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Boosting investment in climate adaptation initiatives

In this video Dominic Molloy explores business cases that can be used to encourage investment in adaptation solutions by public and private sectors.
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DOMINIC MALLOY: Finance and investment are crucial elements of the task to stimulate action on adaptation. The Global Commission on Adaptation’s flagship report illustrates that investment in adaptation delivers excellent value for money
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with cost-benefit ratios ranging from 1:2 to 1:10. However, despite this fact, public and private finance for adaptation activities are far below the required levels. The UN environment programme estimates that by 2030, between $140 and $300 billion of investment per year will be needed in developing countries to help them adapt to climate impacts. But recorded international flows currently total just $30 billion per year and are not increasing nearly fast enough to meet the needs. This graphic maps the overall flows of public and private climate finance. It illustrates that adaptation still forms the vast minority of total climate finance flows and that adaptation finance relies primarily on government grants.
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Private investment in adaptation has proven difficult to unlock for a number of reasons. For example, we face what has been described as the tragedy of the horizon, whereby firms and governments undervalue adaptation investments that deliver benefits over longer time frames. Interventions such as flood protection have traditionally been seen only as short term unrecoverable costs that protect against potential future losses but deliver no benefits in the short term. To address this misconception, the commission’s flagship report champions a new framing for the economic case for adaptation. It highlights the triple dividend that resilience can deliver. The first dividend is around avoided losses. Early warning systems save lives and assets worth at least 10 times their cost.
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Just 24 hours warning of a coming storm or heatwave can cut the ensuing damage by 30%, and spending $800 million on such systems in developing countries would avoid losses of $3 to $16 billion per year. Second, delivering economic benefits. Reducing flood risks in urban areas lowers financial costs, increases security, and makes otherwise risky investments far more viable. London’s Canary Wharf, for example, a hub of finance and banking, would never have thrived without flood protection offered by the Thames barrier. The third dividend relates to the social and environmental benefits delivered by adaptation interventions.
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Mangrove forests provide more than $80 billion per year in avoided losses from coastal flooding and protect 18 million people, but they also contribute almost as much, some $40 to $50 billion per year in broader benefits associated with fisheries protection, wildlife conservation, and recreation. Combined, the benefits from mangrove preservation and restoration are up to 10 times the costs. In the context of rapidly worsening climate impacts, we need to continue to make this economic case with urgency, increasing the supply of finance and developing high-quality adaptation programmes. We also face a significant systemic challenge.
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To truly transition to climate-resilient modes of growth and development, there needs to be a transformational shift in the way in which planning and decision-making happens in our financial systems. We are already starting to see this happen today. For example, in December 2019, the coalition of finance ministers for climate action met for the first time at the annual UN Climate Summit. Ministers from over 50 countries, launched an ambitious new action plan designed to integrate climate change into central government’s financial decision making. On the private sector side, businesses worth trillions are exploring how climate risk affects their portfolios and shifting their investments onto more sustainable pathways.
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And at the global level, the International Monetary Fund has started to work with the most vulnerable countries to assess the risks that climate impacts pose to their economies and help advise on long term policies to manage those risks. In summary, promoting initiatives to mainstream climate risks into our long term thinking while also addressing the urgent need for additional resources offers a roadmap towards a global financial system that is ready to respond to the changing climate.

In this video Dominic Molloy from the Global Center on Adaptation explores business cases that can be used to encourage investment in adaptation solutions by governments, and private sector alike.

The Global Commission on Adaptation’s flagship report illustrates that investment in adaptation delivers excellent value for money with cost-benefit ratios ranging from 1:2 to 1:10. Dominic Molloy talks about some real-world examples with these kind of cost-benefit ratios.

The landscape of climate finance graphic used in this video can be found here. Or you can download the full report of the Climate Policy Initiative through the link below.

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