The warning could hardly have been starker: “Climate change is widespread, rapid, and intensifying, and some trends are now irreversible”, the Intergovernmental Panel on Climate Change (IPCC) said in its latest report published in August. It was a stark reminder that action is not only inevitable, but also urgent.
Addressing climate change is a multifaceted challenge. One key task is adaptation. Extreme weather conditions in many parts of the world this summer have demonstrated the seriousness of the situation.
Adaptation is complex and expensive. Raising awareness is imperative, but it is only the beginning. What is needed now is action. Trillions will be needed, and they cannot only come from public sources. Mobilising private sources of financing and using efficient market mechanisms will be key. The European Bank for Reconstruction and Development (EBRD) with its unique private sector mandate stands at the forefront of this effort in close cooperation with other multilateral partners.
Before we act, we need to know what we are doing. Together with the Global Center on Adaptation (GCA), the only international organization focused exclusively on adaptation, and the Climate Bonds Initiative (CBI), we are launching a guide for issuers of green bonds for climate resilience today. The CBI will share two reports resulting from this collaboration, one outlining the market potential for climate resilience bond issuances, and the other providing a guide for issuers, during the Climate Bonds Conference 2021, held on 6-10 September.
The EBRD issued its first climate resilience bond in 2019 and to date we have raised US$ 1.15 billion from capital markets against our portfolio of climate resilience investments.
The cooperation with the GCA, an international centre of excellence on the subject, and the CBI, an international, investor-focused not-for-profit organisation, has enabled us to pool our expertise in this important emerging area. This knowledge sharing and collaboration are crucial for helping others to realise the potential of climate resilience bonds and unlock larger flows of finance from the private sector.
Another area where involving the private sector can drive change is the resilience of critical infrastructure systems such as energy and transport, as well as urban infrastructure. Having climate-resilient infrastructure is crucial for safeguarding economic development in the face of a changing and more variable climate.
Here too the EBRD is collaborating with the GCA. Together we have supported the development and roll out of a new knowledge module for climate resilient Public Private Partnerships for infrastructure.
We see this as a practical way to involve the private sector in the financing, development and implementation of adaptation investments. It serves as an example of how international partners can work together to encourage stakeholders to mainstream adaptation in all stages of the investment process.
We strongly believe that strengthening our combined efforts and reinforcing common vision across both public and private sectors are essential to successfully deploying policy support and finance in appropriate solutions at the scale and urgency needed to address the enormous challenges particularly the emerging and developing countries face.
The multilateral development banks are leading the way. Climate finance committed by these institutions rose to a total of US$ 66 billion last year, which included US$ 16 billion of adaptation finance. Of this, 58 per cent – or US$ 38 billion – was committed to low- and middle-income economies, with US$13 billion of adaptation finance committed to low- and middle-income countries.
This approach is not only inspired by the need for effective and rapid action, but also by the determination to turn the huge challenges we face into unique opportunities for economic transformation that can generate multiple socio-economic -benefits. As Charles Darwin, the father of the theory of evolution, famously remarked: “It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.”