Climatic natural disasters caused global economic losses of $275 billion in 2022, and this trend is anticipated to continue as economic growth and property development increase the exposed economic value, according to Swiss Re.
A new report, authored by Veronica Scotti, Chairperson, Public Sector Solutions, highlights how the global protection gap has also been rising steadily over the last five years.
Data from Swiss Re Institute’s Resilience Index shows that it reached a new high of $1.8 trillion in 2022. Over 40% of global risks remain uninsured.
Scotti addresses how the effects of climate change are already being felt worldwide, noting that the finance sector needs to start putting more focus on climate adaptation, alongside mitigation efforts too.
She highlights how it is well known that besides addressing risks, investing in climate adaptation can create a “competitive advantage”, as well as support economic stability, create more job opportunities, and also protect the natural environment.
But, although there are measurable targets for mitigation and work on standardisation continues, the same cannot be said for climate adaptation, she warns.
A major factor that has to be take into consideration is cost, as the overall cost of adaption will not be cheap.
The UN Environment Programme estimates the annual cost of climate adaptation for developing countries at $315-$565 billion by 2050.
However, Scotti suggests that one way to accelerate greater progress is to justify that funding through measurable outcomes.
She states that organisations can make an impact within this by creating the structural conditions necessary for private capital to flow into climate adaptation projects.
As well as this, companies can also grow and optimize the use of public funds that will remain central to this battle.
In addition, consistent use of a BCR metric can also heavily drive transparency and comparability for adaptation projects.
Initial studies conducted by Swiss Re into flood and heat-related adaptation show that BCRs are practical metrics, however they also revealed a lack of data and consensus, which could be an issue.
Scotti explains that this clearly showcases why measurement and multi-stakeholder collaboration are not only a major key to unlocking financing for climate adaptation action, but also for data and examples of effective adaptation initiatives too.
