Global losses due to climate impacts total US$100bn a year and are set to rise unless we take climate resilience seriously.
On 21 September, Amber Rudd, UK Energy & Climate Change Secretary, and He Jiankun, Representative of China’s National Expert Committee on Climate Change, will address the British Embassy in Beijing on the dangers of climate change and the importance of climate resilience.
The event will launch the Chinese edition of Mott MacDonald’s report: Climate Change and Business Survival which highlights how increases in global temperatures have unleashed acute weather events which have hit our asset base, causing US$100B in annual insured losses.
These losses will proliferate as further ‘locked in’ temperature rises lead to more severe climate impacts. We estimate that annual global investment in climate resilience needs to increase to US$200B a year to protect against losses which will hit US1T within the next 20 years.
But while three decades of campaigning and media focus means the need to cut carbon emissions is almost universally accepted from classroom to boardroom, little has been done to promote climate resilience, and the report highlights a growing ‘funding gap’ in investment. Clearly, it’s time to start taking climate resilience seriously.
The second report being launched at the event is the Chinese edition of Climate Change: A Risk Assessment, sponsored by the UK Foreign & Commonwealth Office. The report was led by Sir David King, UK Special Representative for Climate Change, who speaks in his closing notes of the need for political, financial and technological innovation to tackle climate change mitigation. We need innovations in the very same fields to steer our policy on climate resilience.
Political leadership
For climate resilience to move up the agenda we need strong and sustained leadership to convince businesses of the need to secure their assets and supply chains.
While reducing carbon emissions is a key part of sustainability policy, withstanding increasingly severe weather events should also be seen as integral to business sustainability, with regulatory guidance to ensure climate resilience is given due consideration. Mitigation and resilience are complementary tools to protect against climate shocks and must both be acted upon now to avoid the escalating costs of climate change.
Leadership is also needed from within the private sector to ensure that investments which fall outside of most 5-10 year business plans are fully considered to ensure long term stability.
Financial innovation
We estimate that a third of the required spend on climate resilience will protect against half the potential losses. This will bring positive returns and will make good business sense. However, this leaves two thirds of the necessary investment in resilience – reaching up to US$130bn per annum within 20 years – to be found. Innovative funding schemes bringing together the public sector, the financial sector and private businesses are needed to fill this funding gap by pooling resources and managing risk collectively.
There are already some incentives for investment in resilience. Insurance companies are backing away from assets which are vulnerable to climate impacts, and as these impacts worsen in frequency and severity, non-resilient assets will become uninsurable and therefore stranded. Meanwhile, companies with strong sustainability and risk management policies will attract more investment and have access to financing at lower rates than their competitors who are not prepared for climate shocks.
The public sector should work with the financial sector to provide businesses with supportive funding schemes to stimulate investment, but this has to be followed by financial regulations that require action on climate resilience from the private sector to ensure the longer term viability of assets.
Technological progress
The focus on climate mitigation over the last three decades has seen huge technical advances in sustainable building and manufacturing, using materials and methods which result in lower carbon emissions in production and in use. This has been accompanied by the development of renewable energy sources and emergent techniques such as carbon capture and storage (CCS) to further reduce pressures on the environment. We have the tools we need to limit climate change; what is missing is the necessary political action, and hopes are high that COP21 in December will see an international agreement on tough climate mitigation measures that can in time prevent us exceeding the UN’s 2oC target.
To be successful, climate resilience also needs to be supported by shifts in our technological abilities. Assets need to be designed so as to take into account weather that will become hotter, colder, wetter or drier, with land use planning and construction techniques and materials that are better able to withstand climate extremes. Research is needed to develop cost-effective resilience measures, with a focus on solutions which can be retrofitted to existing assets.
The fact that the most senior climate change spokespeople from the UK and China are helping to launch a report on climate resilience shows the importance of matching our commitment to climate mitigation with action to strengthen our infrastructure. Because only through major investment, backed by political, financial and technological innovations, can we strengthen our asset base against the increasingly devastating climate shocks we know are coming.