COP27 HOW CLIMATE FINANCE AND ADAPTATION CAN SUPPORT VULNERABLE COUNTRIES

As the first developing nation to host the UN Climate Conference (COP) since Morocco in 2016 (COP22), Egypt is pushing the needs of developing nations to the top of the COP27 agenda, with a focus on climate finance, climate adaptation and loss and damage. To date, the global response to climate change has focussed on climate mitigation — an issue championed by the developed world, which is calling on all countries, not just historical emitters, to make drastic efforts to cut emissions.

Equally, with more than a third (702) of the world’s largest companies having net zero commitments, and 550 financial institutions committing to aligning their portfolios with a net zero world, the private sector is mobilising around global mitigation targets.

However, as Marisa Drew, Chief Sustainability Officer of Standard Chartered Bank, highlighted in a recent interview for the World Economic Forum, there is a growing need to focus on financing climate adaptation efforts. She notes: “The world has largely galvanised around the concept of mitigation, which is reducing carbon emissions. But we must deal with the reality that climate change is here to stay and even with all the best will in the world we’re going to have to deal with this. Therefore, we need finance to flow towards the reality that is here.”

TRANSITIONING TO INNOVATIVE FINANCING MODELS
Developing countries also want more public finance and grants instead of loans, as many of the worst-impacted countries face debt crises. Jennifer Morris, CEO, The Nature Conservancy, notes: “A lot of countries are unable to adapt because of increased debt burden. Between 2010 and 2020, the public debt of developing countries increased from 40% of their GDP to an average of 62%. More than a third of that happened in 2020 alone. We have to think of the climate crisis in the frame of the debt crisis as well. Most climate finance – 61% ($384 billion) – was raised as debt, of which only 12% ($47 billion) was lowcost or concessional.

ROLE OF MULTISTAKEHOLDER PARTNERSHIPS ON CLIMATE ADAPTATION
Adapting to climate change requires a concerted global response. This includes leveraging innovative forms of blended finance, forging new multistakeholder partnerships and incubating innovative solutions to adapt to climate impacts. Governments, businesses, investors and innovators can partner with communities at the frontline of climate impacts, to ensure they not only survive but thrive in a climateimpacted world.

CREATING INCENTIVES FOR BUSINESS ADAPTATION
The adaptation market could be worth $2 trillion per year by 2026, with the developing world standing to benefit from much of this. Currently, only 1.6% of all adaptation funding comes from private investment — making climate adaptation an untapped opportunity. There is a clear business case for climate adaptation: a 2019 report by the Global Commission on Adaptation demonstrated that investing $1.8 trillion globally in climate adaptation measures, such as early-warning systems, climate-resilient infrastructure and nature-based solutions from 2020 to 2030 could generate $7.1 trillion in net benefits. “If we think about this in the context of a generated market rate of return, a US dollar invested in climate adaptation generates five to seven times that investment in risk or GDP degradation avoided. There’s a real economic case here for those investments,” Drew adds.

SOURCE: WORLD ECONOMIC FORUM

ABHINAV CHUGH The writer is content and Partnerships Lead, Expert Network and Content Partners, World Economic Forum
NATHAN COOPER The writer is lead, Partnerships and Engagement Strategy, Climate Action Platform, World Economic Forum