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Colossal and rapid mobilisation of investment capital needed to protect global economy from intensifying climate risks

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In a new report, Coalition for Climate Resilient Investment also warns resilience to severe climate impacts will only be possible when existing systemic market failures are addressed.

As climate disasters intensify and prospects for avoiding even more catastrophic warming diminish, Coalition for Climate Resilient Investment (CCRI) warns in its maiden report since launching in 2019 that systemic market failures must be addressed before it will be possible to unlock the scale of private finance needed to support climate adaptation and resilience in both vulnerable and developed countries.

According to the report ‘Risk and Resilience published by CCRI, a global coalition of institutional investors, banks, insurers, rating agencies and governments representing over US$20 trillion in assets, three key factors are responsible for the chronic underinvestment in climate resilience by the private sector:

  • Lack of analytical tools to quantify the exposure of assets to physical climate risks;
  • Difficulty in determining and comparing resilience options; and
  • Investors not adequately adjusting their expected returns or cost of capital to account for such risks.

The report details progress made by CCRI to support and accelerate the shift towards greater investment in resilience, including development of a framework for approaching different levels of physical climate risk within the global economy. The framework goes from top down, looking at systemic risk and resilience, to bottom-up, looking at how investors should integrate physical climate risk considerations in the asset design and structuring of specific investments.

“Even if we stop all emissions today, adaptation will still be necessary. For nations and investors to fund and build infrastructure that is more resilient and capable of withstanding present and future impacts of climate change, physical risks must first be properly priced upfront in financial decisions.”
Carlos Sanchez, Executive Director at CCRI

The latest report by the Intergovernmental Panel on Climate Change states that mean global surface temperatures will continue to increase until at least the mid-century, requiring all countries, but especially vulnerable developing economies, to be ready for at least 30 years of increased frequency of floods, heatwaves and sea level rises.

“This is no longer a ‘vulnerable nation’ discussion,” said Sanchez. “Extreme weather is taking hold in every part of the world and causing damage beyond our worst case scenarios. In response, we need a colossal and rapid mobilisation of investment capital to find solutions which will both mitigate climate change and increase our resilience to it.”

However, latest assessments reveal that adaptation in developing countries is estimated to require as much as US$300 billion investment per year by 2030[1], overshadowing the US$79.6 billion spent in 2019 on both mitigation and adaptation in these countries. In fact, the same analysis shows that investment in resilience for Small Island Developing States has actually declined, revealing a global ‘adaptation gap’ that is widening.

“The warming we’ve experienced to date has caused irreversible changes to many of our planetary support systems on timescales of centuries to millennia,” added Sanchez. “There is increasing demand for practical approaches to deal with the challenge of scaling up adaptation, with CCRI playing a key role in advancing solutions that will allow more private finance to support the orderly transition to a low-carbon, resilient economy.”

[1] UN Environment Programme, “Adaptation Gap Report 2021”.

Quotes included below from stakeholders
in Climate Resilient Investment

“I am encouraged by the progress made by the Coalition for Climate Resilient Investment. Their efforts to develop practical solutions that better integrate and price physical climate risks in investment decision-making can make a difference.”
H.E. António Guterres, Secretary-General of the United Nations
“CCRI has a crucial role to play in the evolution towards investors integrating physical climate risks into their decision-making process. The Coalition’s commitment to collaborate with other initiatives, such as the Task Force for Climate-Related Financial Disclosures, the development of practical solutions, and consultation with global regulators is enabling a deeper and more pragmatic understanding of the climate transition challenge ahead of us.”
Mark Carney, UN Special Envoy for Climate Action and Finance, and the Finance Adviser to the UK Prime Minister for COP26, Vice Chair and Head of ESG and Impact Fund Investing at Brookfield Asset Management
"I am encouraged by the progress made in bringing together governments, financial institutions, asset managers, insurance experts, multilateral institutions, climate funds and academia, in a unique collaboration in the development of practical solutions. This will help vulnerable countries prioritise actions and investments to protect economic, social and ecosystem value from physical climate risks over the next decades. As a climate vulnerable small island developing state, the principals and mandates of the Coalition for Climate Resilient Investment strongly resonate with Jamaica.”
Andrew Holness, Prime Minister of Jamaica

About the Report

Risk and Resilience – Addressing Physical Climate Risks in Infrastructure Investment’ focuses on the need to incorporate physical climate risks in infrastructure design and investment decision-making. It presents how Coalition for Climate Resilient Investment (CCRI) is addressing the ‘climate resilience market failure’ through the implementation of tools, methodologies and principles to help the various stakeholders involved in infrastructure, including the financial industry, build resilience to a changing climate.

About the Coalition for Climate
Resilient Investment

A United Nations Climate Action Summit (UNCAS) and COP26 flagship initiative, The Coalition for Climate Resilient Investment (CCRI) represents the commitment of the global private financial industry, in partnership with key private and public institutions, to foster the more efficient integration of physical climate risks (PCRs) in investment decision-making.

CCRI aims to create a more resilient global financial industry in which key incentive structures foster an accurate pricing of physical climate risks (PCRs) in investment decision-making, resulting in more resilient economies and communities across the world.

The Coalition brings together private companies, governments and inter-governmental bodies, including many of the world’s leading financial businesses and asset managers that collectively manage more than US$20 trillion in assets.