The Coalition for Climate Resilient Investment (CCRI) has suggested a shift towards greater investment resilience, including the deployment of a framework for approaching different levels of physical climate risk within the global economy.
The suggested framework goes from top down, looking at systemic risk and resilience, to bottom-up, looking at how investors should integrate physical climate risk considerations in the asset design and structuring of specific investments.
“Even if we stop all emissions today, adaptation will still be necessary,” said Carlos Sanchez, Executive Director at CCRI.
“For nations and investors to fund and build infrastructure that is more resilient and capable of withstanding present and future impacts of climate change, physical risks must first be properly priced upfront in financial decisions.”
A new report from the Intergovernmental Panel on Climate Change (IPCC) suggests, mean global surface temperatures will continue increasing until at least the mid-century, requiring all countries, but especially vulnerable developing economies, to be ready for at least 30 years of increased frequency of floods, heatwaves and sea level rises.
“This is no longer a ‘vulnerable nation’ discussion,” said Sanchez. “Extreme weather is taking hold in every part of the world and causing damage beyond our worst case scenarios. In response, we need a colossal and rapid mobilisation of investment capital to find solutions which will both mitigate climate change and increase our resilience to it.”
However, latest assessments reveal that adaptation in developing countries is estimated to require as much as US$300 billion investment per year by 20301, overshadowing the US$79.6 billion spent in 2019 on both mitigation and adaptation in these countries.
In fact, institutional investors, banks, insurers, rating agencies and governments representing over global coalition of US$20 trillion in assets.
The same analysis shows that investment in resilience for Small Island Developing States has actually declined, revealing a global ‘adaptation gap’ that is widening.
“The warming we’ve experienced to date has caused irreversible changes to many of our planetary support systems on timescales of centuries to millennia,” added Sanchez.
“There is increasing demand for practical approaches to deal with the challenge of scaling up adaptation, with CCRI playing a key role in advancing solutions that will allow more private finance to support the orderly transition to a low-carbon, resilient economy.”
