G7 Unfurls Climate Adaptation Agenda, EU Adopts Nature Law, EDF to Explore Solar Geoengineering, and More

Today in Climate Proof:

Finance:

• G7 Lays Out Climate Finance Strategy

• Climate Disasters Since COP28 Cause US$41bn of Losses, Says Christian Aid

• Cat Bonds Boom

• Insurers, DFIs Team Up on Disaster Risk Management

Policy:

• G7 to Tackle “Climate-Food Systems Nexus”

• EU Adopts Nature Restoration Law

Tech:

• EDF Explores Global Cooling Tech

• WTW Steps Up Climate Risk Analytics

Research:

• Another round-up of papers and journal articles on all things climate adaptation

G7 Lays Out Climate Finance Strategy

The climate finance buzz migrated from Bonn to Apulia, Italy, last week, where the latest Group of Seven (G7) summit wrapped up on Friday.

The leader’s communiqué had plenty of policy red meat in it for climate adaptation fans (which you can read below), as well as a restatement of the G7’s approach to climate finance — one that’s already rubbing activists the wrong way.

In relation to the New Collective Quantified Goal (NCQG) on climate finance, which UN negotiators sparred over at Bonn, the G7 said that donor countries should include those “that are capable of contributing to any international public finance mobilization.” This is a clear reference to large, growing developing countries — like China, Saudi Arabia, and India, to name a few — which the G7 think should pay up because of their contribution to current greenhouse gas emissions.

At Bonn, certain developed countries tried to include similar language on broadening the NCQG contributor base in a draft negotiating text, but were unable to get poorer nations on board. Additional talks on the new goal are expected to take place before the UN Climate Change Conference (COP29) in Azerbaijan later this year. Still, it remains to be seen whether either developing or developed countries will budge from the entrenched positions they held during last week’s negotiations.

Climate finance advocates think the G7 have more work to do themselves when it comes to supporting the new goal. “The G7 needs to step up strongly and demonstrate they are serious about their responsibility to provide climate finance,” says Bond, a UK network for organizations working in international development. “Fair taxes on wealthy polluters and ending harmful subsidies can generate new public finance at scale.” Moreover, research by the Lowy Institute argues that China, one of the countries in the G7’s sights, already provides large amounts of climate finance that are simply not tracked officially.

The G7 communiqué also singled out the importance of adaptation finance, a rarity for these kinds of bulletins. Leaders stated that “there is a need to continue to scale up action and support, including finance for climate adaptation as called for in the Glasgow Climate Pact” and promised help for climate-vulnerable countries on translating their national adaptation plans and instruments into “investment plans aligned with their needs and priorities”, including through the G7 Adaptation Accelerator Hub. This Hub is designed to engender partnerships and mobilize support to put adaptation plans into action.

Moreover, the leaders said they welcomed the development of Climate Resilient Debt Clauses (CRDCs) — special terms in loans to governments that allow repayments to be temporarily suspended in the wake of climate shocks. This indicates the G7’s appreciation of financial innovation as a means to support climate goals, and may help build support for CRDC instruments across public and private finance sectors.

Climate Disasters Since COP28 Cause US$41bn of Losses, Says Christian Aid

Climate shocks have unleashed US$41bn of damages since the UN Climate Change Conference (COP28) in Dubai last December, according to data compiled by the charity Christian Aid.

Four particularly devastating extreme weather events inflicted the highest human and financial toll: floods in southern Brazil, Southwest Asia, and East Africa, and the extreme heat waves that overwhelmed large parts of Asia. “The science is clear: all four of these events were made more likely and/or more intense by climate change,” Christian Aid writes.

Ten of the costliest extreme weather events:
December 2023 —May 2024 (US$bn)

The Brazil floods are estimated to be the costliest climate disaster this year so far. The Rio Grande do Sul’s regional governor estimated that reconstruction will cost at least US$3.7bn, while Christian Aid cites reports claiming that the total hit to Brazil’s GDP could amount to some US$7bn.

Torrential rains and subsequent floods in the UAE earlier this year incurred around US$850mn in insured losses. In Asia, heatwaves in Myanmar, Thailand, Bangladesh, India, and other countries are projected to amp inflation and slow GDP growth.

Christian Aid stressed that its overall figure is likely a gross underestimate because of the difficulty gathering financial loss data in developing economies, where insurance is less prevalent than it is in the rich world.

Cat Bonds Boom

Catastrophe (or Cat) bonds are on a tear. New issuance of the instruments hit a record high US$4bn in May, according to data and news provider Artemis, pushing this year’s total sales to US$11.7bn. That’s 38% more than this time last year.

Predictions of a rough US hurricane season to come, fueled by near-record Atlantic Ocean temperatures and La Niña conditions in the Pacific, are a likely driver of higher cat bond activity. Insurance companies have struggled in recent years to absorb losses from disaster policies written in vulnerable states like Florida and Texas. Since 2017, 15 insurance companies have gone belly-up in Florida, although startups and established companies continue to enter the market.

Catastrophe bond and Insurance-Linked Securities issuance for the month of May, 2020-2024 ($USbn)

Cat bonds support climate resilience by transferring (re)insurance losses from disasters like hurricanes to capital markets investors. In doing so, they free up space on underwriters’ balance sheets to write more catastrophe policies.

Two jumbo cat bond deals pumped up May’s issuance total. One, issued by Florida Citizens, settled at US$1.1bn and should absorb losses related to “named storms” (meaning big hurricanes) that land on the Sunshine State. Another, sold by insurer State Farm, came in at US$1bn and is designed to handle losses from multiple perils that could hit the US.

The total amount of cat bonds outstanding is closing in on US$48bn, Artemis states. 

Insurers, DFIs Team up on Disaster Risk Management

The Insurance Development Forum (IDF) has been busy this year. Back in April, the public-private partnership announced a climate resilient investment blueprint (watch out for Thursday’s newsletter for more on this). Last week, it made news with the formation of the Integrated Disaster Risk Management Alliance (IDRIMA) — a sort of think-and-do tank for strengthening the resilience of sovereign, sub-sovereigns, and public utilities in the developing world.

The Alliance sees the IDF join forces with France’s Development Agency Group (Agence Française de Développement and Expertise France) to deliver a raft of support programs. These include efforts to protect sovereigns and sub-sovereigns from defaulting on their debts following painful climate shocks, and experiments testing public utilities’ interest in portfolio-level insurance protection against certain climate risks. The Alliance will also work on better incorporating insurers’ expertise into policy discussions on disaster risk reduction measures.

Said Michel Liès, chair of the IDF steering committee and chair of Zurich Insurance: “This alliance … is a significant step forward in our mission to integrate disaster risk management with climate adaptation strategies. By embedding risk management measures and actions into financial solutions from the outset, we can offer better protection measures to sovereigns in addition to ensuring critical infrastructure in the Global South is resilient to disasters over the long-term.”

Other Stuff

Climate vulnerable countries’ debt payments highest in three decades (Debt Justice)

President of African Development Bank says Africa loses $7bn-$15bn a year to climate shocks (Eco-Nai+) 

Biden-Harris administration announces US$15mn to make national parks more climate resilient, completes disbursement of US$210mn in climate finance from the Inflation Reduction Act (US National Park Service)

US earmarks US$60mn to support nine projects for training a climate-resilient workforce (National Oceanic and Atmospheric Administration)

In the US, flooding costs US$179.8bn-US$496bn annually (Joint Economic Committee Democrats)

Climate risk and the US housing market: a conversation with Fannie Mae chief climate officer Tim Judge (Marketplace)

Washington state electric utility issues US$800mn notes, with some proceeds earmarked for climate adaptation (Fitch Ratings)

The road to Baku, Belém, and beyond: a 5-year outlook for US international climate finance (Center for American Progress)

University of Louisiana at Lafayette awarded US$697,000 to examine flood resilience and climate adaptation for Caribbean communities (University of Louisiana at Lafayette)

G7 to Tackle “Climate-Food Systems Nexus”

Apulia, the site of the latest G7 summit, is known for its ancient farms and rich history of agriculture. What better backdrop for a new initiative to promote climate-resilient food systems?

The G7 Apulia Food Systems Initiative (AFSI), announced in the leader’s communique, is intended “to build resilient sustainable and productive agriculture and food systems, and to ensure that all people can progressively realize the right to adequate food.”

At the heart of the effort is a bundle of policies and investments to “address the climate-food systems nexus”, especially in poor countries.

In particular, the AFSI will bolster support for specific programs aimed at food-fragile nations in Africa and elsewhere. This involves the rich nations helping enhance access to technical aid for incorporating food issues into climate plans.

In addition, the G7 pledged to work on improving “the fiscal space for food security”, for example by exploring how debt swaps could free up poor countries’ budgets for fighting malnutrition. There was also a promise on rallying G7 public financial institutions to the cause of sustainable agriculture and food systems transformation.

And in another nod to climate resilience, the leaders said they would help design and implement a “Financing for Shock-Driven Food Crisis Facility”, which would facilitate the rapid transfer of finance to regions on the cusp of severe food crises.

The G7 leaders charged their Development Ministers to flesh out the AFSI ahead of their meeting in October.

EU Adopts Nature Restoration Law

European ministers signed off on a bundle of regulations intended to revive the continent’s ecosystems and strengthen its climate resilience.

The Nature Restoration Law — greenlighted by the European Council earlier today — aims to restore 20% of land and sea ecosystems in the European Union by 2030 and all those in need of revival by 2050. Its purpose is to “mitigate climate change and the effects of natural disasters”, the Council said.

The law obliges European Union member states to draft national restoration plans detailing how they will deliver on legally-binding nature restoration targets. A comprehensive range of habitats are covered by the law, including terrestrial, coastal and freshwater, forest, agricultural and urban ecosystems.

The European Environment Agency reported in 2020 that 80% of Europe’s habitats are in poor shape, which is bad news for the continent’s climate resiliency.

Other Stuff

Poor progress at Bonn meetings leave countries with “very steep mountain to climb” ahead of COP29 (United Nations Climate Change)

South Africa’s Presidential Commission says country unprepared for climate shocks (eNCA)

408 climate experts lobby UK party leaders to adopt “an ambitious programme of climate policies that accelerate action, in the UK and across the world, both to cut greenhouse gas emissions and to increase resilience to those impacts of climate change” (Grantham Research Institute at LSE)

US Democrats knock bank regulators for “obstruction” of global climate risk regulation and for weaknesses in the recent bank climate scenario analysis (Senator Elizabeth Warren)

Egypt, African Union plan African Centre of Excellence for Resilience and Adaptation, to be hosted in Cairo (Daily News Egypt)

Lagos, Nigeria’s largest city, announces climate adaptation and resilience plan (Lagos State Government)

Delaware River Basin Commission to develop its first Climate Resilience Plan (NJ.gov)

San Francisco Civil Grand Jury finds city governance impeding adaptation progress (SF.gov)

Vatican calls for urgent climate action and migrant protection at 34th Standing Committee on Programs and Finance of the International Organisations for Migration (Vatican News)

EDF Explores Global Cooling Tech

The Environmental Defense Fund (EDF) is investing millions to research planet-cooling tech, The New York Times reports. It’s a venture into new territory for the climate justice nonprofit, and potentially a controversial one, given the uncertainty surrounding the long-term effects of the technology.

EDF chief scientist Dr Lisa Dilling told the newspaper it is bankrolling research into solar geoengineering, a group of technologies aimed at reflecting more of the sun’s energy away from the Earth. These include techniques for brightening clouds and pumping special aerosols into the upper levels of the atmosphere.

While such technologies could reduce global temperatures, they could also produce unintended consequences — like changing rainfall patterns or upending ocean circulation. EDF hopes its research will shine a light on some of these possible consequences, and is adamant is not funding real-world implementations of the technology. “We are not in favor, period, of deployment. That’s not our goal here,” Dilling told the Times.

Still, EDF’s investments underscore the growing interest in solar geoengineering as a radical, but plausible, climate adaptation strategy.

WTW Steps Up Climate Risk Analytics

It’s been a dismal couple of years for climate and ESG data providers, and though the industry isn’t out of the woods yet, it continues to innovate. 

Financial solutions giant WTW was early on the climate risk bandwagon, and is out this month with a new software tool to help companies identify material climate shocks and build resilience against them. 

Climate Quantified is a Software-as-a-Service technology that analyzes potential climate risk impacts across companies’ value chain in order to build a comprehensive picture of their financial exposure.

According to the press release, Climate Quantified can help firms “quantify the financial impacts of climate change on a portfolio of assets and products, whether owned or belonging to a third party.” Damage to property, business interruption, and more can be estimated using physical risk scenarios that cover perils including droughts, river flooding, and tropical cyclones. The tool is also capable of calculating potential climate transition risk impacts to companies. 

To this long-time observer of the climate risk analytics space, the latest offering from WTW sounds like it belongs in the same category as S&P Global’s Sustainable1 suite of products, and of course MSCI’s Climate Value-at-Risk tool. 

On the surface, it’s hard to tell what differentiates Climate Quantified from the herd. Peter Carter, head of WTW’s climate practice, says the tool combines “advanced, high-resolution climate data “ with the firm’s “in-house risk engineering”, and certainly the company has a wealth of risk expertise on its roster. One to watch going forward, perhaps.

Other Stuff

Vermont’s BioFinder maps wildlife trails, habitats, helps nature adapt to changing climate (vtdigger) 

NATO studies effects of warming on Arctic Ocean’s sonar properties (The Maritime Executive)

Bank for International Settlements, Monetary Authority of Singapore outline platform for integrating regulatory and climate data to aid financial authorities’ climate-related risk management efforts (Bank for International Settlements)

Massachusetts experiments with first-in-the-nation community heating/cooling project (Inside Climate News)

UCSD-UCSC coastal project highlights importance of building local resilience to climate change (Times of San Diego)

Research

Models of sub-national US quasi-governmental organizations: implications for climate adaptation governance (Climatic Change)

The essential role of local context in shaping risk and risk reductions strategies for snowmelt-dependent irrigated agriculture (Earth’s Future)

Thanks for reading!

Louie Woodall
Editor