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Better climate resilience across the developing world
As the rate of climate change increases, related hazards will have a disproportionate effect on those who are least able to protect themselves.
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Financing climate resilience in the developing world

Building greater climate resilience in developing countries will require an integrated approach to development spending, the mobilisation of small businesses and private finance, and fresh thinking about how we measure success

As the rate of climate change continues to increase, related hazards such as windstorms, intense precipitation, heatwaves and storm surges will have a disproportionate effect on those who are least able to protect themselves.

It is the poor who are the most exposed and vulnerable, whether they are subsistence farmers who see their crops and livelihoods withered or washed away, or the urban poor living in slum housing on the periphery of coastal cities which may soon be submerged by the sea.

Action to build resilience is critical to protect communities against these emerging hazards. Measures such as flood barriers, water storage capacity, fire breaks and stronger buildings will be required alongside a host of interventions to grow community resilience – for example the promotion of sustainable farming methods and training and expertise in keeping key infrastructure up and running. Governments in developing countries, however, do not have the income or resources to provide all of what is needed.

Potentially many millions of ‘climate refugees’ will be created in the coming years – often displaced people seek refuge locally or in their region. The developed world has both a moral and a practical reason to act.

The funding question

We know what the physical risks are, and in many cases how these are changing. We can calculate where the exposure lies. And we have a growing sense of what the solutions are. But the major question is one of funding. Where will this come from and how can it deliver resilience on the scale that is required? In September last year the Global Commission on Adaptation published a report that estimated a total of $1.8trn is needed by 2030 to meet global adaptation needs.

It’s clear that it can’t all come from the public sector and the development agencies. There’s simply not enough of this money to go round. The development agencies will have to use their resources to leverage private sector finance.

From a global perspective the investment of $1.8trn concentrated in five categories—weather warning systems, infrastructure, dry-land farming, mangrove protection and water management—would yield $7.1trn in benefits, nearly four times the investment. Yet the private sector is only going to invest if there is a discernible return on their investment, and if that return comes with a minimal or manageable risk. The benefits of an investment are often felt away from the sector that needs to make it. This is the essence of the challenge.

Resilient infrastructure

One key category of investment that can be delivered by the private sector is resilient infrastructure such as telecommunications, power, and to some extent water.

If you look at it from the perspective of a large global company that could move into a new or emerging market to grow its business, a key barrier to investment is physical risk. Without climate resilience the move is unlikely. But with protection in place, then it is a different story.

Resilient infrastructure builds confidence among private sector firms to spend on their operations without fear of disruption and loss. Their investment will create more taxation for local and national government, which will in turn allow more beneficial public investment, including in resilience.

It’s a virtuous cycle. If you create the resilience, that creates the environment for investment. More investment means more economic growth and wellbeing, more tax receipts and public investment, which then creates more resilience, and the whole thing starts all over again.

SMEs

Small and medium-sized enterprises – shops, small factories, and other smaller businesses – can be especially vulnerable to climate-related physical impacts. If the premises of a SME gets repeatedly flooded, for example, there is a high chance the owners will either decide to move or be forced out of business. Insurance schemes will only be part of the solution if losses are exceptional, rather than the norm.

Yet SMEs have enormous potential. They are vital for spurring on economic development in any location, urban or rural. It is small private enterprises that provide the majority of jobs and give people a reason to stay and live in an area. Together with education and healthcare, small enterprises are the building blocks of communities.

United Nations figures show that for every dollar you invest in climate resilience, there’s a benefit of at least six dollars. Much of that gain is likely to be delivered by SMEs which flourish in the newly resilient community.

Making the most out of public sector investment

The overall message is that if the public sector provides the bigger schemes – like coastal flood defences and a more robust governance and policy environment – then the private sector will be willing and able to add resilience and protection at a more local scale. Large corporations and SMEs alike will want to develop their own protective measures to ensure their operations are secure.

Public sector investors, and particularly those spending Official Development Assistance (ODA) funds, need to see their role as putting in place that first step – ensuring the physical risk and building the right level of protection and resilience from the hazard – which will give the private sector the confidence to invest.

So, when pursuing investment in that first step, how do we identify and evaluate success?

How to measure success

The problem is that quantifying, monitoring and measuring success is more difficult with resilience spending than it is with other types of green investment. Projects have got to deliver economic, social and environmental benefits, and the return periods of climate-related weather events are unpredictable, even though their frequency and intensity is increasing. If you are building a solar or wind farm, for example, ROI is fairly straightforward as it delivers an immediate revenue stream (an economic benefit) a quantifiable CO2 reduction (environmental benefit) and it will provide a defined number of homes with power (social benefit).

Resilience is a lot more challenging. The direct benefits may be seen immediately, or not for many years, depending on the complex variability of weather systems. The value of the resilience measures is only proved when the community and assets protected survive an event of predicted magnitude. Success is quantified in lives saved and damage avoided. The flood defences built as a result of the 1953 floods in the South East of England – including the Thames barrier – have undoubtedly worked in that they have provided security and enabled economic development for London and coastal communities. But it is difficult to quantify this benefit even now, let alone at the point when they were originally conceived.

The Intergovernmental Panel on Climate Change (IPCC) defines the climate risk of a community in terms of hazard, exposure and vulnerability. The hazard (ie the extent of the physical threat) is only likely to increase due to the locked-in effects of historic and present greenhouse gas emissions, which will continue to drive climate change for decades to come, even if emissions stopped today. Resilience measures therefore need to concentrate on reducing exposure (the likelihood of being impacted) and vulnerability (what they stand to lose if impacted).

One complication is that all three of these variables are dynamic and change over time. You may be satisfied that you have reduced your level of exposure, but if the hazard increases at a quicker rate than expected over the coming years, then measures that are adequate to meet today’s hazard level may turn out to be inadequate in the face of tomorrow’s. What’s more, if an area enjoys social and economic growth, its vulnerability increases because people and businesses have more to lose.

Resilient and sustainable growth

What this highlights is that resilience is not a problem that is distinct from socioeconomic development and sustainability. They are all interrelated, which is why we need fully joined-up solutions: a programme that promotes climate resilient social and economic development.

This thinking is in line with the UN’s Sustainable Development Goals, in which the aims of eradicating poverty and creating economic growth sit alongside those relating to sustainability and climate action.

How we can help

At Mott MacDonald, we are uniquely placed to advise on green investment in the development world, having decades of experience in climate resilience, education and health projects across the world.

This is the first article in a series looking at the challenges and opportunities for achieving climate resilience in developing countries. Read about making a lasting difference and people and wellbeing.

John Carstensen, climate change lead, international development

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