Climate-related risks are on the rise, so companies need to upgrade operations, infrastructure and supply chains
Recent UNEP estimations place adaptation financing requirements in the range of $140 billion to $300 billion by 2030 in developing countries alone. While international adaptation finance flows to developing countries reached $29 billion in 2020, clearly a lot more funding is required. Rightly so, at COP27, there was a strong focus on adaptation and resilience, loss and damage, and climate justice. The most welcome outcome of the Summit was the decision to establish a loss and damage fund that will be operationalised by COP28 in 2023. This decision was important for developing countries that made strong appeals at COP27 with the goal to compensate the countries that are the most vulnerable to climate-related disasters while contributing little to the climate crisis.
It is also good to note that significant progress was made on adaptation, with parties deciding on the establishment of a framework for achieving the Global Goal on Adaptation (GGA). Through the Glasgow–Sharm el-Sheikh work programme (GlaSS) on GGA, the work will conclude by COP28 in 2023—just in time to inform the first Global Stocktake. Pledges totalling $230 million were also made towards the adaptation fund at COP27. While the focus of the conversations around adaptation was on African countries and Small Island Developing States, these outcomes have significant implications for India as well.
The UNESCAP (United Nations Economic and Social Commission for Asia and the Pacific) Risk and Resilience Portal estimates India’s annualised average loss (AAL) from slow-onset hazards, extreme events and biological hazards at $93 billion—or 3.35% of GDP. Recent studies have highlighted that 75% of India’s districts are climate hotspots. Various studies have shown how extreme temperatures can seriously affect crop yield. Recent estimates from the National Bank for Agriculture and Rural Development highlight that about 50% of India’s cropped area is rainfed.
Other reports state that there has been a 20–40% reduction in agricultural production in rainfed areas due to severe droughts. These events are often linked to an exponential rise in the incidence of pests and diseases. Extreme weather events such as droughts, floods and heat waves all have complex socio-economic implications for our country.
To address its unique riskscape, India should prioritise making new infrastructure resilient, strengthening early warning systems, making water resource management resilient, and improving dryland agriculture crop production. It is important for India to safeguard its food security while ensuring that the most vulnerable sections of the population have access to nutritious food.
In this context, the ‘Sharm el-Sheikh Adaptation Agenda’ launched at COP27—the first comprehensive global plan to rally states and non-state actors towards a set of adaptation outcomes by 2030—assumes great significance and is an important area of global collaboration and opportunity for our country. Several of the Adaptation Agenda outcomes align very well with India’s own ongoing efforts in addressing issues related to adaptation and resilience, food security, energy access, and nature conservation.
India has shown its acknowledgement of the challenges of climate adaptation and building resilience at both national and international levels. Internationally, India plays an important leadership role in the Coalition for Disaster Resilient Infrastructure (CDRI), which is an effort that addresses the multifaceted issues posed by the vulnerability of infrastructure systems globally. On the national front, India has established the National Adaptation Fund for Climate Change (NAFCC) scheme to support adaptation activities in climate-vulnerable regions of the country. The PM Gati Shakti plan to invest $1.3 trillion in integrated infrastructure also provides a great opportunity to invest in resilient infrastructure.
Global studies by Swiss Re reveal rising catastrophe losses will translate into an estimated $149–183 billion of new global property premiums by 2040. This will lead to rising insurance premiums around the world for residential and commercial property. Major buyers are expected to face $120 billion in losses from 2020–25 due to rising environmental risks in their supply chains. Yet another CDP report highlighted that the estimated financial risk of reported climate-related risks for Indian businesses was approximately ₹7,000 billion.
Addressing adaptation challenges and building resilience makes business sense for India Inc. Climate-related risks are on the rise and necessitate that companies upgrade their operations, infrastructure and supply chains. While all sectors are affected, food and agriculture, commercial and residential real estate, infrastructure, and companies with extensive supply chains need to be extra vigilant.
The Adaptation Agenda also clearly identifies that non-state actors, particularly businesses, will have a crucial role to play in ensuring investments in resilient infrastructure and in implementing meaningful projects. The focus of the agenda on mobilising required finances—from both public and private sources—for adaptation and resilience, and to spur the world’s largest companies to address physical climate risk and develop actionable adaptation plans, is then a big opportunity for Indian business leaders to leverage.
While businesses and the government continue to pursue GHG emissions mitigation on India’s road to net-zero emissions, there is an urgent need to address the unavoidable climate-related risks that are on the rise. These climate-related risks impact not only the nation’s growth and development but also have substantial impacts on how businesses conduct their operations. Adaptation and resilience activities must receive a more equal share of resources—financial or otherwise—as compared to mitigation activities.
With the Indian Presidency of the G20 in 2023, this is a prime moment for India Inc. to push for the necessity of resilient infrastructure for the good of businesses and the world. As B20 Secretariat, CII will seek to integrate the rising importance of resilient infrastructure, secure global value chains and an equitable global adaptation plan during the discussions that take place over the next year.
Hopefully, the outcomes shall lead to an impactful COP28 that delivers on the adaptation plans and goals under the Glasgow Climate Pact and Sharm el-Sheikh.
The article was first published in The New Indian Express on 22 December 2022