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Climate Adaptation: Show Us the Money
When people think of the future of climate change action, hopeful individuals might imagine zero emission transportation, industries built on and around renewables, and a mitigated anthropogenic footprint on the climate. But that future won’t come soon enough for the lived realities of climate vulnerable communities around the world that bear the brunt of the extreme impacts from climate change like Jakarta, Fiji...or even Houston. These vulnerable communities rely on climate financing—specifically financing for adaptation—to respond to and survive while facing these negative impacts.
According to the Climate Policy Initiative (CPI) the total average annual investment in climate funding is $410 billion, with private sector investments accounting for 60% of total climate funding. But $382 billion out of the total amount of climate funding goes toward mitigation (mitigation is largely concerned with reducing emissions and the enhancement of GHG sinks). Adaptation funding—which includes reducing vulnerability and increasing resiliency with respect to the already-manifesting negative impacts of climate change—receives only $22 billion, even though adaptation needs are estimated to be between $300 and $500 billion. Despite this need, adaptation efforts receive only 16% of public financing, and only 3% of private funds.
To catalyze innovation in adaptation finance, international players including the European Investment Bank (EIB) are trying strategies to showcase new talent. One of the projects receiving the most attention at COP23 is a project by Jay Koh, an American international financial management expert and professor at Columbia University. At the COP, Koh announced that his venture, the Lightsmith Group, has secured major funding to launch the Climate Resilience and Adaptation Finance Transfer Facility (CRAFT), the first private sector investment strategy for adaptation and resilience. The Lightsmith group aims to leverage existing services companies use to “manage weather volatility, physical disruption and damage, operational risk, and resource scarcity,” for climate adaptation funding.
“Climate change risks are not new risks, they are old risks,” Koh said at an adaptation finance panel in Bonn, but solutions “need to be at a higher volume, and at a lower cost,” particularly targeting developing countries. CRAFT, which recently received funding from the Nordic Development Fund as well as the GEF, is a public-private partnership that represents a new approach to closing the funding gap.
Vulnerable populations subject to increasingly extreme climate impacts must be resourced to develop resilient systems that can adapt and respond to the changing world. Unfortunately, current “catastrophe risk modeling” is severely outdated, and financial planning and risk management for vulnerable population relies on data that by and large are not keeping up with the times. If the world is serious about reaching a bright climate future, we must plan effectively for our increasingly dark present.
Photo: Jay Koh, climate investment innovator, describes the role of climate finance in adaptation