the ability to pay. But these may not accurately reflect a country’s ability to access capital to mitigate disaster and strengthen resilience. A NEW APPROACH We propose a new approach, embodied in the Climate Finance Vulnerability Index, created as a composite of the climate risk each country faces and its ability to access funding. Moreover, the approaches to computing climate and financial vulnerabilities are also unique. In assessing a country’s susceptibil- ity to climate hazards, it is important to consider the risk not just retrospec- tively but also prospectively – that is, incorporating the future risk of loss from disasters. Similarly, to assess a country’s ability to access financing, the focus should be on the sustaina- bility of its debt, financial integration with the rest of the world and the level of sophistication of its capital markets. Of course, central to all this are indi- cators relating to governance and the capacity to manage complex financial and disaster risk reduction portfolios. In having a more robust under- standing of risk across multiple dimensions – as this index does – better programmes and interventions can be designed to meet climate adap- tation needs. Donors interested in funding cli- mate adaptation and resilience want their contribution to have the max- imum impact possible. By adding a separate dimension on a country’s ease of access to finance, the index can help donors pick between two coun- tries facing similar climate disaster risks: based on where the funds can go further, they can pick the one in more dire need. Many countries that need adapta- tion funding the most are not the ones receiving it, as underscored by the Brookings Institution. A more holis- tic approach to understanding climate adaptation financing risk can support closing this gap by highlighting the compounding effects of high climate risk and low access to capital to inform adaptation and financing strategies of countries so that aid, grants and concessional loans can be prioritised within existing and future resources to help prevent the worst impacts of cli- mate change.
// GAUTAM JAIN Gautam Jain is a senior research scholar at the Center on Global Energy Policy and an adjunct profes- sor at the School of International and Public Affairs at Columbia Univer- sity. His research focuses on the role of financial markets and instruments – including thematic bonds, blended finance structures, and carbon mar- kets – in the energy transition. He has an extensive background in the financial industry, where he covered emerging markets as a portfolio man- ager and strategist. X-TWITTER @gjain_nyc
“The lack of revenue streams from resilience- strengthening projects makes financing a challenge, even though these investments are good for economies”
development finance institutions, phil- anthropic organisations and other donors are thus necessary to help close the adaptation investment gap.
THE NEED TO TARGET FINANCING BETTER
Historically, aid was disbursed by focusing primarily on a country’s income level or GDP per capita. This approach has helped reduce pov- erty worldwide, but does not work well when addressing the climate crisis. Many middle- or high-income emerging and developing economies, especially small island developing states, may be one climate disaster away from getting downgraded to a low income. This is because they may be highly indebted or have limited access to financial markets. The approach of international finan- cial institutions has been changing in recent years as the climate crisis has become apparent. To help donors allocate funding to countries, many approaches have been proposed that rank countries based on climate vul- nerability and the capacity to cope with climate shocks. Others have looked to include poverty indicators that reflect
// JEFFREY SCHLEGELMILCH Jeffrey Schlegelmilch is an associate professor for professional prac- tice in climate and the director of the National Center for Disaster Pre- paredness at the Columbia Climate School, as well as its director of exec- utive education and non-degree programmes. His areas of expertise include public health preparedness, community resilience, and the inte- gration of private and public sector capabilities. He is the author of Rethinking Readiness: A Brief Guide to Twenty-First-Century Megadisas- ters and co-author of Catastrophic Incentives: Why Our Approaches to Disasters Keep Falling Short .
X-TWITTER @jeffschlegel clifvi.org
87 globalgovernanceproject.org
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