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Stopping the river from coming down

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Stopping the river from coming down

Delivering climate resilient infrastructure through private sector finance

Earlier this month, Jamaica became the world’s first country to launch ground-breaking technology capable of accelerating the resilience of its major national infrastructure to extreme weather events.

By Alan Smith

Systemic Resilience Forum Chair at the Coalition of Climate Resilient Investment

Jamaica’s road to climate resilience

Coming from the Caribbean and having studied at the University of the West Indies at Mona in Jamaica, I have seen up close how escalating physical climate risks are impacting lives and livelihoods.

As a student, I first heard the vivid phrase “river come down” expressed by Jamaican friends and family, encapsulating how, after periods of great rainfall, the swollen rivers would indeed “come down” and disrupt lives and livelihoods through flooding, making people more vulnerable, disrupting school and education, literally washing away economic activity.

Today, because of climate change, not only is the river coming down with greater frequency, but the sea is also rising. Beaches all over the Caribbean are being eroded, including Hellshire Beach[1], one of Jamaica’s most popular, which is being swallowed due to a wide range of physical climate change impacts. A stark and graphic warning of the future that awaits us all if we fail to act - environmentally, economically, socially and culturally.

In many ways the saying “river come down” was prophetic of what we face today. All over the world, because of physical climate risks, the river is coming down for each of us.  And, as Bob Marley reminds - “when the rail falls, it don’t fall on one man housetop”[2]. We are in this together and it is important to collaborate to find solutions that will make us all more resilient. Adequate supporting flows of finance will be a critical enabler.


Driving private finance into resilient infrastructure

Enabling finance to flow, in particular private sector finance, into climate resilient infrastructure is both a huge challenge and a massive opportunity. Increased investment in climate resilient infrastructure to address physical climate risks has the potential to be game changing in our fight against climate change as well as being an attractive investment.

In a world of rising inflation, the private sector is on the hunt for new asset classes for investment that provide long-term, sustainable risk adjusted returns. Climate resilient infrastructure, if one can consider it as a distinct asset class, has huge potential if the correct market, institutional and policy-building blocks are put in place.

J-SRAT – A new key to unlock private investment

A few weeks ago, Jamaica became the world’s first country to use ground-breaking technology[3] capable of accelerating the resilience of its major national infrastructure to extreme weather events.

The climate technology has been developed to help identify ‘hotspots’ across the country’s major infrastructure networks most vulnerable to climate risk, ensuring effective and efficient investment of public and private resources.

Designed by Oxford University in collaboration with the Jamaican Government and support from the Coalition for Climate Resilient Investment (CCRI) and the UK’s Foreign Commonwealth and Development Office, the Jamaica Systemic Risk Assessment Tool (J-SRAT) will help Jamaica’s government prioritise where infrastructure investment is needed most and attract the scale of private sector finance that has so far been missing until now.

The work being done in Jamaica is pioneering. This is just one of a number of key building blocks needed, however, if we are to achieve the necessary levels of increased capital flow to climate resilient infrastructure. Six additional ‘blocks’ stand out that together we will also need to address:

  • Educate and build understanding and capability - In the assessment and risk management of climate resilient infrastructure as an asset class.
  • Enable the measurement of financial value - Help understand “the dates, the rates and the cash flows” which underpin climate resilient infrastructure projects.
  • Define and help understand risk appetite - From investors perspective and their risk-adjusted thinking, especially return on capital, to identify the risk appetite “gaps”.
  • Climate Resilient Infrastructure as the ESG investment of choice - Climate resilient infrastructure is arguably the ultimate ESG asset class, which is now powerfully supported by the cutting-edge capabilities of J-SRAT, providing the data-driven evidence-based analytics.
  • Climate resilient infrastructure as a powerful inflation hedge - In a period of rising inflation, investment in climate resilient infrastructure as an asset class has the potential to be a powerful inflation hedge, generating risk adjusted returns more than the long-term cost of capital.
  • Innovation and the development of financial products – Parametric insurance[4] is one example that will help to enable greater finance flows into climate resilient infrastructure. The Caribbean Catastrophe Risk Insurance Facility (CCRIF)[5] is another, pioneering force in disaster risk management and climate change adaptation.

The river is indeed coming down and the rain is falling on all our house tops. Yet, we are already seeing through the work of CCRI and its partners in Jamaica, practical and innovative solutions that are making it a reality for greater private finance to flow into climate resilient infrastructure as an investment and asset class. This gives a real sense of possibility and hope, not just for Jamaica, but beyond.