Climate investment

THE increasing frequency and intensity of extreme weather events such as heavy rainfall, droughts, and heatwaves, result in loss of livelihood, human lives, and economic output. Furthermore, extreme weather events seriously undermine efforts to eliminate poverty and improve living standards, offsetting gains from economic development and resulting in the wastage of scarce resources. Thus, enabling adaptation to climate change and developing the resilience of key social and economic systems has become a top priority of governments worldwide.
Resource-scarce countries like Pakistan have no option, but to invest in climate change adaptation, developing climate resilience of vulnerable communities, and cushioning social and economic systems from climate-related stresses. Investment in climate resilience in the Pakistani context can protect the lives and livelihoods of vulnerable communities and shield social and economic systems, safeguarding the country’s economic progress. For example, saving jobs and household incomes and avoiding and mitigating displacements can help maintain economic activity, facilitating local economies to rebound faster. Furthermore, investments in climate adaptation and resilience can increase the resource base, improve health and well-being, and reduce pollution, enabling a transition to a low-carbon economy.
There is much evidence of gains in investment in climate adaptation and resilience. A World Resources Institute study claims that for every dollar invested in climate adaptation and resilience, the returns range from $2 to $10, demonstrating a clear business case for investment in climate adaptation. The study revealed that investment in early warning systems alone can help avoid losses and damages amounting to at least 10 times the value of the investment. The returns, however, depend on several social, economic, political, and institutional factors, which create conducive conditions for climate interventions and returns on such investments.
However, the latest estimates of the 2024 Climate Resiliency Report show that for every $1 invested in climate resilience, $6 is saved in terms of avoided losses and damages and $7 is saved in terms of averted loss to the local economy, making the return on investments in climate change adaptation and resilience $13. This means that billions of dollars could be saved by investing in climate change adaptation and resilience.
While the Climate Resiliency Report estimates are from the US, there are successful examples of investing in climate resilience from low-income countries as well. For example, investment in water availability and increased water food security in Kenya, typhoon-resilient housing in Vietnam, urban flood risk management and averted losses in Mozambique, and urban heat management and reduced heat-related mortality and morbidity in India are some of the pieces of evidence of gainful investment in climate adaptation and resilience in Global South.
This evidence also offers key insights into successful climate interventions. Examples of such interventions include the use of data and climate information, participatory approaches, involvement of the private sector, strong coordination, decision-centred planning, political support, and long-term preparation. Notably, these strategies are included in key policy documents in the Pakistani context; however, their successful implementation, scaling up, and dissemination remained hurdles.
Developing climate resilience of key economic and social systems also involves climate-informed investment decisions to develop critical infrastructure, and prevent it from extreme weather events, mi­­tigating the losses and damages and thus wastage of limited resources. How-ever, among other things, limited climate change knowledge and institutional capacity and the absence of ap­­propriate data and information impede climate-informed decisions to support adaptation and resilience building.
Importantly, investment in climate resilience is profitable even if there are no extreme weather events. For example, investment in agriculture resilience can improve crops and thus the food security and performance of the agriculture sector. Similarly, better infrastructure can improve population access to basic services such as clean drinkable water, transport, and health, resulting in improving human capital, employment and economic opportunities, social equity, and economic uplift of marginalised segments. Pakistan is not only in desperate need of developing climate resilience, but it also urgently needs to improve its human capital. Both aims can be achieved by aligning climate and development policies and interventions and integrating climate action in development programmes and projects.
The writer has a PhD in economics from Durham University, UK. He specialises in environmental economics.
Published in Dawn, October 27th, 2024