Can we spare $200B a year for climate adaptation?
This is the amount the United Nations Environment Programme Finance Initiative (UNEP FI)'s Adaptation Gap Report 2022 estimates developing countries need by 2030 in the absence of significant action to reduce emissions.
While climate mitigation benefits from well-established target-setting frameworks, adaptation hardly does. UNEP FI has thus outlined a set of steps with Principles for Responsible Banking signatories to deliver an initial framework for commercial banks over the next two years:
- Adaptation and resilience are poorly defined, especially in the context of the financial sector. High uncertainty around climate hazards and data availability make setting quantifiable targets difficult, and collaboration between public authorities, businesses, financial institutions and citizens is highly challenging.
- None of the seven adaptation frameworks reviewed in the Chapter 3 of the report appear to have all the necessary elements for off-the-shelf deployment by commercial banks.
- A target-setting climate resilience framework for banks should include a factor that identifies financing that contributes to positive adaptation impact, as well as adaptation metrics.
- The Principles for Responsible Banking's adaptation framework should be compatible with existing regulatory frameworks, practical, adaptable, measurable and impactful, as defined in the report.
- This framework should be applied initially to specific sectors where data is available to conduct adequate risk assessments, engage with clients and build the case for financing adaptation.
These guidelines can support the alignment of banks' portfolios with climate adaptation goals and sustainable development, and consequently drive their financing activities towards more climate resilience.