July 25th, 2023
Courtesy of The New York Times, an article on the need to shift climate finance from mitigating climate change to helping people adapt to the effects of global warming:
As heat waves gripped three continents this week, venturing outside for even a few minutes in Phoenix, Rome or a town in northwest China at times meant risking heatstroke or worse. This weekend, about 80 million Americans are expected to experience a heat index — what the temperature feels like to the body — of at least 105 degrees, according to the National Weather Service.
The extreme heat is prompting violent typhoons in Asia and flash floods in the United States. It’s taxing power grids, driving up health care costs and messing with tourists’ holidays. And it’s eventually going to impact everything — and the business of everything.
El Niño and a stagnant jet stream contributed to the record-breaking temperatures. But to the pragmatist, extreme heat is the new normal.
Carl-Friedrich Schleussner, the head of climate science at Climate Analytics, a policy institute in Berlin, said, “Most of our cities are not equipped to deal with these kinds of summers.”
“We’ll have to develop adaptation strategies” — and fast, he told DealBook.
The good news: Investors are spending big on climate projects. Global warming helps make periods of extreme heat more frequent, longer and more intense, and it will continue getting worse unless humans essentially stop adding carbon dioxide to the atmosphere, scientists say. Venture investing in climate tech has boomed since the post-Covid recovery began (though it fell, along with venture funding overall, in the first half of the year). And global public and private investment in climate finance, on projects ranging from decarbonizing architecture and transport to developing renewable energy initiatives, more than doubled from 2011 to 2021, to an estimated $850 billion, according to the Climate Policy Initiative, a nonprofit climate advocacy group. (It will top $1 trillion with the passage of the Biden administration’s sweeping climate bills, the European Union’s Green Deal and China’s low-carbon development initiatives announced in its latest five-year plan.)
“There’s been huge, huge progress” in developing green technologies and bringing down their costs, said Bella Tonkonogy, the U.S. director of Climate Policy Initiative whose funders include the Bloomberg Foundation and the German government.
The less good news: Addressing a source of the problem is no longer enough. The effects have arrived, and extreme heat has become the leading weather-related killer in much of the world. Some cities, homeowners and businesses are investing in low-cost hacks that can help make cities, which tend to absorb and re-emit heat more than natural landscapes, more bearable in the summer. Painting roofs white or another reflective color can cool structures down, making air conditioning units as much as 15 percent more energy-efficient, said Jane Gilbert, the chief heat officer of Miami-Dade County, Fla. Homes and businesses have to be retrofitted to stay cooler in the summer and warmer in the winter, and Miami-Dade has secured millions in federal funding for that plan. Planting trees also adds vital shade to reduce temperatures on city streets.
Only about 7 percent of climate finance is focused on adaptation efforts, according to the Climate Policy Initiative. But more investors are becoming interested, Ms. Tonkonogy said. Last year, the organization partnered with LightSmith Group, a private equity firm, on a $186 million climate fund designed to finance climate resilience projects that could help communities adapt to and withstand the kinds of the extreme weather events that have become so frequent this summer.
“The reason that people are investing more in climate adaptation is because they’re actually seeing the impacts of climate change,” Ms. Tonkonogy said.
'Black Swans' are highly improbable events that come as a surprise, have major disruptive effects, and that are often rationalized after the fact as if they had been predictable to begin with. In our rapidly warming world, such events are occurring ever more frequently and include wildfires, floods, extreme heat, and drought.
'Green Shoots' is a term used to describe signs of economic recovery or positive data during a downturn. It references a period of growth and recovery, when plants start to show signs of health and life, and, therefore, has been employed as a metaphor for a recovering economy.
It is my hope that Black Swans / Green Shoots will help readers understand both climate-activated risk and opportunity so that you may invest in, advise, or lead organizations in the context of increasing pressures of global urbanization, resource scarcity, and perils relating to climate change. I believe that the tools of business and finance can help individuals, businesses, and global society make informed choices about who and what to protect, and I hope that this blog provides some insight into the policy and private sector tools used to assess investments in resilient reinforcement, response, or recovery.