Easier said than done

June 7, 2013 admin

If it is true that the first step to solving a problem is admitting there is a problem, then perhaps we are on the road to “solving” climate change; however, as the OECD’s National Adaptation Plan report published in April reminds us, it is the transition from acknowledging a problem to taking action to address the problem that can be the most daunting. The OECD notes:

A review of companies’ climate risk disclosures indicated that while three-quarters of surveyed companies acknowledged climate risks to their business, only one in four assessed the extent of their risks or possible risk management options, and only one in 20 implemented risk management actions.

This paradigm reflects the nature of climate change research to date — it has focused on identifying and showing there is in fact a problem, but the job of developing the resources and tools leaders need to make climate-based decisions have lagged. The report notes:

Part of the challenge are the demands both for more sophisticated climate change projections and data, and that they be made easier for end users to apply. Progress on the former has been more rapid than on the latter.

And for many infrastructure owners and operators, this is bad news. As the report notes:

This lack of action is a particular concern in the case of economically significant sectors, those that are climate sensitive and those where investment decisions have long-term implications. For these reasons, the provision and management of infrastructure plays a major role in countries’ national adaptation planning, both in terms of the need for additional investment for addressing climate risks and the need to climate-proof existing infrastructure and ongoing investments.

The OECD hopes the private sector can help countries adapt to climate change by providing products and services that can help combat the effects as well as alter their practices to be more aligned with policy. According to the OECD, the private sector can help with climate change adaptation by:

  • Providing tools and guidance — these go beyond general information provision and provide high-quality, accessible climate data, guidance managing climate issues, and tools assessing climate risks and planning adaptation responses.
  • Maintaining regulatory coherence — governments have emphasized the need to ensure regulatory frameworks are conducive to risk management, including mapping overlapping and conflicting regulatory regimes. For example, governments have updated design codes so that new developments are resilient to projected climate change impacts.
  • Establishing reporting requirements — this is a less common approach but has been used to ensure companies in key areas, such as providers of critical national infrastructure, regularly assess and report on their exposure to climate risks. A notable example is the United Kingdom Adaptation Reporting Power Commission.
  • Using procurement policies — governments have recognized their powers as procurers to encourage and require private sector suppliers to take account of climate risks.

The opportunity to finance investment in climate change strategies such as renewable energy also exists. The OECD explains:

As a starting point, governments have encouraged the private sector to secure its own resilience to climate change, which ought to reduce the need for public investments in adaptation. Beyond this, several government representatives stated that the public sector should consider how to attract private financing for adaptation investments.

The OECD detailed some ways private sector investment might better be matched to investment in a report titled Mobilising Investment in Low Carbon, Climate Resilient Infrastructure, and recommends developing “a domestic policy framework for encouraging private sector investment in low-carbon and climate-resilient infrastructure.”

Of course, the stakes are high, as researchers from the University of Southampton Highfield in the United Kingdom point out in their report A Global Ranking of Port Cities with High Exposure to Climate Extremes. The report includes a ranking of the top 20 cities in danger of climate-fueled flooding whose combined future asset exposure totals $26.8 trillion.

Drew Campbell is senior editor of Institutional Investing in Infrastructure.

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