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Taking the lead on climate adaptation

Climate adaptation choices can have an impact on just transition efforts

Climate adaptation choices can have an impact on just transition efforts Image: Chris Boese/Unsplash

Veronica Scotti
Chairperson, Public Sector Solutions, Swiss Re Management Ltd
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Davos Agenda

This article is part of: World Economic Forum Annual Meeting

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  • Trillions of dollars will need to go into climate adaptation to make our world more resilient.
  • Governments need to lead the charge, but alone cannot make changes on the scale and at the pace that’s required.
  • Equally, business leaders can adapt their business models to climate related shocks, but real resiliency will only result from a whole of society approach.
  • Public-private partnerships can catalyse the conditions necessary to create a world capable of withstanding the consequences of climate change.

Limiting global warming to 1.5C remains our generation's biggest challenge. It requires permanently decarbonising our economies by greening industry and energy systems, deploying large-scale carbon capture, and putting a price on residual carbon emissions.

But, since our planet has already grown warmer, cutting future carbon emissions won't be enough by itself. In parallel, society must direct trillions of dollars into transformative climate adaptation actions to make our world more resilient, not decades in the future, but now.

Recently at COP27, progress was made in advancing the Loss and Damage agenda and various coalitions reaffirmed their commitment to limiting global warming to 1.5C, but too little action was agreed upon to limit carbon emissions and create the systemic change necessary.

The upcoming World Economic Forum Annual Meeting in Davos offers another opportunity to deepen alignment between State and non-State actors and to start to get serious about accelerating the built environment and business adaptation needed to protect our economies from escalating extreme events. One thing is clear: the adaptation choices we will make this decade can have an impact on just transition efforts.


What’s the World Economic Forum doing about climate change?

Accelerating adaptation efforts will be a challenge, but it's also an unavoidable necessity

Adaptation efforts have some unique features that make them difficult to accomplish on a large scale; here's why I believe we have not yet seen the necessary adaptation actions:

1) Locality:

While climate change is a global phenomenon, the adaptation actions necessary to counteract its effects are mostly local. Because of this fragmentation in actions and stakeholders involved, it is difficult to see the wood for the trees and align our collective efforts behind a single metric of success. And whilst replication in other contexts may be possible, it is not the same as being 'scalable'.

2) Metrics of success:

We have no overarching, standardised approach to 'normalise' across very distinct adaptation measures and KPIs, or a plan of how to get to a universal adaptation scoring system that allows us to track over time if we are making progress on our resiliency objectives (adaptation hardly ever manifests its benefits over a single year horizon). The absence of a frame of reference for what success looks like - today and over time - hinders decision making and interrupts flows of finance, be it in mitigating risks or even, seizing business opportunities.

3) Assurance:

With competition for limited funds, it’s hard from a financier standpoint (be it commercial or concessionaire based) to know which projects to back or how to track the sustained impact actually realised (vs expected) after deployment of those funds. Further, we have no system of quality reassurance standards today to independently verify the resiliency gains that follow adaptation actions (although independent assessments and certification providers do exist on a project-by-project basis). Heightened greenwashing concerns only make these considerations more relevant.

4) Affordability:

Adaptation efforts can be costly, even if the ROI may be excellent. And since climate change often hits vulnerable populations hardest, this means adaptation work is often most needed where resources are scarcest. Lack of adaptation funding and well-informed technical assistance fuels a spiral of progressive poverty with each year of inaction aggravating the climate justice divide.

5) Financing models:

Adaptation projects often don't lend themselves well to traditional commercial financing models, as "adaptation dividends" often come as a "loss avoided". It takes a scenario management mindset to appreciate that the best strategy for businesses and communities alike is to reduce risk through preventative actions and minimise financial consequences by appropriate preparedness. In some cases, who pays for the adaptation measure and who benefits may be different, raising questions about the alignment of interests. Lack of data and evidence-based prior successes also contribute to the challenge of producing credible cashflows that are needed to establish and scale up new financing models.

Despite these challenges, adaptation is essential if we are to secure our safety and sustain our productivity, since both slow-onset perils such as droughts and high-intensity events like hurricanes can bring an ill-prepared society to its knees and cause avoidable deaths.

We need to devise in earnest effective strategies that protect our societies. Early adopters of pragmatic pathways to adapt business models, products, operations, supply chains, employee safety practices, but also local communities standards and codes, tax incentives and critical infrastructure, will benefit. Some may even thrive.

New partnerships

Adaptation needs are so widespread and so monumental that they cannot remain the remit of actors working alone – we need partnerships to continuously learn from one another and make adaptation breakthroughs together.

Figures suggest the public sector accounts for almost all adaptation projects financed, and that's just a fraction of all projects we collectively need to safely adapt. Whilst National Adaptation Plans are being refined and updated by a growing number of governments around the world, they still lack the granularity and sectorial considerations that are needed to catalyse business leaders' reactions. Yet businesses of all sizes contribute taxes, provide employment, fund innovation, support consumption – this is a missing link worthwhile establishing.

Have you read?

It is in our collective interest to create a world capable of withstanding the consequences of climate change - and one that can thrive despite them, inclusively and responsibly.

I look forward to engaging both with State and non-state actors in Davos in contributing towards establishing robust pathways and frames of reference for adaptation investments.

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