Lack of investment in climate-related steps to cost emerging markets dearly: report

KARACHI: Failure to invest the bare minimum needed to withstand projected climate damage could cost emerging markets hundreds of billions in damages and lost GDP growth this decade, according to a new study by Standard Chartered.

Adaptation Economy, which investigates the need for climate adaptation investment in 10 markets including China, India, Bangladesh and Pakistan reveals that without investing a minimum of $30 billion in adaptation by 2030, these markets could face projected damages and lost GDP growth of $377 billion — over 12 times that amount.

As per estimates, Pakistan with a minimum investment of $600 million can avail economic benefits of $7.6 billion.

The projection assumes that the world succeeds in limiting temperature rises to 1.5°C, in line with the Paris Agreement. In a 3.5°C scenario the estimated minimum investment required more than doubles to $62 billion and potential losses escalate dramatically if the investment is not made.

Examples of climate adaptation projects include the creation of coastal barrier protection solutions for areas vulnerable to flooding, the development of drought-resistant crops and early-warning systems against pending natural disasters.

Among the 10 markets in the study, India is projected to benefit the most from adaptation investment. The market would require an estimated $ 11 billion to prevent climate damages and lost growth of $ 135.5 billion in a 1.5°C warming scenario, equal to a thirteen-to-one return for the Indian economy of investment in climate adaptation.

Meanwhile, China could avoid an estimated cost of $ 112 billion by investing just $ 8 billion. India required to invest $10.6 billion for economic benefits of $135.5 Kenya could avoid costs of an estimated $ 2 billion by investing $ 200 million in adaptation. Bangladesh needs to invest $1.2 billion for $11.6 billion economic benefits.

According to report, even if the world’s nations manage to achieve the goals of the Paris Agreement, measures to adapt to climate change must be pursued alongside the global decarburization agenda, with the banking sector having a critical role to play in unlocking finance.

The $30 billion investment required for adaptation represents only slightly more than 0.1 per cent of combined annual GDP of the 10 markets in the study and much less than the estimated $ 95 trillion emerging markets require to transition to net zero using mitigation measures, as outlined in Standard Chartered’s Just in Time report.

The Adaptation Economy also surveyed 150 bankers, investors and asset managers and found that, currently, just 0.4% of the capital held by respondents is allocated to adaptation in emerging markets where investment is needed most.

However, 59% of respondents plan to increase their adaptation investments over the next 12 months. And on average, adaptation financing is expected to rise from 0.8% of global assets in 2022 to 1.4% by 2030.

Commenting on this report Marisa Drew, Chief Sustainability Officer, Standard Chartered has said that this report makes it clear that irrespective of efforts to keep global warming as close to 1.5C as possible we are going to have to incorporate climate-warming effects into our systems and adapt to its reality.

“All nations will need to adapt to climate change by building more resilient agriculture, industry and infrastructure, but the need is greatest in emerging and fast-developing economies with a disproportionate risk of exposure to the negative effects of rising temperatures and extreme weather”, he added.-PR

Copyright Business Recorder, 2023