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Market weekly – Climate change: It is adapt or… (read or listen)

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The results of the recent COP26 climate change conference fall into the glass half full, glass half empty category. The onus now is on greater efforts to adapt to higher global temperatures as work on mitigating the temperature rise continues, says Alex Bernhardt, global head of sustainability research.  


Listen to the podcast with Alex Bernhardt on what the Glasgow Climate Pact means or read the article below:


 

I believe we’ll have to accept that a rise in global temperatures by 1.5C above pre-industrial levels by 2040 is baked in no matter what emissions reduction scenario we look at.

A greater focus should now be on adapting to that increase – in both developed economies, which historically are the largest CO2 emitters, and developing countries such as India and China, which will be the large emitters of the future as their economies grow.

Some welcome progress, more to do

While COP26 resulted in a number of welcome announcements and initiatives, as detailed by my colleague Thibaud Clisson in this video and this blog post, the reality is that countries’ current ambitions in mitigating climate change will not allow us to prevent the 1.5C maximum rise in global temperatures of the 2015 Paris Agreement.

That leaves a lot more to do be done and that includes a shift to adaptation and spending on efforts to prepare for the consequences of higher temperatures on work & livelihoods and wellbeing & health – in fact, on life in general. 1.5C higher temperatures will have a significant impact: for example, a one in 10 year extreme heat event is now going to become a four in 10 year event.

As a reminder, physical climate risks come in two forms: [1]

  • Chronic – steadily rising temperatures will increasingly impact the productivity of the land and the people that depend on it for their livelihoods; changing rainfall regimes will result in water stress in more regions; and sea-level rise will impact coastal real estate, industry and, more fundamentally, habitability in low-lying areas.
  • Acute – this means there is an increased likelihood of heat extremes; then there are wildfires, droughts and extreme storms – their frequency and intensity are projected to shift to varying degrees in a warming world.

Adaptation will cover, for example, infrastructure and buildings – our lived environments – and we welcome the commitment in the Glasgow negotiations to double adaptation financing specifically for developing countries from 2019 levels by 2025, although I should note that we need to spend more on mitigation and adaption.

Adapt or…

There is a clear call to action here for private investors to move money flows towards climate solutions such as greater energy and water efficiency, the large-scale use of clean hydrogen, precision irrigation, and carbon capture and other net zero technologies.

The cost of climate adaptation is estimated to reach up to USD 300 billion a year in 2030, compared to the USD 30 billion invested in 2017-2018. Just 1.6% of this is coming from private sources.1

Private investors will also have to engage with portfolio companies more aggressively to get them to adopt net zero strategies and work alongside the public sector more effectively.

We believe it is time for the world to start thinking about more climate resilience. Trillions of dollars will need to be mobilised in meeting the Sustainable Development Goals (SDGs), adapting to climate change and mitigating climate change in line with the goals of the Paris Agreement.

[1] From How to finance climate change resilience by Alex Bernhardt and Thibaud Clisson


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