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5th International Disaster and Risk Conference IDRC 2014 Integrative Risk Management - The role of science, technology & practice 24-28 August 2014 in Davos, Switzerland

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  1. 1. Promoting Private Investments in Climate Change Resilience – Readiness Index August 25, 2014 5th International Disaster and Risk Conference IDRC 2014 ‘Integrative Risk Management - The role of science, technology & practice‘ • 24-28 August 2014 • Davos • Switzerland
  2. 2. © Deloitte LLP and affiliated entities. Overview 1 Challenges Approach Indicators and measures Results Concluding thoughts
  3. 3. Climate trends, coping capacity and value at risk • Most private sector organisations © Deloitte LLP and affiliated entities. rely on weather • Existing risk management measures build resilience against today’s climate normals & climate variability • The climate is changing – historic climate data no longer a guide for the future • Without adaptation, uncertainty about future business performance in light of climate change projections Challenges Source: 2 Willows and Connell (2003)
  4. 4. Challenges Resilience deficit • 90% of S&P Global 100 identify risks but few have invested in resilience (e.g. improving design standards, hardening infrastructure, purchasing insurance) • Macro-economic studies (World Bank, UNFCCC) confirm worldwide © Deloitte LLP and affiliated entities. resilience investment deficit • A portion of the global US$100 billion a year pledge in Cancun Agreements expected to come from the private sector  How will these funds be mobilized without adequate mechanisms in place? • Major gap in our understanding of private sector resilience  Body of work on tracking, case studies, barriers/incentives exists  But what of readiness of country/local business environments for private sector resilience? 3
  5. 5. Approach From drivers/barriers to country indicators & measures DEFINING TYPES OF PRIVATE SECTOR RESILIENCE & PROCESS ASSESSING DRIVERS & BARRIERS DEFINING INDICATORS & MEASURES ‒ Private sector resilience takes multiple forms ‒ It is context specific ‒ Despite complexity, private sector resilience process is relatively standard ‒ 5 factors found to influence private sector decisions  Several factors enable/incentivize or constrain private sector resilience • Focus on sectors with opportunities for inclusive green growth ensures positive development outcomes  A set of drivers and barriers for resilience stands out ‒ Key drivers & barriers are redefined into 16 indicators of country conditions for private sector resilience ‒ Each indicator is evaluated through specific measures ‒ Only those where evidence of positive benefit-to-cost ratios exist are retained © Deloitte LLP 4 Source: Stenek, Amado et Greenall (2014) and affiliated entities.
  6. 6. Five areas important for private sector resilience Changing use/activity and/or changing location © Deloitte LLP and affiliated entities. Indicators and measures PRIVATE SECTOR RESILIENCE Data and information Institutional arrangements Policies Economic incentives 5 Technology and knowledge Preventing loss & damage Spreading or sharing loss & damage Taking advantage of emerging opportunities ROLE OF GOVERNMENT Drivers Barriers 1 2 3 4 5
  7. 7. © Deloitte LLP and affiliated entities. Indicators and measures (cont.) Focus on data and information 6 • Starts with hydrological, meteorological and climate observations and projections – but much information and guidance is needed, e.g.:  Impacts and risk (e.g. updated flood risk maps)  Costs of impacts and resilience measures (e.g. increased cooling capacity)  Community and urban vulnerability, risk and resilience priorities • Underlying economic opportunities of data/information improvements are underestimated Hydromet projects in Central Asia with benefit-to-cost ratios of 23/1 to 53/1 US$ 8-19M and 240-320M each year from ENSO forecasts for Mexico and U.S. agriculture Source: Adams et al. (2003); Solow et al. (1998); and World Bank
  8. 8. Indicators and measures (cont.) Focus on institutions Each $1 of government base funding has leveraged $1.6 in additional project-based funding in Quebec, Canada Source: Ouranos • Institutions and forums working on climate resilience serve several functions:  Improved awareness of risks and use of data/information for resilience;  Improved dialogue and alignment between private sector, government and civil society; and  Platforms for partnerships on common issues. • Demonstrated success of collaborative institutional arrangements to promote climate resilience, e.g.:  UKCIP, CSIRO, Rwanda’s Private Sector Federation © Deloitte LLP 7 and affiliated entities.
  9. 9. Indicators and measures (cont.) Data & institutions are not enough Each $1 invested in adapting infrastructure can save $4-69 per year from 2030 onward $17 levied from household insurance premiums each year to cover insured losses in 99.5% of years Sources: World Bank and Association of British Insurers (2013) • POLICIES – Several tools known to play key role in private sector resilience: • Updated building/infrastructure standards and codes • Local zoning, permitting and impact assessment requirements • ECONOMIC INCENTIVES – Public sector subsidies, finance and risk transfer solutions have been effective at promoting private sector resilience • E.g. Australia’s National Drought Policy reform • TECHNOLOGY & KNOWLEDGE – ICT, technology transfer and school/professional training curriculums are key vehicules for capacity building © Deloitte LLP 8 and affiliated entities.
  10. 10. Implications Lessons learnt from 3 pilots • Successful promotion of private sector resilience requires integrated set of © Deloitte LLP and affiliated entities. favorable country conditions  E.g. Large amounts of quality data/information and technical assistance capacity does not translate in high private sector uptake • Levels of country income and development are not good measures of readiness for private sector resilience – E.g. Bangladesh has a number of favorable conditions, despite low levels of income: e.g. well-established government and research institutions, reasonable amount of data/information and several economic incentives • Improvements in country readiness can lead to short-term reductions in loss and damage • Difficult access to information on policies and low levels of transparency on economic incentives create challenges for measuring country readiness 9
  11. 11. What does it mean for the Post-2015 DRR Framework? © Deloitte LLP and affiliated entities. Implications (cont.) To fully leverage the private sector in climate DRR, improvements in country readiness are needed – this is an area where the new Hyogo Framework can play a key role • RESEARCH & CAPACITY  Better understand country readiness to receive and generate private sector investments in resilience  Identify opportunities for climate DRR through the private sector  Develop tools to assess and improve joint effectiveness/efficiency of DRR and climate resilience financing (e.g. maximize private sector leverage factor) • POLICY  Readiness for private sector resilience should be considered as part of DRR • IMPLEMENTATION  Vulnerability-based methods and indices need to be complemented by indices looking at business environments for DRR and climate resilience 10
  12. 12. © Deloitte LLP and affiliated entities. Contact for Deloitte ‘Disaster + Climate Resilience Services’ Valerie Chort Partner – Americas Leader, Sustainability T: +1 416.601.6147 E: Jean-Christophe Amado Manager – Sustainability T: +1 613-751-5475 E: 11