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Adaptation to climate change is becoming as important as climate mitigation in terms of protecting wealth and lives. Accelerated investments in adaptation finance will be needed to avoid the most severe impacts, and there are signs those investments may be at a turning point.
“The physical impacts from climate change are increasing, and the window of opportunity for building resilience and adapting at lower costs is closing rapidly," notes Romain Pison. In order to be successful, adaptation strategies must be tailored to local contexts and reflect the unique social, environmental, and economic needs of the communities they are being implemented but also need to be embedded in global strategies. That is the key challenge for climate change-related programs.
“There is also the challenge and complexity that stems from multiple sectors", explains Romain Pison. “Adaptation investments must be made across all sectors, with a particular focus on agriculture, water management, infrastructure, coastal zones, health, and disaster preparedness and response."
A key opportunity will be to mainstream adaptation into existing projects but, most importantly to transition these project-based approaches into program-based approaches. “We cannot continue to finance project after project, and not work on global budget allocation and strategies", says Pison.
For that, explains the climate change experts, we need to develop innovative approaches, financing mechanisms, and institutions to support adaptation action. International climate finance will be important in helping vulnerable countries and communities adapt to climate change. Countries, investors, and international organisations such as the World Bank and the Global Environment Facility increasingly commit resources to adaptation finance. However, there is still a significant gap between the adaptation finance needs and the amount available.
To ensure that adaptation investments are effective, decision-makers must increase their understanding of the impacts of climate change and the need for adaptation. Adaptation investments must also be made with an eye to the long term since climate change is an ongoing process that evolves across geographies, time, and sectors rather than a one-time event. Finally, governments and international organisations must collaborate and share best practices to ensure that investments are allocated efficiently and reach those most in need.
It is clear that the physical effects of climate change are increasing and that the impact is rising. In 2022, the U.S. saw at least 10 disasters resulting in over $1 billion or more damage, extending a growing trend since the 1990s (NOAA). And others mention that about 4% of global gross domestic product could be lost annually by 2050, according to S&P Global Ratings research, surpassing the 3.3% contraction caused by COVID-19 in 2020.
“And this is only in the United States, a developed country with current systems in place", says Romain Pison. “The adaptation challenges facing all countries — and, by association, companies — including less developed countries differ because of the varying frequency and severity of climate hazards, but also their level of preparedness. Lower income countries have less ability to cope with and adjust to damaging events, leading to higher and more persistent economic losses".
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These countries are the most vulnerable to the devastating consequences of climate change and will require the most significant investments to help them adapt. They require additional resources to minimize the risk and respond effectively to climate change, and this lack of resources has accelerated their vulnerability to the increasing climate risks. Furthermore, the risk of climate change events affecting these countries is increased due to the lack of dedicated or efficient policies that are well adapted to the changing climate. This compounded lack of resources, proficiency and proactive approaches provides a unique set of challenges for corporations operating in such countries.
Adaptation investments include infrastructure such as sea walls, early-warning systems for extreme weather, and improving agricultural practices to better prepare for floods or drought. Other measures, such as diverse energy portfolios, can help reduce the vulnerability of businesses and economies. These investments must also consider changing climate risk and the need to build resilient infrastructure that can sustain “shocks", such as extreme weather or economic crises like the pandemic.
The costs of adaptation are continuously increasing — estimates suggest that the global climate finance needs could reach US$5-7 trillion by 2030. However, the majority of these investments will likely be domestic, and yet there is a growing need for international support and collaboration.
All countries must come together to develop a global strategy for adaptation finance, and to ensure that investments reach those most in need — particularly the most vulnerable countries, as well as those that have contributed the least to climate change.
The success of adaptation investments will depend heavily on the ability of countries to build effective governance and management systems. Ideally, these systems should involve the public, private, and civil society sectors and ensure effective information flows, accountability and transparency. In addition, adaptation investments must be tailored to local conditions, and should seek to improve the capabilities and the capacities of local actors to design and implement effective strategies.
In conclusion, adaptation finance is becoming increasingly important as climate change impacts worsen. It is essential that investments are tailored to local conditions and needs, and involve all sectors to leverage capital and maximize the scope of programs. To ensure that these investments are effective, countries must prioritise building effective governance and management systems and must collaborate to ensure bankable yet equitable investments.
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- FIRST PUBLISHED30.01.2023 | 07:09 PM IST
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