Companies and investors are beginning to see climate change adaptation as an opportunity rather than simply a cost as climate impacts are generating a need for new products and services that present solutions for resilience.
Private Markets for Climate Resilience is an assessment of risks and opportunities for companies and investors. This project is the first major investment by Climate Finance Institutions—the Multilateral Investment Fund and Nordic Development Fund--to systematically evaluate the potential market for climate resilience solutions in the private sector. Focusing on transport and agriculture, this initiative seeks to examine current best practices and investigate the opportunities in this emerging sector by identifying the leaders that will shape the emerging market, highlighting products, services, tools and innovative processes, creating an information platform with emerging opportunities for investment, and identifying companies that are candidates for investment.
Led by Tom Downing of the Global Climate Adaptation Partnership, and Carmen Lacambra of Grupo Laera, the assessment builds on six country analyses to ground innovation in real stakeholder communities. In Colombia, South Africa, and the Philippines, our teams are developing stakeholder and technical networks. In Nicaragua, Kenya and Vietnam, the project teams are in place for a rapid appraisal and applications.
Our methodology: designed to promote investment opportunities
The survey of the rapidly expanding literature, project launch, interactions with the investor community and clarification in our design stage for the project methodology across our team all point to four major headlines. These are working propositions that already have some evidence and will be further investigated during the project:
First, the market for climate resilience in the private sector jumped from ‘construction’ to emerging market status. New working groups, initiatives, funds and meetings are indicative of a rapidly growing field.
Second, major investments are planned but are not yet of the same magnitude as public funding for climate resilience. However, there is a notable gap in the market intelligence regarding private sector expenditure and the pipeline of potential investment funds.
Third, private sector finance is hindered by methodological gaps. Many of the lessons learned in understanding vulnerability, modelling climate impacts and risks, and planning technical and institutional interventions in complex socio-ecological systems have not been brought into the potential private sector applications.
Fourth, investment needs to deliver verifiable results, and avoid a ‘resilience investor bubble’. Without a method to measure success and track the performance of investments in achieving long-term resilience, proven returns may not justify the initial appetite for risk.
The PMCR project sits early in the market-innovation cycle at the stage of identifying the nature of the market and business models for different types of investments and its methodology is designed to inform decision making rather than produce investment ready business cases. The approach taken by the project team for the analytical methodology is rooted in three fundamental understandings of climate resilience and investment decision making:
- We cannot predict the future so investment is required under conditions of uncertainty.
- Resilience is a layer to existing and sometimes new business processes rather than a stand-alone objective.
- The market analysis focuses on the interspace of decision making—beyond raising awareness and before due diligence for specific projects or investment decisions.
By framing climate resilience in a way that reflects our foundations in understanding wicked environmental problems and adaptive management of complex, coupled socio-economic systems, our approach is targeted in each country with links to global sector organizations to influence the private sector ecosystem of emerging leaders on climate resilience. Our methodology focuses on three streams, a global methodology and two sectoral pathways, which feed into our model:
As we move from market construction to an emerging market, interest in private sector investment in climate resilience is moving rapidly to the fore as new working groups, initiatives, funds and meetings are indicative of a rapidly growing field. New actors look for new opportunities for selling services, launching products and Big Data and established investors scan the resilience landscape for verifiable outcomes with sound business cases. The prospects for the Private Markets for Climate Resilience project are promising as there is a pressing need for the methodology and technology we bring to this emerging market.
The Private Markets for Climate Resilience project is led by the Joint Venture between the Global Climate Adaptation Partnership and Grupo Laera in partnership with a consortium of leading regional and sectoral experts.