The climate is impacting our societies, disrupting our food security, infrastructure, water systems and coastal zones. Sea level rise, widespread wildfires and supply chain disruptions induced by harsher and more frequent severe weather events are only a few examples.
As a result, climate adaptation and climate transition have become two important investment themes in modern times.
Climate adaptation refers to actions taken by governments, non-governmental organizations (NGOs) and companies to adjust and adapt to the current and future impact of climate risks. The goal of climate adaptation is to render communities and ecosystems more resilient to the detrimental effects of climate impacts. Climate transition, meanwhile, refers to the steps that organisations and governments are taking to reduce emissions and move towards a low-carbon economy.
Investing in resilience today helps mitigate future climate-related liabilities and costs, both direct (such as physical damage to assets) and indirect (such as higher insurance costs). Adaptation can therefore provide a triple dividend: it avoids economic losses, brings positive gains, and delivers additional social and environmental benefits.
Conservative estimates are that climate finance flows need to reach US 4.3 trillion annually by 2030 to transition to a more sustainable world this decade. Developing economies alone will require up to $300bn a year by 2030 to adapt their agriculture, infrastructure, water supply and other parts of their economies to counterbalance the physical effects of climate impacts.2
But developing countries, which rely most on natural resources, often lack the financial firepower and institutional capacity to put adaptation programs in place to protect people and their livelihoods.