In a sea of climate cash, adaptation left stranded?

This past fortnight, the hopes raised by repeated impassioned calls leading up to the UN Climate Action Summit  failed, by most measures, to lead to raised ambitions. But while governments have dragged their feet in the face of huge public protests, the tide seems to be turning in favour of climate action when it comes to private money. With big money falling in line with the climate agenda, is it time for governments to start thinking about priorities, and not just ambition?

And just like that, the numbers involved in climate action have moved from billions to trillions of dollars. Somewhat surprisingly, leading this private finance movement towards climate responsive development in New York, on the sidelines of the UN General Assembly, were banks. One hundred and thirty leading banks, collectively holding $47 trillion of assets – or a third of the total global banking sector, committed themselves to the newly formulated Principles for Responsible Banking to align investments with the objectives of the Paris Agreement and the Sustainable Development Goals. The list includes 24 national and regional development banks, which, for the first time, announced a quantitative target of mobilising $1 trillion by 2025, while some 1,100 institutional investors managing $11 trillion have committed to moving away from fossil fuel investments. Another 515 global institutional investors holding portfolios of assets worth more than $35 trillion have chided national governments for failing to keep step with private commitments.

While corporations around the world are still widely guilty of not reporting emissions, the climate movement among private businesses seems to have reached a tipping point with private investors and businesses increasingly siding with protestors rather than governments. According to a recent study conducted by Swiss bank UBS, over half of the family offices, which act as financial managers for the world’s ultra-high-net-worth individuals, now “consider climate change to represent the single greatest threat to the world.” Even in the US, which has gained a reputation for notoriety when it comes to climate action, the Chamber of Commerce, this past week, announced that it would be forming a climate change task force to analyse how businesses are responding to the threats posed by climate change.

So what has prompted this sudden change of heart? In reality, the change in mindset has been building for a few years now. While the bank of England underlined the “huge” threats of climate change to global financial stability back in 2015 and banks have increasingly prioritised “green loans”, the recent acceleration in climate-responsive commitments made by large banks and private businesses is likely the result of a different realisation – more accurate estimations of the escalating liabilities of inaction. Since this 2015 Economist Intelligence Unit report that put up to 30% of the world’s manageable assets at risk from climate change, portfolio level investment analyses of climate risks have been coming thick and fast- and almost all have come to chilling conclusions. The implication being that self-interest would be incentive enough for businesses to invest in sustainability.

Although investors and businesses becoming more cognisant of the unfolding crisis is indeed good news, it should be noted that more than half of climate finance is already privately mobilised. What’s more, the scope is overwhelmingly domestic. Read self-interest. And for the same reason, it would be foolhardy to believe that private finance alone would be able to tackle climate change since most of such funds go towards primarily mitigation activities such as improving energy efficiency and increasing renewable energy capacities.

The bias towards mitigation is clear even when it comes to public climate finance. While annual private climate finance is estimated to have been at around $500 billion in 2017, public finance has struggled to inch its way towards the $100 billion a year commitment made by developed nations, of which less than a fifth goes towards climate adaptation. Of the total climate finance flow, less than 0.05% makes it towards adaptation interventions despite mounting tolls of climate impacts.For India, the lop-sidedness of climate action is readily visible. The bulk of India’s progress has come through industry-led mitigation, while adaptation funding has fallen severely short.

A recent report by the Global Commission on Adaptation found that $1.8 trillion investment in adaptation activities would yield net co-benefits worth more than $7 trillion. A pretty good investment, except much of the value will be added through benefits to the public such as ecological services and improved resilience – things for which we look to our governments. With increasingly ready businesses, the time is right for governments to start focusing on adaptation. The clues couldn’t be clearer, no matter the levels of private climate finance, unless governments start spending on adaptation, catastrophic losses will be unavoidable. And who’s to say what the anger will look like then.

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