Veronica Scotti, Chairperson, Public Sector Solutions at reinsurance giant Swiss Re, discusses how a more systemic use of a universal approach to measuring climate adaptation interventions could help catalyse the business case for action.
Commentary from Scotti ahead of the COP28 event in the UAE, highlights Swiss Re analysis which reveals that the benefits of climate adaptation can outweigh the costs by a factor of 10 or more.
As global economic and insured losses from natural disasters continue to increase, Scotti explains how providing stakeholders with a universal adaptation metric could be crucial to unlocking much-needed adaptation financing and accelerating decision-making on climate resilience actions.
“Natural disasters alone caused global economic losses of USD 275 billion in 2022, continuing an upward trend that is only expected to increase in the coming years. Urbanisation, property development and growth will increase the economic value at risk, while natural perils will increase in frequency and severity as a result of climate change,” said Scotti.
“Investing in adaptation will increase resilience by supporting economic stability, create job opportunities and protect the environment, but the inability to easily quantify and compare the financial benefits has contributed towards a significant gap in adaptation financing,” she added.
The intention, according to Scotti, is to “elevate the perspective above technically complex and nuanced considerations at the project level, to drive transparency and to help speed up decision-making of investment decisions through a universally valid, easily derived and trackable metric: the benefit-to-cost ratios (BCRs).”
She explained that the Swiss Re Institute recently assessed the BCRs for a range of global adaptation projects addressing both flood and extreme heat. These BCRs compared the present value of future net economic benefits, discounted for the time value of money and inflation, with the upfront costs of the adaptation project. The initial research found that on average, the benefits of adaptation interventions can outweigh the costs by a ratio of 10:1.
Such use of BCRs could be a first step to drive transparency and comparability across the expected value creation and impact of different adaptation interventions, said Scotti.
In her view, the universal adoption of BCRs in the initial assessment of adaptation projects and later at delivery milestones can drive progress in three ways: catalysing decision-making, comparability and prioritisation, and benefit measurement.
“It is in our collective interest to accelerate investment in adaptation and help society withstand the consequences of climate change – and even thrive despite them. Of course, a ratio is just a robust yet practical and scalable way to bring transparency on different opportunities. BCRs can trigger the decision for action, to then draw in the necessary expertise and local engagement to design and implement appropriate and effective adaptation programs. It’s in the correct execution of these programs that resilience is truly built.
“Through our comparative study of published flood- and heat-related adaptation interventions, we wanted to testify that BCRs are practical metrics. We need more examples of effective adaptation interventions, so we open up the call for partners, project developers and sponsors to help us further develop and integrate this approach, as we execute the necessary adaptation programs,” said Scotti.
