Despite the commitments negotiated at the 21st Conference of the Parties of the UNFCCC in Paris in December 2015, the impacts of a changing climate are being increasingly felt across the globe. Extreme weather events, changes in precipitation patterns, melting ice caps and glaciers, rising sea levels and the potential for demographic, health and economic instability will affect us in incalculable ways in the near future. Climate change is likely to impact the poorest and most vulnerable the hardest, despite most of the responsibility for climate change lying with the wealthier regions and societies.
Although the precise impacts of climate change are highly unpredictable, we cannot use this as an excuse for inaction. However, efforts to reduce greenhouse gas emissions to date fail to reflect the urgency communicated in the most recent IPCC reports. Further delays to action will result in increasingly costly measures to adapt to a changing climate.
UNEP’s Climate Change Adaptation Finance Gap Report (2016) estimates that the annual cost of adaptation will be between $140-300 billion by 2030, which suggests that public budgets will not be able to address the financing challenge alone. Therefore, there is not only a risk to the global economy and consequently the finance sector from climate vulnerability, but also financing from the private sector will be necessary to increase economic and social resilience to climate impacts. However, since the publication of this report, there has been increasing evidence of short-term economic and financial losses from extreme weather events associated with climate change. Swiss Re, for instance, estimated total economic losses of $330 billion in 2017 alone, of which $136 billion were insured. More advanced global catastrophe models are working out the impact of early-onset effects of climate change on these extreme events.
Responding to the increasingly material impacts of climate change, UNEP FI is working closely with the Global Center and the Global Commission on Adaptation (GCA), to identify how financial institutions can best adapt to a changing climate, build resilience in the financial sector and scale up resilient investments to meet the adaptation funding gap.
In early 2019, UNEP FI was engaged by the Global Commission to develop a paper on adaptation finance, “Driving Finance Today for the Climate Resilient Society of Tomorrow”, to contribute to the GCA’s flagship report launched in September 2019. You can find more information on the background paper here.
Building on the recommendations of UNEP FI’s paper for the GCA, UNEP FI launched a Climate Risks & Resilience Statement at the GCA’s Climate Adaptation Summit in January 2021. UNEP FI has convened a group of leading Financial Institutions to call on the finance sector to scale up climate-related physical risks disclosure, mainstream climate risk management, standardise reporting and scenarios, and improve access to standardised climate risk datasets. You can find further information here.
To examine the impact of such litigation in adaptation finance and address some of the challenges identified in scaling up adaptation capital from the GCA Adaptation Finance Paper (2019), UNEP FI has collaborated with MinterEllison to produce the paper, “The Forgotten Climate-related Financial Risk: Liability Impacts on Adaptation and Adaptation Finance“. You can find more information here.