In response to the adaptation challenge, the Global Center on Adaptation (GCA) was established in 2018 and convened the Global Commission on Adaptation, headed by Ban-Ki Moon, Bill Gates and Kristalina Georgieva, to identify the immediate challenges and launch a Year of Action beginning at the UNSG Summit on Climate Change in September 2019.
One of the key topics identified by the GCA is to integrate climate change adaptation into financial decision-making. In order to provide the GCA with the technical background on the role of finance in adaptation, UNEP FI launched the paper, “Driving Finance Today for the Climate Resilient Society of Tomorrow” on 17 July 2019 to focus greater attention on climate risks and opportunities in private sector investment decisions, as well as accelerating the flow of finance into adaptation activities. To deliver the report, UNEP FI engaged two highly respected experts on climate finance, Stacy S. Swann and Alan S. Miller, as well as drawing together a Review Panel of international experts from commercial and development banking, investment, academia, private consulting and government.
The paper outlines the many efforts that have been made to tweak the financial system to better integrate climate change into decision making, but the necessary best practice, regulations, rules and standards are currently weak and ill-defined. The authors identify the barriers to scaling up financing for adaptation which include weak policies and conventions in the financial industry and a low technical capacity for climate risk management amongst others. There is also a range of opportunities to accelerate the investment required to prepare the planet for climate change, though these face additional barriers such as the perceived lack of private benefits and the immaturity of business models.
This paper presents a set of six recommendations, with illustrative case studies, to promote investment in resilience:
- Accelerate and promote climate-relevant financial policies;
- Develop, adopt, and employ climate risk management practices;
- Develop and adopt adaptation metrics and standards;
- Build capacity among all financial actors;
- Highlight and promote investment opportunities; and
- Use public institutions to accelerate adaptation investment.
Collectively, they offer a program that is ambitious, actionable, and can directly impact how finance can be unlocked for adaptation and resilience.
The paper has been used as background for the GCA’s flagship report launched on 10th September 2019. One of the key recommendations carried over to the GCA report from UNEP FI’s technical paper is the need for more widespread climate-related financial risk disclosure in relation to the physical impacts of climate change. This is why 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 – to be launched at the Climate Adaptation Summit in January 2021. More information can be found on the Climate Risks & Resilience Statement here.
Listen to the presentation given at the launch of the paper here.