COP28 Reinforces the Need for Resilience, CDR
Climate adaptation matters more than ever. The outcome of COP28 reinforces this growing reality.
I’m a climate optimist. But I’m also a realist. Hopes were high among climate activists that the final global stocktake from COP28 would call for a “phase out” of fossil fuels. Instead, consensus statement released today (Dec. 13, 2023) )includes a call for the world to “transition away” from fossil fuels in energy systems and triple renewable energy capacity by 2030. The UN press release has a summary and links to the full statement.
The COP28 compromise reinforces key themes for Climate Pivot:
- The effort to mitigate harmful emissions and radically reduce fossil fuel will likely fall short of its goals. There will be consequences for overshooting the 1.5C goal, altering the risk equation.
- Climate adaptation and resilience are more important than ever, and will be crucial to our ability to manage through the impacts of climate change.
- Carbon dioxide removal (CDR) may become an important last line of defense in stabilizing our climate. The business sector can play a key role in the development and scaling of these technologies (and using them appropriately).
Advancing adaptation and CDR will be expensive, and require commitment. Investment in adaptation will ultimately be a bottom-line decision that action has become less costly than inaction.
Companies once similarly resisted investing in off-site data backups or advanced IT security. These are now essential strategies for most businesses because bad outcomes (downtime, hacks, ransomware) convinced them the risk was real.
Continuing the IT analogy, the response on adaptation and CDR could end up looking a lot like Y2K: The worst outcomes are avoided, largely through the reluctant late-stage commitment of time and money.
While the global stocktake was frustrating for many, COP28 featured the release of several excellent roadmaps for future investments in adaptation and CDR.
The’ Business Imperative’ on Climate Adaptation
A new report prepared by BCG for COP28 makes the business case for funding climate adaptation, saying climate risk has become material for many companies, and the benefits now outstrip the financial expense.
“Financing climate adaptation and resilience is an opportunity for businesses and private investors – not a burden,” states the intro to Financing Climate Adaptation and Resilience is Good for Business and the World. It adds:
In 2022, global climate, weather, and natural disasters resulted in economic losses of over $313 billion, affecting lives, livelihoods, and economies around the world. This trend makes financing adaptation and resilience measures a business imperative.
The report notes that 25% of the 18,700 companies participating in the Climate Disclosure Project (CDP) say physical climate risks will be financially material. Meanwhile, CDP reporters outline a benefit-to-cost ratio for adaptation and resilience projects ranging between 2:1 and 15:1.
Investment Opportunity on the Horizon
Importantly, the report notes that corporate attitudes toward adaptation and resilience are evolving.
Most business leaders and investors have long viewed proactive investment in adaptation and resilience as important but not urgent. The business case was elusive because assessments of the negative financial impacts were based on uncertain climate scenarios, and the solutions seemed unclear and often fell into the domain of public sector investment. But all of this has changed dramatically. The negative effects of the climate crisis on the global economy are no longer theoretical—they are happening now.
The report outlines three themes for investment opportunities:
- Protect: Companies can protect assets, supply chains, and operations by implementing and financing adaptation and resilience measures. Lenders and investors can safeguard their portfolios by deploying capital toward resilient assets and companies.
- Grow: Investors can finance companies that develop adaptation and resilience solutions, and companies can invest in new adaptation and resilience product lines, creating climate-resilient revenue streams.
- Participate: The private sector can collaborate with the public sector to fund and implement capital projects.
You can read the introduction or the full report (PDF).
The Importance of Carbon Dioxide Removal
The report outlines the tension between regions and technologies, and the need to consider social and economic justice in developing programs. The upside: a balanced ensemble of carbon removal strategies could create 440,000 long-term jobs. For more on this report, see The State of Carbon Dioxide Removal.
Links: Climate Adaptation Matters More Than Ever
- Why No One is Investing in Adaptation: The Bloomberg Zero podcast digs into the adaptation gap with Patrick Verkooijen, CEO of the Global Center for Adaptation, which acts as a “solutions broker” for financing adaptation projects.“ Verkooijen says adaptation is “seen as a sunk cost and not as an investment, and that’s wrong. By not investing in adaptation we’re missing economic opportunities at scale.” Listen on Apple or Spotify.
- Call for Collaboration on Adaptation and Resilience: This COP28 initiative aims to connect private financial institutions to policymakers to mobilize funding for adaptation and resilience. “If the world continues on the same climate trajectory, the global economy is expected to lose 10 percent of its value due to extreme weather events by 2050,” the organizers note. “Mitigation alone will not be able to offset these loses. Alongside work to reduce global emissions, it is incumbent on stakeholders around the world to prioritize climate adaptation and the resilience of our societies and economies.”
- Climate activist Bill McKibben sees opportunity in the compromise language in the COP28 stocktake. “The world’s nations have now publicly agreed that they need to transition off fossil fuels, and that sentence will hang over every discussion from now on—especially the discussions about any further expansion of the fossil fuel energy,” he writes. Read more at The Crucial Years.