In recent times we have seen a significant increase in natural hazards and volatility in weather across the world. South Africa has not been immune to the adverse impacts.
Entering the second half of the year offers an opportunity to reflect on our ever-evolving climate and the need to talk about how we are adapting. Importantly, we need to talk about how we move forward in finding innovative financing solutions to build resilience in our communities.
According to the World Meteorological Organisation “State of the Climate in Africa 2024” report, our continent has been, and will continue to be, disproportionately affected by climate change and the associated high costs required to fund essential climate adaptation and build resilience. The same report highlights that costs associated with climate change can be as much as 5% of the continent’s GDP and many are allocating up to 9% of their annual budgets to respond to climate extremes.
It is therefore essential that the public and private sectors shift their focus and prioritise adaptation and resilience, alongside mitigation. We need to continue to focus on climate mitigation projects such as funding cleaner energy sources and decarbonisation activities.
Equally, we need to consider how we reduce vulnerability to the negative impacts of climate change. This climate adaptation finance includes investments in climate-smart agriculture such as drought-resistant crops or improved water management, investment in infrastructure such as flood defences and early warning systems, energy storage systems and development of resilient buildings. Financing these activities improves resilience of economies and communities to floods, drought and other extreme weather events.
Addressing climate-related impacts, and specifically prioritising adaptation and resilience, is a moral and business imperative. Based on various reports, including British International Investment’s “Emerging Economies Climate Report” of 2023, the business cost associated with climate change for Africa is undisputable. According to the BII report, 79% of respondents said climate change is impacting their organisation today, up from 68% in 2022, with flooding, drought and heat noted as the top physical risks.
Business and finance need to invest in our assets, infrastructure and communities to ensure we can better withstand these risks
Business and finance need to invest in our assets, infrastructure and communities to ensure we can better withstand these risks. This is not, however, an easy call to action. There are many challenges in scaling up financing for adaptation and resilience, such as a lack of clear revenue streams, insufficient and inaccurate data and a lack of expertise.
Among some of the newer thinking in addressing financing gaps are initiatives such as using revenue streams from carbon credits or from associated eco-tourism to fund adaptation projects. Similarly, blended finance solutions are essential in bringing together multiple players with differing risk appetites and mandates to fund some of these critical projects that may not be commercially bankable on a stand-alone basis, and index based (parametric) insurance can be applied to mitigate physical risks.
In the words of composer and economist W Edwards Deming: “In God we trust. All others must bring data.”
While adaptation is a relatively new concept for many governments, data will be a foundational building block for any adaptation strategy. Better data, modelling tools and geolocation data will be essential for comprehensive solutions. We will need a measure of boldness and visionary leadership to drive a step-change in conventional business considerations.
In pursuit of an integrated considered approach and to paraphrase Voltaire, “we should not let perfect be the enemy of the good”.
As most readers will know, South Africa holds the presidency of the G20 this year and is effectively using the global convening platform to drive key initiatives that make adaptation a norm rather than an exception. Multilateral organisations and forums have a key role to play in driving systemic and behavioural changes.
The scale of the challenge is too big for any one participant to solve alone. Gatherings such as COP30, G20 and the Sadc sustainable finance forum (among others) must serve as catalysts for innovation, action and target-setting. It is crucial for African countries to make our voices heard in these forums, given the scale of the challenges faced by our continent.
We have the opportunity to make a lasting difference. We cannot fail to meet this challenge, lest we put future generations at risk.
• Cook is head of sustainable finance at Standard Bank Corporate & Investment Banking
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