Financing climate resilience and adaptation

This is part two in a four-part series exploring climate risk, resilience and adaptation. 

An enormous opportunity exists for businesses, governments and communities to harness climate finance to increase resilience and enable adaptation to climate change. 

Climate finance refers to financing – drawn from public, private and alternative sources – that supports mitigation and adaptation actions that can address climate change. It will be a central topic for the COP28 climate summit in Dubai.

Climate change impacts all facets of our society, environment and economy. Cutting emissions is critical to slow the rate of global warming, but we also must consider what it means to be more resilient, and better able to adapt, to a rapidly changing, warming world. 

The systems we rely on – often thought about as ‘domains’ – will all be affected. These include natural, social, built and economic domains, all of which are connected and interdependent on each other and underpin our lives, livelihood and wellbeing. This means that we must elevate climate resilience and adaptation and, to do so, ensure that financial flows are seized in ways that maximise efficiencies of scale, and are equitable. 

Unlocking the potential of climate finance 

The rate and scale of climate impacts can be overwhelming. Record-breaking heatwaves, catastrophic floods, wildfires and more have affected most countries  in recent times and the impact of these events is becoming more severe on communities, economies and the environment. 

It is well documented that climate change disproportionately affects marginalised communities. 

By channelling investments towards sustainable solutions, we can mitigate environmental risks and, at the same time, drive better investment and support businesses addressing their climate risks, all while supporting communities. 

Not only can we enable efficiencies through strategic investment of climate finance, we can also optimise social impact. For example, there is an opportunity to include gender equality, disability and social inclusion paradigms into financial models to build longer-term community resilience and adaptability. Equally, climate finance that focusses on addressing transition risks, including social licence and reputational risks, can put government and business at the forefront of the new wave of climate-savvy growth. 

When climate financial flows go beyond piecemeal and reactionary projects, there is potential to address multiple, intersecting ‘securities’, such as gender inequality and food and water security. 

Financing climate mitigation and adaptation globally is a humanitarian and geopolitical security imperative. For example, financing climate initiatives is a critical factor for our Pacific Islands neighbours, who are watching whether nations such as Australia and commercial entities are financing initiatives to address climate change. 

Building investor confidence

Building resilience among institutional sectors for community benefit is a climate-savvy investment. The more climate resilience that is created, the more confident investors are in optimising their operations. A good example is climate resilience for built infrastructure. If buildings can better withstand disaster events, this may put less pressure on insurance costs. It also gives confidence to the private sector or governments to invest in these assets in ways that ‘build back better’ by investing in the longer-term resilience of these assets.

Our environment, society and economy need the same level of future-proofing.

Shifting mindsets

Although climate finance flows have been trending upwards since the adoption of the Paris Agreement in 2015, spending on adaptation is well behind where it needs to be, and well short of spending on emissions reduction. Both are important, but adaptation demands a stronger focus.

There is a need to prioritise where investment occurs. When thinking of investment, we often think of built infrastructure. However, nature is also an ‘asset class’. 

Active management via end-to-end climate advisory services – which assist in identifying key areas for investment, how to invest and how to evaluate and learn – is the key to enabling stronger, more resilient  and well-adapted communities, environments and institutions.

This blog was co-authored by Dr Tayanah O’Donnell, Partner for Climate & Sustainability, Tori Laniakea, Senior Manager for Climate & Sustainability, and Eleanor Robson, Senior Manager for Climate & Sustainability.