Pre-COP Climate Finance Talks, Banks' Adaptation Disclosures, UK Climate Agenda, and More

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Climate Proof will report on the hottest adaptation and resilience news out of the Big Apple all week — keep an eye out for bonus newsletters through Friday, and please reach out with your own highlights by replying to this post or messaging Louie via LinkedIn.

Today in Climate Proof:

Finance:

• Stage Set for pre-COP Climate Finance Talks

• How the World’s Top Banks Rank on Adaptation

• MDBs Double Climate Finance in Four Years

Policy:

• Climate Resilience Key to US Development Strategy

• UK Foreign Secretary Outlines Climate Agenda

Tech:

• Development Banks Trial Climate Risk Tool

Research:

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

Stage Set for pre-COP Climate Finance Talks

The race to set a new global climate finance target is entering its final, frenzied sprint.

High-level discussions on the New Collective Quantified Goal (NCQG) for climate finance will be held in Baku, Azerbaijan on October 9, the UN announced last week. Officials will pick over the reports from a special working group on the goal, which held its final pre-COP29 discussions on the goal on September 11 and 12. The purpose of the October meeting is to promote “effective political engagement and open, meaningful, and robust discussion,” the announcement states.

The talks will follow hot on the heels of the UN General Assembly, held in New York from this Tuesday (September 24) to next Monday (September 30). The annual diplomatic summit offers member states an opportunity to thrash out their differences on the size, scope, and ambition of the NCQG. However, Reuters reports that uncertainty around the US election is hampering progress, with countries unwilling to set out their stalls without knowing who will occupy the White House next year.

A delay to negotiations, however, could place the NCQG in jeopardy. A new climate finance agreement is needed before the current US$100bn-a-year pledge expires at the end of 2024. The latest update on discussions shows countries are still at loggerheads. Seven competing options for a deal were set out in a paper published in late August.

Another document synthesizing written submissions from member states highlighted the broad range of views on the scope, scale, and donor base for the NCQG. While some countries prefer a single, unified goal, others want a multi-level target made up of a “core” of public finance commitments and “outer layers” provided by private financial institutions and “innovative financing mechanisms.” Moreover, some want thematic sub-goals embedded in the NCQG, including on adaptation and loss and damage.

Perhaps the most contentious sticking point, however, concerns who should pay into the goal. While developing countries, including high-emitting countries like China, believe they should be exempted from the donor base, rich world players including the US and European Union want them to contribute. 

How the World’s Top Banks Rank on Adaptation

What are the world’s top commercial banks disclosing on climate physical risk and adaptation? 

It’s a question Climate Proof and Climate X — a climate risk analytics firm — set to answer in a first-of-its-kind ranking of banks’ adaptation maturity published last week. The findings suggest that most banks have a long way to go when it comes to proving they have a grip on adaptation and resilience.

The ranking graded 50 of the world’s largest banks by assets, excluding China, against 17 disclosure indicators. These were calibrated to find out what each bank was saying on their management of physical risks, engagement with adaptation issues, and use of relevant metrics and targets in their annual reports.

Of the 50 banks, 43 met less than half the indicators — suggesting a low level of adaptation maturity among the world’s biggest lenders. Moreover, while most banks met at least some indicators on analyzing physical risk exposures and collecting climate hazard data, only a handful were found to disclose specific information on adaptation and resilience actions, such as the provision of adaptation finance products and services to clients. 

UK bank Standard Chartered topped the inaugural ranking, meeting 12 of the 17 indicators. Banco Santander and Banco Bilbao Vizcaya Argentaria rounded out the top three. European and UK banks were found to disclose more information on physical risks and adaptation than their US, Australian, and Canadian counterparts.

LLM-Based Approach For Analyzing Adaptation Indicators

The analysis was limited in scope to bank annual reports. Standalone climate and ESG reports were not included in the interest of comparability. Each report was marked against the 17 indicators using a Large Language Model (LLM) approach, adapted from one used by researchers at the universities of Oxford and Zurich.

MDBs Double Climate Finance in Four Years

Climate finance from multilateral development banks (MDBs) hit a record high of US$125bn in 2023, new data shows, more than double the amount provided four years earlier. Of this amount, around US$28bn was spent on climate adaptation. 

The Joint Report on Multilateral Development Banks’ Climate Finance counts up the loans and equity investments made by public lenders, including the World Bank Group, Asian Development Bank, and European Bank for Reconstruction and Development. Its purpose is to increase transparency on development banks’ spending and track their progress supporting climate goals.

Total MDB Adaptation Finance By Region, 2023

Of the US$28bn spent on adaptation, U$25bn was allocated to low- and middle-income countries. The Asian Development Bank supplied the most adaptation finance among MDBs last year, at around U$4.5bn. The region that received the most adaptation finance was Sub-Saharan Africa, followed by South Asia, and Latin America and the Caribbean.

Other Stuff

Biden-Harris administration announces funding to enhance resilience of critical infrastructure, protect against extreme weather events (FEMA)

Biden-Harris administration announces US$205mn to help communities address impacts from growing flooding threats (FEMA)

Africa partners delivering adaptation results: US$10bn of development investments made climate resilient (Global Center on Adaptation)

Microsoft-backed water impact fund raises US$100mn (New Private Markets)

The UN Principles for Responsible Banking marks its five year anniversary (UNEP FI)

Identifying barriers to advancing climate equity through US financial markets (Brookings)

US$5trn owed to Global South by Global North due to the climate crisis (Climate Action Network International)

Emerging trends, challenges, and opportunities in climate finance (Global Innovation Lab for Climate Finance)

Climate Resilience Key to US Development Strategy

The White House debuted a new strategy on global development last Wednesday (September 18), one that has increasing climate resilience as a key strategic objective.

“The Intergovernmental Panel on Climate Change has made clear that climate change is having dangerous and pervasive impacts on nature, livelihoods, and infrastructure in every region of the world,” the strategy document says. “These impacts threaten sustainable development — and our ability to meet basic human needs — around the world, but particularly in the least developed countries.”

The strategy highlights the importance of the President’s Emergency Plan for Adaptation and Resilience (PREPARE), a blueprint for helping half a billion people in developing countries adapt to climate risks by 2030. Officials working on PREPARE are hosting an event on enlisting the private sector today (September 23). Climate Proof will report on this call to action in a special bulletin tomorrow. 

The White House has also pledged to “bring to bear an array of analytical and capacity strengthening tools and expertise focused on local and regional efforts to adapt, build resilience, and develop more sustainably” as part of its development plan. In addition, it has promised to accelerate its climate finance push “to rapidly scale investment and adopt policies and programs inclusive of displaced persons, refugees, and migrants.”

UK Foreign Secretary Outlines Climate Agenda

“There is no pathway to countries’ development aspirations without climate resilience,” said David Lammy MP, the UK’s Foreign Secretary, in his first major policy speech.

The wide ranging address sketched out how the new UK government would pursue a climate-aware development agenda and take action on those climate and nature risks that are threatening the country’s security and flaring geopolitical tensions. 

On development, Lammy said the UK and partners “must unlock much, much more climate and nature finance” for those on the frontline of climate risks. To this end, he promised to bring before Parliament a UK guarantee for the Asian Development Bank, which could facilitate over US$1.2bn of new climate finance for developing countries in the region. 

In addition, he said the UK is backing changes to the International Bank for Reconstruction and Development so it can supply more climate finance. “[W]e need to become more creative in unlocking private sector flows for the green transition, and especially adaptation, across the Global South,” Lammy explained.

The Foreign Secretary also promised action to tackle biodiversity loss, announcing the start of “a new programme of research into nature and water” and a review of how development efforts are implemented on the ground.

“Ultimately, there will be no global stability, without climate stability. And there will be no climate stability, without a more equal partnership between the Global North and the Global South. For Britain to play its part, we must reset here at home, and reconnect abroad. That is what this Government will deliver,” said Lammy.

Other Stuff

A US framework for climate resilience and security (The White House)

NOAA, climate mayors join forces to advance climate resilience (National Oceanic and Atmospheric Administration)

Development Banks Trial Climate Risk Tool

Financial institutions of all stripes are crying out for data and analytics on climate physical risks and adaptation — the findings of the Top 50 Banks on Adaptation report being just one among many data points on the matter.

There’s no shortage of high-tech software tools to help, though. One recent addition is a tool developed by European consultancy Climate Risk Services and the Joint Impact Model, a toolkit that assesses climate risks to financial portfolios.

The CRS-JIM tool is designed to provide decision-useful climate risk analytics to banks and investors. While it shares this ambition with many other solutions on offer, this tool is designed to work with relatively little input data from users and is offered at a low price point — two factors that should make it attractive to financial institutions in emerging markets, and development banks operating in poorer, less tech-savvy regions.

The Dutch development bank, FMO, has lent a hand developing the tool, and it has already been piloted and deployed by the International Finance Corporation and European Bank for Reconstruction and Development, among others.

Today, the tool offers global coverage, across all sectors and asset classes, for 14 physical hazards — including coastal flood, heat stress, and land subsidence. Users can read a ‘Hazard Score’ for a specified exposure, calculated by multiplying the risk level at a given geolocation by the sensitivity of the given sector/company to a designated climate hazard.

There’s also a transition risk module for users wanting to cover climate policy and technology risks, too.

“The vision is to enable harmonized climate risk and adaptation data and insight for financial institutions operating in emerging markets and unlock much-needed adaptation and transition finance flows,” says Pekka Piirainen, head of product at Climate Risk Services.

Other Stuff

NOAA, Esri team up to make ocean data more accessible and actionable (National Oceanic and Atmospheric Administration)

RESEARCH

Cultivating climate resilience in California agriculture: Adaptations to an increasingly volatile water future (PNAS)

Breaking the Barriers: New CARE study highlights intersection of climate, inequality, and hunger (CARE)

Thanks for reading!

Louie Woodall
Editor