The costs of climate change on people and the economy are clear. The question is, how will the world respond? Will we delay and pay more or plan ahead and prosper?
Climate change is one of the greatest threats facing humanity, with far-reaching and devastating impacts on people, the environment and the economy. It affects all regions of the world and cuts across all sectors of society.
Failure to adapt to this new reality will have a wide range of devastating impacts. For example, climate change could depress growth in global agriculture yields by up to 30% by 2050, with the 500 million smallholder farmers in developing countries the most affected.
Meanwhile, the number of people who lack sufficient water at least one month per year will soar from 3.6 billion today to more than 5 billion by 2050. Rising seas and greater storm surges could force hundreds of millions of people from their homes in coastal cities, with a total cost to coastal urban areas of more than $1 trillion each year by 2050.
Poverty rates could also climb, with more than 100 million people living below the poverty line by 2030, within developing countries.
The costs of climate change on people and the economy are clear. The toll on human life is irrefutable. The question is, how will the world respond: will we delay and pay more or plan ahead and prosper?
An economic imperative
That accelerating climate change adaptation is a human and environmental imperative is well-established - but it is also an economic one.
In its new report, Adapt Now: A Global Call for Leadership on Climate Resilience, The Global Commission on Adaptation has found that the overall rate of return on investments in improved resilience is very high, with benefit-cost ratios ranging from 2:1 to 10:1, and in some cases even higher.
Specifically, our research finds that investing $1.8 trillion globally in five areas from 2020 to 2030 could generate $7.1 trillion in total net benefits. These five areas are early warning systems, climate-resilient infrastructure, improved dryland agriculture, mangrove protection, and investments in making water resources more resilient.
We also find that adaptation actions bring multiple benefits, which we call the “triple dividends.” The first dividend is the ability of the investment to reduce future losses. The second is positive economic benefits through reducing risk, increasing productivity and promoting innovation; and the third is social and environment benefits.
Many adaptation actions generate significant additional economic and social and environmental benefits, which accrue regardless of how the local climate changes and whether an extreme event actually hits. Better awareness of and evidence for all three dividends will make the economic imperative case for adaptation ever stronger.
What is the World Economic Forum’s Sustainable Development Impact summit?
It’s an annual meeting featuring top examples of public-private cooperation and Fourth Industrial Revolution technologies being used to develop the sustainable development agenda.
It runs alongside the United Nations General Assembly, which this year features a one-day climate summit. This is timely given rising public fears – and citizen action – over weather conditions, pollution, ocean health and dwindling wildlife. It also reflects the understanding of the growing business case for action.
The UN’s Strategic Development Goals and the Paris Agreement provide the architecture for resolving many of these challenges. But to achieve this, we need to change the patterns of production, operation and consumption.
The World Economic Forum’s work is key, with the summit offering the opportunity to debate, discuss and engage on these issues at a global policy level.
Three revolutions for a better future
The case for ambitious adaptation is clear, but it’s not happening at nearly the pace required. This is because climate impacts and risks are not yet adequately factored into decisions by those who make choices about the future.
Achieving the change needed requires revolutions in three areas: a revolution in understanding to ensure that the risks societies and economies face are fully understood and reflected in the decisions that public and private actors make. A key element is the need to make risk visible, requiring more precise characterization of who and what is at risk - and why. As part of making risk visible, the public and private sectors can work together to more explicitly price risk in both economic and financial decision-making.
Equally important is supporting experiential learning, stimulating innovations in science and technology, sharing solutions, and piloting new business models and financial services. It is important to consider all forms of knowledge, recognizing that valuable local knowledge rests with communities and indigenous populations. Since many climate impacts are local, devolving planning and even financial responsibility to those most affected is critical.
A revolution in planning to improve how we make policy and investment decisions and how we implement solutions is also urgently required. The climate challenge is both urgent and pervasive across virtually all economic sectors.
In the private sector, companies worldwide are starting to improve planning to protect their operations and assets from climate risks, but current levels of physical risk disclosure remain low. Both the public and private sectors need to learn to better incorporate high levels of uncertainty in their decision-making, as choices will need to be made soon between radically different options - long before we know if the world will actually be on a 1.5°C or a 4°C pathway.
Lastly, we need a revolution in finance to mobilize the funds and resources necessary to accelerate adaptation. Even though the imperative for action is clear, money is not flowing at the pace or scale needed. The public sector is an essential provider of necessary finance to protect people and livelihoods across communities and sectors, and is also an enabler of increased private sector finance through disclosure requirements, metrics, and incentives.
The private sector will increase investments on its own account, but it should also increasingly complement the public sector in sharing the costs and benefits of adaptation investments, such as for infrastructure, contingency finance, and insurance. There is a critical need for higher levels of international financial support for adaptation in developing countries. Fully implemented, these three revolutions will protect livelihoods, homes, and jobs for the world’s population in the face of climate change.
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How to respond
We must apply these revolutions to the key economic systems affected by climate change: systems that produce food, protect and manage water and the natural environment, plan and build our cities and infrastructure; protect people from disasters; and provide financing for a more resilient future. The report shows how the climate crisis is disrupting these systems and offers specific, actionable recommendations for how to respond.
Take our food system for example. Global demand for food will increase by 50% by 2050 while yields may decline by up to 30% in the absence of ambitious climate action. A more resilient food future will rely on sharp increases in agricultural R&D which has demonstrated benefit-cost ratios between 2:1 to 17:1. The existing $500–$600 billion of public support for agriculture must be redirected to more inclusive, resilient and low carbon production and innovative technologies and finance to enhance the resilience of small-scale producers.
Nature, meanwhile, underpins the resilience of communities and economies, but is rapidly being degraded. Large-scale protection and restoration of nature will require accelerating progress to meet existing political commitments, such as through the Convention on Biological Diversity; appropriately valuing natural assets in land use and investment decisions; and increasing the scale of public and private resources to safeguard nature.
Nature-based solutions regulate water flows, protect shorelines, cool cities, and complement built infrastructure. Many nature-based adaptation solutions are also beneficial for mitigation, and can provide one-third of the climate mitigation needed between now and 2030 to keep global warming below 2°C.
Climate change is also fundamentally connected to water systems and resources. Successful adaptation will require scaled-up investments in healthy watersheds and water infrastructure, dramatic improvements in efficiency of water use, and the integration of new climate risks such as floods and droughts at every level of planning and operation. The impact of more efficient water allocation and use on economic growth should not be underestimated.
Our cities, meanwhile, are places of constant change and renewal. Adaptation efforts, if designed well, can take advantage of this transformative energy and generate high economic returns. In coastal cities, for instance, the cost of good adaptation is one-tenth the cost of no action. Cities need to invest in better climate risk information and land use controls, such as by drawing on updated topographic maps, in nature-based solutions to tackle water and heat risks, and in upgrading the living conditions of the 880 million people who now live in vast informal settlements that are often highly vulnerable to climate change.
Investments in infrastructure need to directly build resilience, whether for storm water drainage in cities or protecting coastal communities against sea level rise. This will require developing blended public-private approaches that share the costs and benefits of investing in resilient infrastructure.
It’s essential that we make the right choices about where and what to build, prioritizing green infrastructure wherever possible, and ensuring infrastructure continues to function even as damages occur.
Lastly, we need to scale up efforts to warn and prepare people ahead of disasters, actions which can dramatically reduce the loss of life, and deliver very high returns on investment. At the same time, we need to proactively move people and assets out of harm’s way through better planning and investment decisions.
The way forward
While the major transitions proposed in the report will take a decade to fully implement, it is essential that they start right away and with great urgency. The next 15 months are critical.
For this reason, the Commission will devote the coming 15 months to drive a set of Action Tracks that are essential to jumpstart the needed transitions. In some cases, these actions will involve mobilizing political, technical, and financial support to existing initiatives; in other cases, they will entail forging new coalitions for change.
We will support efforts to integrate climate risk into all aspects of national fiscal and financial planning and decision-making. We will marshal a doubling of the scale of agricultural research for climate resilience. We will seek to transform how infrastructure investment decisions are made. We will call for scaled up investment to improve people’s ability to act ahead of extreme weather events, reduce deaths and human suffering, and lessen economic impacts. We will galvanize national, local and private sector leadership for nature-based solutions. And, we will seek to strengthen the resilience of natural freshwater and critical human water systems to reduce risks for billions of people facing high water stress and for those whose lives are impacted by floods and droughts.
The Commission will also aim to encourage countries to raise the level of ambition on adaptation in the lead up to the international climate summit, COP26, in December 2020. We invite collaboration from all segments of society - governments, the private sector, civil society, and citizens around the globe - to join us in urgently taking this agenda forward.