRADE) Assessments : The Frontier in Rapid Post-Disaster Damage Estimations for Developing Countries 2015 - 2024. Available from: https://documents.worldbank.org/en/publica- tion/documents-reports/documentdetail/099031025181518202. 40 Conclusion Bridging the Resilience Gap Through DCAFF APPENDICES 41 High angle view of buildings by the river in Indonesia. Credit: Eyeem mobile gmbh. Appendix A Summary Table of Case Studies Table A.1  Summary of Case Studies Case study Executing Description Results/Outcomes Key takeaways Agency Saint Lucia: Saint SLDB A US$5 million pilot facility Households and small business- Stresses the importance of a robust Lucia Climate that provided loans to lower- es showed a willingness to bor- climate policy framework to ensure Adaptation and middle-income house- row for risk reduction activities, credibility, strategic direction, and Financing Facility holds and small businesses to with CAFF disbursing 384 loans enforcement. Highlights the need (CAFF) finance specific climate adap- totaling US$4.26 million. for incentives, such as grants and tation and mitigation projects training, to support beneficiaries. Antigua and DOE Piloted a revolving fund that Provided over 200 concessional Highlights international partnerships Barbuda: SIRF provided highly concessional, loans for resilience interventions (GEF, GCF, Adaptation Fund) for fund Fund RLP for noncollateralized loans to to vulnerable populations, with mobilization, knowledge sharing, and Adaptation low-income homeowners and 88% of beneficiaries using funds synergies to strengthen climate re- MSMEs for implementing to enhance hurricane resilience.1. silience strategies. Use of innovative adaptation measures on their tools like a multi-indicator approach properties, aligned with the that includes climate, financial, building code income, social, and gender vulner- ability aspects in loan application assessments. Latin America IDB Lab A US$17 million facility that Issued more than 8,000 green This TA approach prioritizes institu- and the Carib- provides technical assistance loans, directly and indirectly bene- tional commitment among FIs and bean: EcoMicro (TA) to MFIs for designing and fiting over 32,000 people through countries. Emphasizes the value of program piloting green financial prod- financing, awareness, and capac- climate risk tools to help FIs assess ucts for low-income house- ity building. Trained more than and report risks while fostering local holds and MSMEs, developing 6,000 FI staff in environmental green technology partnerships. internal greening policies, and awareness, green products, and managing climate risks in FIs’ risk assessment.2 portfolios Global: Micro- HFHI A US$100 million housing Demonstrated that housing mi- Adopts a multistakeholder approach, Build Fund financing facility that supplies crofinance products are profitable engaging NGOs, impact investors, debt capital and technical and carry lower institutional risk social ventures, and foundations to expertise to MFIs to provide for FIs. Over the past decade, attract significant capital. Includes housing loan products for the fund has disbursed US$230 specific criteria for selecting FIs and low-income customers. million through 62 FIs in 33 coun- monitoring and evaluation tools for tries, enabling 236,461 borrowers performance tracking. (~1.18 million people) to access improved housing.3 Mexico: Patrimo- CEMEX Private sector initiative that Over 20 years, Patrimonio Hoy Features a holistic model providing nio Hoy provides low-income families has helped more than 600,000 technical support for design and con- with access to financing, families improve their homes and struction alongside building material construction materials, and ar- stimulated local economies by loans. Promotes collaborative com- chitectural advice for progres- engaging material suppliers, ar- munity networks and highlights the sive construction and housing chitects, and other stakeholders. effectiveness of community-focused improvements. marketing strategies. Peru: BPVVRS Mi Vivienda Program that provides a Strengthened structural safety Recognizes accredited technical Fund (gov- subsidy to households living in in vulnerable homes, reducing entities for implementing interven- ernment FI) poverty aimed at strengthening earthquake risks and boosting tions and disbursing funds based homes located in seismic-vul- local economies by involving ma- on verified compliance through site nerable areas or built under terial suppliers and construction inspections.4 fragile conditions. professionals. Sources: 1 Le Groupe Conseil Baastel (2023). Evaluation of the Department of Environment’s (DOE) Sustainable Island Resource Framework (SIRF) Fund’s Revolving Loan Programme (RLP); 2 EcoMicro (2022b). Annual Report 2022: Making climate finance work for MSMEs and low-income households; 3 Habitat for Humanity (2025). MicroBuild Fund Annual Report: Year in Review FY24. 4 El Peruano. (2018). Operational Regulations for the Bonus for the Protection of Homes Vulnerable to Seismic Risks. 42 Appendix B Detailed Tables of the Comparison of Institutional Arrangements and Financing Products Between International Programs Table B.1  Comparison of Institutional Arrangements Program Saint Lucia CAFF SIRF Fund RLP EcoMicro program MicroBuild Fund Patrimonio Hoy BPVVRS name Country or Saint Lucia Antigua and Bar- LAC International Mexico Peru region buda Countries analyzed: Grenada and Dom- inica Executing SLDB DOE’s SIRF Fund IDB Lab. HFHI CEMEX (private Mi Vivienda Fund Agency under its Adapta- company) Executing agencies tion Window analyzed: • GDB • NDFD Program To provide loans to To provide financ- To support LAC’s To provide finan- To improve To support purpose lower- and middle-in- ing to individuals, FIs to provide new cial support to housing condi- and enhance come households communities, finance instruments MFIs for small- tions for low-in- the safety of and small businesses and businesses to capitalize on scale housing come families in housing in earth- to finance specific cli- to enhance their opportunities in projects that Latin America by quake-prone mate adaptation and resilience against green financing, while aim to improve providing access areas by pro- mitigation projects. climate-related adjusting their risk living conditions to affordable con- viding financial events and natural management models. in underserved struction materi- assistance for disasters. communities. als and financial the structural services. reinforcement The RLP serves as a financial of low-income mechanism families’ homes. to support the country’s climate objectives and the implementation of the Environmental Protection and Management Act. Type of The CAFF was a Three donors, Provides TA to FIs Supplies debt Financing hous- Government support component of a through three um- to design and pilot capital and TA to ing improvements financial instru- loan provided to the brella programs1, green loans, and to MFIs providing for low-income ment used to Government of Saint provided grants to build institutional housing loans households with a mobilize funding Lucia by the World the SIRF Fund RLP capacity. to low-income social and corpo- for implement- Bank . The total for on-lending and customers. rate responsibility ing structural funds were used for TA to pilot a revolv- approach. reinforcement on-lending and TA to ing loan program. interventions for the SLDB. earthquake-re- sistant housing. 43 Appendix B Detailed Tables of the Comparison of Institutional Arrangements and Financing Products Between International Programs Program Saint Lucia CAFF SIRF Fund RLP EcoMicro program MicroBuild Fund Patrimonio Hoy BPVVRS name Funding Total funds: US$5 Total funds: US$7 Total funds: Investment capi- Total funds: In 20 Total funds: amount million million US$400,000 in TA tal (in 2012): years, CEMEX has US$28 million per FI invested approx- assigned to Funds for lending: Funds for lending: Debt capital: imately US$400 disburse as sub- ~US$4.2 million US$6.3 million Each FI must mobi- US$100 million million in Patrimo- sidies to benefi- lize funds from its (90% debt and TA: ~US$0.8 million TA: US$0.59 nio Hoy. ciaries balance sheets to 10% equity) for 59 million disburse as loans. institutions in 33 countries TA: US$10 million provided by HFHI In 10 years, the Fund has generated a total turnover of US$207.3 million. It has mobilized US$825 million in additional capital. Funding Funding from the • GEF through the • IDB Lab U.S. International CEMEX uses Resources from sources Strategic Climate Special Climate • Nordic Develop- Development corporate funds a supplementary Fund, part of the Change Fund ment Fund Finance Corpo- and the funds credit from the Climate Investment • Adaptation Fund • Global Affairs ration (US$90 generated by the Public Treasury Funds channeled • GCF Canada million of the debt credit program. of the Ministry through a World Bank capital) of Economy loan, the Disaster Vul- The remaining and Finance, nerability Reduction US$10 million aimed at climate Project. was provided by: change preven- Additional Funding tion and mitiga- • HFHI (51%) tion initiatives. was also provided for • MetLife Foun- The resources TA via grants and in- dation (24.5%) are transferred kind support from: • Omidyar Net- to the Ministry • Africa, Caribbean, work (20%) of Housing, Con- Pacific-European • Triple Jump struction, and Union Natural (4.5%) Sanitation and Disaster Risk Re- are managed by duction Program the Mi Vivienda • Global Facility for Fund. Disaster Reduction and Risk • Adaptation Fund • Caribbean Centre for Renewable Energy and Energy Efficiency • Local associations of engineers and architects • Sir Arthur Lew- is Community College • Organisation of Eastern Caribbean States Commis- sion 44 Appendix B Detailed Tables of the Comparison of Institutional Arrangements and Financing Products Between International Programs Program Saint Lucia CAFF SIRF Fund RLP EcoMicro program MicroBuild Fund Patrimonio Hoy BPVVRS name TA for TA to the SLDB for: Donors hired EcoMicro hired TA to MFIs for: N/A N/A institutional experts to provide consulting firms that • Market research • Designing loan strengthen- TA for: supported FIs in: prior to CAFF products that ing fit their local design • Operationaliza- • Understanding the • Climate adaptation tion of RLP needs of MSMEs markets training for staff • Development of and households to • Preparing MFIs • Preparing proto- key tools (e.g., mitigate or adapt to manage and type adaptation loan track- to climate change market these projects with indic- ing systems, • Design and piloting new products ative designs and monitoring of green financial • TA could costs for housing and evaluation products. also come in and agriculture systems, and • Development of the form of • Developing out- communication a climate risk as- construction reach and market- strategies) sessment tool advice provided ing strategies, such • Training for • Creation of green- directly to the as the Act to Adapt SIRF Fund RLP ing policies for the borrower initiative staff (e.g., loan institutions • Review of risk processing, • Use of digital solu- management pro- application tions to improve cedures assessments) the resilience of FIs • Implementing a and MSMEs centralized core banking system • Upgrading the environmental and social screening policy • Conducting engi- neering analyses of slope stabiliza- tion projects Partner- SLDB collaborated Three donors part- Partnerships with Fund managed Community- N/A ships with the local Cham- nered to increase local green tech- by many orga- based organi- ber of Commerce financing for the nology suppliers, nizations: an zations to offer to provide Business program. providing discounts NGO, an impact TA to borrowers Continuity Planning for borrowers and investment group, and market the training to CAFF BRP encouraging them a social venture, products. borrowers. to adopt sustainable and a foundation. Local architects, technologies. Partnerships with The Fund has engineers, and associations for engi- Mobilization of funds also mobilized construction neers and architects, from green funds US$825 million in workers. the Ministry of Educa- such as GCF. additional capital Local material tion, the Organisation from other institu- suppliers of Eastern Caribbean tions. States, and the World Strategic allianc- Bank Disaster-Resil- es with interna- ience Analytics and tional organiza- Solutions team to tions to expand develop the Act to the program Adapt initiative. (e.g., IDB, United Nations) 1: The RLP was initially designed and implemented with the support of the GEF-Special Climate Change Fund, under the second component of the “Building climate resilience through innovative financing mechanisms for climate change adaptation (5523)” project. Then, the Adaptation Fund collaborated with the revolving fund through a component of the project “An integrated approach to physical adaptation and community resilience in Antigua and Barbuda’s north- west McKinnon’s watershed,” with a focus on strengthening buildings of vulnerable homes and businesses in the McKinnon’s watershed. Additionally, the GCF through its project “FP 061: Integrated physical adaptation and community resilience through an enhanced direct access pilot in the public, private, and civil society sectors of three Eastern Caribbean small island developing states”, provided funds to scale the SIRF Fund RLP, under its fourth output that seeks to increase resilience to climate change of vulnerable population’s privately owned physical assets through concessional microfinancing. 45 Appendix B Detailed Tables of the Comparison of Institutional Arrangements and Financing Products Between International Programs Table B.2  Comparison of Financial Services Program Saint Lucia CAFF SIRF Fund RLP EcoMicro Project in EcoMicro Project in Patrimonio Hoy name Grenada Dominica Executing SLDB SIRF Fund, DOE GDB NDFD CEMEX Agency Type of prod- Only loans under the Highly concessional, Loans for climate ad- Loans for climate ad- Credit for the uct original CAFF. noncollateralized loans aptation and mitigation aptation and mitigation purchase of A blend of loans and for building adaptation purposes purposes building mate- grants under the BRP. measures, aligned with rials the building code Financing Loan size: From Loan size: From Loan size: For mitigation Loan size: From Credit amount: parameters US$1,000 to US$14,000 to US$35,000 loans, up to US$150,000; US$3,700 to US$11,100 From US$350 to US$74,000 and for adaptation loans, US$1,200 Interest rate: 2% to 4% Interest rate: From 5% up to US$3,700 Interest rate: 4.5% to 11% Interest rate: Repayment period: Up to to 7.5%, varying by Interest rate: From 5% Around 1.5% 20 years Repayment period: sector and borrower to 6% From 1 to 7 years Repayment peri- credit risk profile Repayment period: Up to od: Weekly small Repayment period: Up 30 years payments up to to 10 years 70 weeks Borrowers / Middle-income home- Homeowners and Existing home mortgage Low-income homeown- Low-income beneficiaries owners, and MSMEs businesses located in customers, new custom- ers, farmers, fisher- families profile Cashew Hill, McKinnon, ers, and MSMEs folks, and MSMEs and the surrounding watershed Unbankable individuals with a source of income. Selection Used the SLDB Lend- Multi-indicator approach Includes energy and risk N/A Applicants pres- process ing Policy, evaluating to assess financial, so- measurement appraisal, ent national iden- potential borrowers cial, and climate vulnera- utilizing the Climate Risk tification docu- only based on eco- bilities Assessment Tool. Results ment and proof nomic considerations A technical expert influence loan terms and that they have committee conducts site recommended interven- lived/worked at verification, climate as- tions. the property for sessments, and engineer- at least three ing assessments of the months. applicants’ homes. Use of funds In the original CAFF, Climate mitigation and Climate adaptation or Approved adaptation Purchase of only for climate re- adaptation, hurricane mitigation activities, or mitigation technol- building mate- siliency including the resilience, combating following a guide that ogies identified in the rials to upgrade following categories: mosquitoes, rainwater includes local providers’ Applicable Technology homes hurricane, flood/land- harvesting, landscaping, contacts Factsheets. slide, energy, water, renewable energy, energy NDFD established a energy and water, efficiency, and drought database of qualified other resiliency mix resilience designers, suppliers, The BRP included and installers for each projects that support technology. business continuity and recovery from the impacts of the COVID-19 pandemic. 46 Appendix B Detailed Tables of the Comparison of Institutional Arrangements and Financing Products Between International Programs Program Saint Lucia CAFF SIRF Fund RLP EcoMicro Project in EcoMicro Project in Patrimonio Hoy name Grenada Dominica Monitoring Documentation of the Documentation of pur- Documentation of the NDFD loan monitoring Technical advis- mechanisms deliverables and mon- chase and installation of purchase and installation information system. er oversight to itoring of the targeted interventions of interventions ensure materials interventions FI inspection of homes FI inspection of homes are properly used FI-managed monitoring, verification, and reporting systems Disbursement Triggered upon the A results-based dis- N/A N/A Borrowers make mechanisms first disbursement bursement mechanism small, fixed of the loan and after requires borrowers to payments each completion of an comply with agreed-up- week. acceptable project on milestones to access site visit. Subsequent funds. disbursements in ac- cordance with agreed project disbursement schedule. Incentives Advice on project Below-market interest Discounts from local Discounts from local No-cost tech- design, special deals rate and long repayment supplier partners on supplier partners on nical advice on green technolo- periods materials and installation materials and installa- to borrowers gies, and business services tion services (e.g., housing continuity training improvement plans, recom- mendations for construction) Materials deliv- ery On-time payment discounts, re- ferral programs, and raffles Outreach, Marketing through ra- Active outreach and ca- Beneficiary outreach Direct marketing strat- Local promot- marketing, dio spots, billboards, pacity-building activities and awareness strategy, egies (e.g., email, client ers advertise and com- and social media for potential borrowers including awareness database) products in local munication Act to Adapt Second- helped increase the num- events with end users Digital marketing markets and strategies ary School Competi- ber of applicants. and technology providers strategies using NDFD door-to-door tion initiative Mobilization of communi- to promote the benefits website and social sales, which ty leaders and conducted of green investments media allows sales community walkthroughs Dissemination activities representatives Public relations to earn a com- to raise awareness of through Facebook, radio, activities (e.g., local mission for new potential borrowers bus advertisements, web TV interviews, NDFD clients. pages, and advertise- flagship events, press ments releases, etc.). Promoters Digital techniques receive benefits were prioritized due to such as ca- COVID-19, including virtu- pacity-building al training, social media activities, pro- promotion, radio, and web fessional growth page advertisement. programs, and recognition pro- Communication from grams. loan officers 47 Appendix C Detailed Discussion on Findings and Lessons Learned from Case Studies The following discussion delves deeper into each lesson, providing context, examples, and insights from the case studies to illustrate their relevance and practical implications. By examining these lessons in detail, we highlight key challenges, successful strategies, and potential areas for improvement in designing and implementing disaster and climate adap- tation financing mechanisms. Institutional arrangements 1. An enabling policy environment is critical to effectively implement disaster risk and climate adaptation financing mechanisms. Key findings from the Saint Lucia CAFF reveal that such initiatives must be integrated into a robust climate policy framework to provide credibility, strategic direction, and support for enforcement measures like building codes and business continuity planning. For instance, the SIRF Fund RLP was closely aligned with national legislation and strategies on climate change and sustain- able development, reinforcing Antigua and Barbuda’s broader goals for climate resil- ience (Department of Environment of Antigua and Barbuda, 2023). The involvement of climate, housing, and economic policy makers is essential for defining monitoring indi- cators, establishing reporting procedures, and acting on feedback to ensure the mech- anism’s success. Furthermore, the Saint Lucia CAFF pilot highlights the importance of comprehensive readiness analyses to assess countries’ capacity to establish and sustain these facilities. A successful climate finance product requires a supportive pol- icy environment, strong partnerships between public and private entities, and targeted technical and analytical assistance to bridge gaps between financial institutions and borrowers, ultimately fostering resilience and climate adaptation. 2. Integration and collaboration significantly enhance impact. Incorporating green fi- nancial facilities into broader umbrella programs—supported by international organi- zations—has fostered collaboration, knowledge sharing, and synergies to strengthen climate resilience strategies. This integration enabled the leveraging of resources, ana- lytical insights, tools, and expertise across various program components. For instance, the SIRF Fund RLP, developed under three umbrella programs supported by interna- tional funds, indirectly benefited from complementary activities, such as updating the national building code (Department of Environment of Antigua and Barbuda, 2024). This highlights the effectiveness of collaborative efforts in enhancing the overall impact of green financial initiatives. 3. The FIs involved in the development of disaster risk and climate adaptation financ- ing mechanisms must demonstrate their commitment to policy objectives and their 48 Appendix C Detailed Discussion on Findings and Lessons Learned from Case Studies capacity for implementation and innovation. Early assessments should evaluate each FI’s commitment and liquidity to support green financing mechanisms, as well as op- tions for securing grants and technical assistance. For example, the EcoMicro program selected participating FIs through competitive processes, assessing their liquidity, com- mitment to mobilizing funds, and capacity to scale green financing products (EcoMicro Program, 2022b). Furthermore, financial projections should ensure that the FI receives reasonable compensation for its involvement; otherwise, a fee-based compensation framework should be considered. 4. Diverse support mechanisms tailored to the unique needs of FIs have proven instru- mental in advancing disaster risk and climate adaptation financing. Lessons from an- alyzed programs reveal three primary support types: standalone TA, TA combined with grants, and TA paired with debt capital. Each approach addresses different challenges and capacities of FIs, demonstrating the need for flexibility in design and implemen- tation. For instance, the EcoMicro program exclusively provides TA to help FIs design and pilot green loans while strengthening their institutional capacity. Conversely, the GEF, GCF, and Adaptation Fund offered grants for on-lending alongside TA to pilot the SIRF Fund RLP, showing how grant-based approaches can scale initiatives and amplify their impact. Meanwhile, the MicroBuild Fund supplies both debt capital and TA to MFIs, enabling them to offer housing loans to low-income households, and illustrating how debt-based mechanisms can ensure financial sustainability while fostering resilience. 5. Tailored TA and comprehensive training programs are crucial for effective disaster and climate adaptation financing mechanisms. The technical complexities of disas- ter and climate adaptation financing mechanisms call for targeted support for various stakeholders, including FIs, governments, beneficiaries, construction professionals, and suppliers. The TA provided by the assessed programs encompassed diverse activities, such as training FIs and borrowers on climate adaptation and mitigation concepts, sup- porting FIs in designing and piloting green financial products, developing climate risk assessment tools, and establishing monitoring, evaluation, and marketing strategies. Additionally, guidance was provided to contractors, suppliers, and beneficiaries—such as MSMEs and homeowners—on resilient construction practices, building code com- pliance, and using digital tools for resilience. Programs underscored the importance of ongoing capacity building through training sessions, operational tools, and staff de- velopment. The varied approaches, including the involvement of consulting firms and topic-specific experts, emphasized the need for flexibility to meet the unique needs of different stakeholders. 6. Partnerships play a critical role in enhancing the effectiveness and reach of DRF and CAF initiatives. The analyzed programs highlight the importance of diverse and strategic collaborations for mobilizing resources, fostering innovation, and ensuring sustainability. The Saint Lucia CAFF pilot underscored the need for cooperation with a wide array of stakeholders, including green building businesses, architects, engineers, industry value chains, and NGOs focused on climate advocacy and education. The complexity of co- ordinating with such diverse groups emphasized the necessity of developing well-de- fined stakeholder engagement plans. Additionally, the SIRF Fund RLP demonstrated the impact of collaborative donor partnerships in scaling financing efforts (Department of 49 Appendix C Detailed Discussion on Findings and Lessons Learned from Case Studies Environment of Antigua and Barbuda, 2023), while the Eco Micro Program leveraged part- nerships with local green technology suppliers to provide borrower discounts and pro- mote sustainable technologies (MicroEnergy International (MEI), Analistas Financieros (Afi) & Perspectives Climate Change (PCC), 2022). Similarly, the MicroBuild Fund show- cased a multistakeholder approach—engaging an NGO, an impact investment group, a social venture, and a foundation—that successfully attracted significant additional capital (Habitat for Humanity, 2024). Patrimonio Hoy highlighted the value of engaging community-based organizations and forming alliances with material suppliers (CEMEX, 2025). Together, these examples illustrate how coordinated partnerships can maximize the impact and sustainability of DRF and climate adaptation financing mechanisms. Financing products characteristics 7. FIs designed customized financial products to address specific beneficiary needs and market characteristics. While all mechanisms supported climate adaptation or housing improvements, their terms varied according to borrower profiles and loan purposes. For instance, the SIRF Fund RLP offered highly concessional, noncollateralized loans with interest rates ranging from 2 percent to 4 percent targeted at adaptation (Department of Environment of Antigua and Barbuda, 2023). In contrast, the NDFD and GDB provided market-based products for both mitigation and adaptation (Green Max Capital Advisors and GFA Entec, 2022a) (MicroEnergy International (MEI), Analistas Financieros (Afi) & Perspectives Climate Change (PCC), 2021). Although these programs primarily target- ed low-income households and MSMEs, each had distinct borrower requirements and specific purposes for fund utilization. This diversity highlights the critical role of market assessments in designing effective green financial products. By aligning with stakehold- er needs, local supply chains, and market conditions, such assessments help identify barriers, tailor product features, and mitigate risks—ultimately enhancing accessibility and adoption. 8. The use of incentives emerged as a critical factor in encouraging participation and ensuring the success of disaster risk and climate adaptation financing mechanisms. Findings reveal that purely demand-driven approaches often fall short of achieving de- sired outcomes, highlighting the need to influence borrower decisions through analyt- ical tools, targeted incentives and support. For instance, CBAs can be used to inform borrowers in advance about the cost-effectiveness of various housing adaptation in- vestments. Additionally, tools such as the Home Risk Assessment Tool, detailed in ap- pendix B, can assist borrowers in diagnosing vulnerabilities in their properties. Targeted incentives were used in the SIRF Fund RLP offering below-market interest rates and long repayment periods to reduce financial burdens, and in the EcoMicro program in Grenada and Dominica where collaboration with local suppliers provided discounts on materials and installation services. Similarly, Patrimonio Hoy leveraged diverse incentives, includ- ing no-cost technical advice, materials delivery, on-time payment discounts, referral pro- grams, and even raffles to engage borrowers and foster loyalty. The Saint Lucia CAFF also highlighted the need to include subsidies to encourage borrowing for more expen- sive projects that could reduce risk more effectively. These approaches demonstrate 50 Appendix C Detailed Discussion on Findings and Lessons Learned from Case Studies that well-designed incentives can lower adoption barriers, align borrower interests with program goals, and maximize impact. 9. FIs used innovative tools to ensure accountability, inclusivity, and impact of financing products. FIs adopted innovative borrower selection processes that considered not only financial indicators but also social, physical, and climate vulnerabilities. For example, the SIRF Fund RLP employed a multi-indicator approach, with a technical expert committee conducting site verifications, climate assessments, and engineering evaluations to iden- tify eligible beneficiaries. Robust monitoring and evaluation systems and disbursement mechanisms further supported the appropriate use of funds. Facilities like those imple- mented by the EcoMicro program in Dominica developed loan monitoring information systems , while the SIRF Fund RLP utilized results-based disbursement mechanisms that required borrowers to meet agreed milestones to access funds. The BPVVRS pro- gram in Peru transferred the funds directly to accredited technical entities, which im- plemented interventions after verifying compliance with the established requirements through site inspections. Additionally, interventions such as technical adviser oversight by Patrimonio Hoy ensured that materials were used as intended, further minimizing risks. These tools underscore the importance of integrating tailored methodologies and rigorous accountability measures in green finance programs to improve their effective- ness and sustainability. 10. Robust risk management strategies are essential for mitigating the inherent physical, economic, and external risks of adaptation lending. Adaptation projects face challeng- es from the evolving science of resilient design and the potential for extreme events to exceed design parameters, compounded by financial instability among lower-income households and small businesses. The Saint Lucia CAFF highlighted the use of tools like property insurance, portfolio guarantees, and grant funds to reduce these risks, al- though market mechanisms like insurance were often unavailable or unaffordable. The COVID-19 pandemic further illustrated these external risks, leading to the restructuring of the Saint Lucia CAFF to support businesses affected by the downturn—an action that increased risk exposure for the SLDB. Partial credit guarantees and matching grants were used to mitigate risks in energy efficiency investments, but they did not fully protect the CAFF’s portfolio or cover adaptation investments by homeowners and commercial sectors. Learning from this experience, future CAFFs should incorporate comprehen- sive risk management strategies from the feasibility stage by modeling loan demand, identifying economic outcomes, and developing mitigation mechanisms. Private sector, financial institutions, governments, and regional entities are crucial to creating fiscally sound, market-based solutions to safeguard borrowers and lenders while encouraging investment in climate adaptation. 11. Effective outreach, communication, and marketing strategies played a pivotal role in raising awareness, driving demand, and fostering long-term sustainability. Programs demonstrated the importance of launching public awareness campaigns before prod- uct rollouts, as seen in the SIRF Fund RLP, where active outreach and capacity-building activities increased the number of applicants. In Grenada and Dominica, the EcoMicro program prioritized digital marketing strategies, leveraging social media, radio, and websites to disseminate information, especially during COVID-19. Additionally, direct 51 Appendix C Detailed Discussion on Findings and Lessons Learned from Case Studies communication between loan officers and applicants—as well as channels connecting borrowers with suppliers—emerged as key elements for building trust and facilitating adoption (MicroEnergy International (MEI), Analistas Financieros (Afi) & Perspectives Climate Change (PCC), 2022). Innovative outreach initiatives, such as the SLDB’s Act to Adapt Secondary School Competition, carried out as part of the Saint Lucia CAFF, demonstrated its effectiveness in educating and raising awareness of the impacts of climate change and structural investments among potential beneficiaries (refer to ap- pendix B for more information about this initiative). Community-focused marketing also proved effective, as exemplified by Patrimonio Hoy, which employed local promoters for door-to-door outreach and market engagement, strengthening program visibility through personal connections. Promoters were incentivized with capacity-building op- portunities, professional growth, and recognition programs (CEMEX, 2025). These find- ings underscore that strategic, multichannel communication and outreach approaches tailored to local contexts are essential to increase awareness, overcome resistance, and promote the uptake of green financial products. 52 Appendix D Saint Lucia’s “Act to Adapt” Competition and Home Risk Assessment Tool The Home Risk Assessment app was initially developed as part of the SLDB’s “Act to Adapt” competition, under the Saint Lucia CAFF, as a tool to help students and homeowners assess their homes’ vulnerability to hydrometeorological hazards and build capacity on the structural improvements that bolster resilience (figure D.1). It was also seen as a tool that could eventually provide the SLDB with a database of households that could benefit from a CAFF loan. In its original design, the app takes users through a step-by step process that helps es- timate the level of impact that would occur in a Category 5 hurricane scenario involving 175 mile-per-hour winds, a 100-year flood, and a two-week cut in the potable water supply. Users first complete a home profile that captures basic property information such as loca- tion, design, and construction materials. Then, they conduct a home risk assessment that covers wind and flood hazards, water shortage, and a carbon footprint calculator. The final step involves utilizing the app’s expert resources to develop an adaptation plan consisting of home improvement projects to address vulnerabilities identified in the assessment. Figure D.1  Wind Hazard Assessment  Page in the Home Risk Assessment App Source: SLDB (2023). Home Risk Assessment App. 53 Appendix D Saint Lucia’s “Act to Adapt” Competition and Home Risk Assessment Tool During the “Act to Adapt” competition, secondary school students (ages 11 to 18) were challenged to conduct assessments of their homes using the app and submit the adapta- tion plans that they thought would best address their homes’ vulnerabilities. Winning entries received prizes and, in some cases, grants to implement select structural improvements identified in their adaptation plans. Over 120 students registered in the app and 36 students across 12 schools completed the assessments and developed adaptation plans. Multiple partners were involved in the design and execution of the competition and app, and in providing technical and financial resources. These included representatives from the Disaster Vulnerability Reduction Project, Ministry of Education, Ministry of Economic Development, Saint Lucia Institute of Architects, Association of Professional Engineers of Saint Lucia, Organisation of Eastern Caribbean States Commission, European Union, Climate Investment Funds, and the World Bank. The competition was effective in informing students, parents, and teachers about the im- pacts of climate change and the structural investments that can mitigate these impacts. Such an initiative can be effective in launching and promoting a CAFF; however, because of the time, resources, and expertise required, it might be best carried out as a multistakeholder endeavor that involves both the public and private sectors. It should also be driven by clear objectives that are monitored throughout the life of the activity and employ a design that is sustainable and useful for various audiences. More information on the Act to Adapt Secondary School Competition is available at www. sldb.lc/act-to-adapt. 54 Appendix E Country Diagnostic Tool and its Application in Saint Lucia and Dominica The Country Disaster and Climate Finance Diagnostic Tool is designed to assess the readiness of countries interested in establishing disaster risk and climate adaptation financing facilities or mechanisms. This tool assesses crucial elements for effective im- plementation, assigns criticality factors, and functions as a guide for evaluating interested countries. Factors considered include policy frameworks, potential private sector engage- ment, demand and capacity of financial institutions, and support from NGOs and associa- tions. This annex presents summaries of the findings for Saint Lucia and Dominica. Summary of the results from the 2023 Saint Lucia Assessment Saint Lucia has been a leader in the development of its climate policy framework fol- lowing the guidance of the United Nations Framework Convention on Climate Change. Besides the National Adaptation Plan and related instruments, this has included issuing the “Saint Lucia Climate Financing Strategy”5 in August 2020 and mobilizing funds for many mitigation and adaptation initiatives, including financing initiatives such as the CAFF and the combined Sustainable Agribusiness for Laborie and Environs /SmartClime project, which serves agricultural producers. The Government of Saint Lucia has received significant support from donors in the last few years to analyze its options for expanding infrastructure financing, including climate finance. Some common themes emerging from these assessments, review of the CAFF, and application of the diagnostic tool include: (i) Saint Lucia’s highly constrained fiscal sit- uation, which increases the need for creative financing solutions (for example, debt swaps and public-private partnerships) and new funding sources to finance climate investment; (ii) the importance for government to create conditions that encourage private financing of climate-related investments, including strengthening its engagement with the private sector and financial sector, creating tax incentives, and so on; and (iii) the need for the govern- ment to develop the capacity to scale up its access to international public climate finance. The assessments also point out the declining importance of commercial banks in financing capital investments in Saint Lucia, which could undermine the impact of efforts to align the 5 Saint Lucia’s Climate Financing Strategy under the National Adaptation Planning Process (2020). Retrieved from: http://bit.ly/3uCFoBw 55 Appendix E Country Diagnostic Tool and its Application in Saint Lucia and Dominica commercial financial sector with the government’s climate finance goals, but could strength- en the role of the SLDB, which maintains a strong focus on its climate investment lending. Saint Lucia is well-positioned to replicate and expand activities such as the CAFF. However, to be as effective as possible, support from the public and private sector will need to be strengthened, and technical assistance (both funding and technical expertise) will be crucial to building the capacity of lending institutions, borrowers, and relevant construction compa- nies or builders. Summary of the results from the 2023 Dominica Assessment The team conducted a hybrid desktop and in-person study for Dominica to determine the state of readiness for the expansion of DCAFF. The team assessed the potential conditions and stakeholder groups to determine the country’s suitability based on the critical success factors as learned from Saint Lucia and the point of entry based on the scoring or prevalence of each condition. In the case of Dominica, several positive conditions exist in each focus area. For instance, the country and several financial institutions have been exposed to climate finance ini- tiatives. The domestic banks—the National Bank of Dominica and the Agricultural, Industrial and Development Bank—each offer climate-related loans, primarily in the renewable ener- gy sector. The NDFD led the climate finance focus through IDB Lab’s EcoMicro Program, a program that works with MFIs to develop green financial products. The Government of the Commonwealth of Dominica has developed and implemented policies focused on its climate resilience strategy through all its ministries, agencies, and state-owned enterprises. The existence of critical agencies, such as the former Climate Resilience Execution Agency of Dominica, now incorporated into the Ministry of Finance, Economic Development, Climate Resilience, and Social Security, reflects the alignment of conditions necessary to support DCAFF. The consistent threat of hydrometeorological events motivates the private sector to participate in climate adaptation and mitigation measures such as the DCAFF, while also highlighting the need for enhanced collaboration with the building and construction sector and various NGOs and associations. The Disaster Resilience and Financing Symposium for the Housing Sector, conducted by the World Bank in collaboration with the Ministry of Housing and Urban Development in March 2024, identified key actions needed to advance ongoing efforts, along with critical challenges and success factors. These included the importance of sustained government support, limited fiscal resources, the need for increased impact financing to assist the most vulnerable, and the private sector’s willingness to play a larger role. Collectively, these factors position Dominica as a strong candidate for the adoption of DCAFF. 56 Appendix F Parametric Insurance Product for Housing Resilience The DCAFF team designed a parametric insurance product in collaboration with Re:focus Partners to increase financial resilience and incentivize greater physical resilience in the housing sector. Explicitly linking residential lending to property insurance can support more efficient capital allocation in adaptation projects by revealing the financial value of in- vestments to protect people and property. It also enables more efficient balancing between physical and financial protection. Property insurance can provide financial protection against losses from climate-relat- ed events. It also effectively converts the risks of uncertain future events into predictable annual cash flows in the form of insurance premiums. Insurance helps reveal the financial value of adaptation measures and provide meaningful price signals and financial incentives to inform investment decisions by householders and business owners. It can help rational- ize both borrowing and loan underwriting to fund projects that reduce the risk of physical damage from climate-related events, projects like roof upgrades, structural reinforcements, drainage improvements, and soil stabilization measures. In this way, linking insurance and adaptation finance can help facilitate efficient investments to manage both physical and financial risks of climate-related events (figure F.1). The parametric product presents the following characteristics:  It provides households with rapid liquidity post-disaster;  It incentivizes households to adopt physical resilience measures (premiums go down as physical resilience measures are implemented); and  It encourages a long-term increase in the penetration of private sector insurance (a Housing Asset Inventory is populated with household information, which can be made available to insurers to reduce data uncertainty, a barrier to private sector engagement). The parametric insurance product could be developed and issued in several ways, a few of which are proposed in the following paragraphs. These may be viewed individually or as incremental steps toward increasing the efficiency of adaptation investments by progres- sively integrating financial and physical risk management into adaptation lending. Option 1: Increase physical protection with resilience finance for properties with existing insurance coverage Potential offering: Home loans (first or second mortgages) for householders of qualifying properties pay for approved resilience upgrades that have finance payments internally fund- ed by insurance premium savings. This option makes it possible to structure a residential loan program to pay for key resilience upgrades for qualifying properties. In this case, the 57 Appendix E Country Diagnostic Tool and its Application in Saint Lucia and Dominica Figure F.1  Program Structure Data & information exchange (structure data, risk information, coverage guidance, etc) to enable Potential Parametric Product households to define policy terms that reflect the structural vulnerability of their homes. Structure Policyholders Vulnerability Param Information existi etric cove System ng iss ra Parametric uance ge provide Housing Units & con d Insurer tractin through Prem g cap Upgraded (FHP) iums acity Post- - Resilient - Event Housing Payou ts Verification Agents ms Indemnity Premiu Existing ayouts Insurer vent P - Vulnerable - (3rd Party) Post-E Housing Housing Asset Structure Data Inventory (with data source qualification) (Government) Source: Developed by Re:Focus Partners Note: Policyholders in vulnerable housing experience reduced premiums as they upgrade their housing units to be more resilient. The product is managed by a Parametric Insurer (for example, the Dominica League of Credit Unions). Policy information populates a Housing Asset Inventory, which can be made available to Indemnity Insurers encouraging traditional private sector insurance. loan payments can be wholly or partially covered by the money saved on insurance premi- ums. The targeted beneficiaries are the households with existing insurance coverage. Option 2: Increase financial protection with climate insurance for properties with resilient construction Potential offering: Affordable (parametric or portfolio-level) insurance coverage for house- holders of qualifying residential properties, such as households that have invested in resil- ient adaptation measures. This offering could be developed by collaborating with relevant risk transfer facilities, such as the Caribbean Catastrophe Risk Insurance Facility Segregate Portfolio Company, to qualify borrowers that participate in the DCAFF loan programs to implement key adaptation measures. Multiple insurance industry participants are actively exploring ways to offer such affordable residential insurance coverage. Option 3: Increase physical and financial protection with bundled insurance and resil- ience finance Potential offering: Bundle affordable property insurance with residential loans that are used to fund qualified adaptation measures. This option could be developed by collaborating with relevant insurance providers, such as the Caribbean Catastrophe Risk Insurance Facility Segregate Portfolio Company or re/insurance companies, to combine climate insurance and adaptation loans and to coordinate the collection of borrower finance payments and insurance premiums. 58