Stenek international finance corporation climate risk

280 views

Published on

Expert Workshop on Adaptation Financing and Implementation, Putting Priorities into Practice in OECD Countries, Paris, 18-19 June, 2014

Published in: Environment
  • Be the first to comment

  • Be the first to like this

Stenek international finance corporation climate risk

  1. 1. Climate Risk OECD Expert Workshop on Adaptation Financing and Implementation Paris, June 18, 2014 Vladimir Stenek International Finance Corporation
  2. 2. Adaptation interventionsAdaptation: Gaps and Barriers Source: Adaptation Market Study, Turkey, IFC and EBRD 2013
  3. 3. • Underlying cash flow values may be significantly altered by climate related impacts • Valuation: effects of CC over the investment lifetime • Operating costs, revenues: changes in price, decreased productivity, availability, depreciation, etc. • Insurance: change in costs and availability • Changes in long-term average conditions Sources: IFC 2011 Climate Risk and Investments Financial and Credit Market conditions Project costs Asset depreciation Efficiency and performance Outputs Loss contingencies Strategic and developmental Environmental and Social Country risk Legal and Reputational
  4. 4. • Pollution • Access to water • Community health and safety • Workplace conditions • Wastewater and water quality • Resettlement, etc. Sources: IFC 2011, BMI 2010 Financial and Credit Market conditions Project costs Asset depreciation Efficiency and performance Outputs Loss contingencies Strategic and developmental Environmental and Social Country risk Legal and Reputational • “Country risk may be aggravated by climate change impacts, particularly in economies where GDP is reliant on scarce water resources, or in smaller economies that are more vulnerable to catastrophic climate events. “ • S&P, May 2014: “Global warming will harm sovereign creditworthiness around the world this century, with poorer nations the worst hit.” “Given the recent damage to infrastructure in the recent flooding - and the massive clean-up costs necessary to get the economy back on its feet - we believe that the country's investment appeal will remain unattractive for the foreseeable future” Climate Risk and Investments
  5. 5. Sources: IFC 2011 Financial and Credit Market conditions Project costs Asset depreciation Efficiency and performance Outputs Loss contingencies Strategic and developmental Environmental and Social Country risk Legal and Reputational • “Some lawyers are beginning to acknowledge that there is now sufficient information available on CC for it to be taken into account in both strategic and operational decision making. • “If CC impacts are considered reasonably foreseeable by a court, decisions that do not take these impacts into account may incur liability in negligence.” • Illinois Farmers Insurance vs. Chicago municipalities, May ‘14: “The defendant knew or should have known that climate change in Cook County has resulted in greater rainfall volume, greater rainfall intensity and greater rainfall duration than pre- 1970 rainfall history evidenced, resulting in greater stormwater runoff.” Climate Risk and Investments
  6. 6. • IFC Climate Risk Management: mainstreaming of climate risk assessment at project appraisal stage and risk mitigation responses in real sector investments • 2012 revision of IFC Performance Standards (definition of clients' responsibilities for managing environmental and social risks) includes climate risk considerations • PS1: “The client will establish and maintain a process for identifying the environmental and social risks and impacts of the project. (...) The risks and impacts identification process will consider (...) the relevant risks associated with a changing climate and the adaptation opportunities (...) Management of financial, E&S related climate, Adaptation • IFC’s Adaptation Definition for investments and advisory services
  7. 7. De-risking investments Storm surge height Seawater flooding, 2050, observed and accelerated SLR scenarios Sources: IFC 2011, Escuela Naval CIOH 2010 • Port Muelles el Bosque, Colombia • USD 180,000 investment in information: o mobilized USD 20 million in private finance for adaptation o de-risks and protects several hundred million worth of infrastructure
  8. 8. Adaptation interventionsIdentifying Investment Needs and Opportunities Source: Adaptation Market Study, Turkey, IFC and EBRD 2013
  9. 9. Enabling Environment for Private Sector Adaptation • G20 Dialogue Platform on Inclusive Green Investment • Gaps: informational, policy, regulatory, economic incentives • Practical and implementable interventions that increase climate resilience and incentivize adaptation
  10. 10. Enabling Environment for Private Sector Adaptation Source: IFC 2014
  11. 11. Vladimir Stenek vstenek@ifc.org Thank you! www.ifc.org/climaterisks

×