Failure by Nigeria, others to invest $30bn may fuel $377bn losses
A new study by Standard Chartered has revealed that failure by Nigeria and other countries to invest the bare minimum of $30billion to withstand projected climate damage may lead to loss of $377 billion and loss in Gross Domestic Products (GDP) growth by 2030.
According to The Adaptation Economy, which investigates the need for climate adaptation investment, aside Nigeria other countries are China, India, Bangladesh and Pakistan, noting that without investing a minimum of $30 billion in adaptation by 2030, projected damages could be over 12 times of that amount for the above countries.
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.
It listed climate adaptation projects to 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 as the market would require an estimated $11billion 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 $8billion, while Kenya could avoid costs of an estimated $2 billion by investing $200 million in adaptation.
Market Minimum investment required (1.5°C) by countries include: India $10.6 billion for $135.5 billion; China, $8.1 billion for $111.9 billion; Indonesia, $4 billion for $39 billion; UAE, $2.7 billion for $31.5 billion; Nigeria, $1.5 billion for $19.9 billion; Bangladesh, $1.2 billion for $11.6 billion; Egypt, $900 million for $8.6 billion; Vietnam, $600 million for $8.9 billion; Pakistan, $600 million for $7.6 billion and Kenya, $200 million for $2.2 billion
Even if the world nations manage to achieve the goals of the Paris Agreement, measures to adapt to climate change must be pursued alongside the global decarbonisation agenda, with the banking sector having a critical role to play in unlocking finance.
The $30billion 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 0.4per cent of the capital held by respondents is allocated to adaptation in emerging markets where investment is needed most.
However, 59 per cent of respondents plan to increase their adaptation investments over the next 12 months. On the average, adaptation financing is expected to rise from 0.8 per cent of global assets in 2022 to 1.4per cent by 2030.
The Chief Sustainability Officer, Standard Chartered, Marisa Drew, said: “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.
“We must urgently recognise that adaptation is a shared necessity, and as our Adaptation Economy research so effectively highlights, inaction creates a shared societal burden of exponentially increasing cost. The financial sector has a crucial role to play in directing capital towards adaptation and creating the proof points to demonstrate that investing in adaptation can be a commercially viable attractive proposition for the private sector.”