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Tailwind Climate's A&R Taxonomy, World Bank Warns Europe on Resilience, & More

A new "classification and exploration tool" has potential to unblock adaptation investment flows

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Hi everyone! I’m rolling out a new format for today’s newsletter. News/analysis summaries are now organized under the headers Finance, Policy, and Tech, to reflect Climate Proof’s widening focus. There’s also a list of recent journal papers to browse under Research.

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Today in Climate Proof:

Tailwind Climate’s A&R taxonomy, the World Bank’s warning to Europe, and an overview of the Atlas of Climate Adaptation in South Asian Agriculture.

Tailwind Enters the Taxonomy Arena

Is this the one taxonomy to rule them all? 

I’ve been sassy about the explosion of adaptation and resilience (A&R) investment taxonomies this year, arguing that there’s been too much focus on classifying A&R companies and activities and too little on encouraging investors to embrace the theme.

But as I’ve come to learn, clear, comprehensive investment taxonomies are a means of unblocking capital for A&R. By signposting the many climate-proofing needs and opportunities that are out there, taxonomies make it easier for investment professionals to build dedicated A&R portfolios and market them to clients. 

Tailwind Climate, a self-described “innovation studio” working to accelerate the deployment of A&R solutions, is out today with their Taxonomy for Adaptation and Resilience Investments (which I’ll shorten to ‘TARI’) — and it’s a beast.

The TARI breaks down potential A&R investments across eight themes and 35 sectors. For each sector, Tailwind provides dozens of examples of activities and assets across the categories Intelligence, Products & Services, Finance & Insurance, and Enabling Interventions.

In addition, it maps potential investments in each sector to existing industry taxonomies, namely the North American Industry Classification System, Global Industry Classification system, and OECD Development Assistance Committee (DAC) Markers. For those focused on impact, the TARI also links potential investments in each sector to the 2023 Sharm-El-Sheikh Adaptation Agenda, which describes 30 global adaptation outcome targets, and the United Nations Sustainable Development Goals (SDGs). By emphasizing the interoperability of the TARI with these well-known classification systems, Tailwind makes it easy for investors to integrate the taxonomy into their existing processes.

“By outlining this starting point for a common language across a range of A&R activities and investor types, we aim to increase alignment and, ultimately, investment,” the taxonomy’s companion deck reads.

The TARI builds on, and augments, the efforts of other A&R taxonomy drafters. Notably, a key development partner was the Climate Bonds Initiative, which has its own Resilience Taxonomy in the works. Indeed, Emilie Mazzacurati, one of Tailwind’s two co-founders (the other being Katie MacDonald) is on the Resilience Taxonomy Advisory Group. The Global Adaptation and Resilience Investor group (GARI) and Climate Policy Initiative also chipped in — two organizations similarly focused on sorting and classifying A&R investments. Additional support came from the philanthropy ClimateWorks Foundation and Vibrant Data Labs’ Climate Finance Tracker.

Tailwind stresses that the TARI is a “classification and exploration tool”, and should be used in conjunction with A&R impact assessment criteria “to determine whether individual projects or investments are, in fact, adaptation.” Recent frameworks like that produced by the United Nations Environment Programme Finance Initiative could be useful in this context. 

Perhaps this is the way to make sense of the profusion of A&R taxonomies — not as a mass of competing systems, but as interdependent components of the same intellectual infrastructure, designed to help adaptation finance flourish.

Other Stuff

World Bank Sounds Alarm on Europe’s Climate Resilience

“There is still time” for Europe to climate-proof itself against worsening climate impacts, but “there is a narrowing window of opportunity to take action,” World Bank director Sameh Wahba said last Wednesday following the release of a series of reports covering the economics of disaster prevention and preparedness on the continent.

The three papers, backed by the World Bank and European Commission, provide perspectives on investing in A&R, climate disaster risk transfer mechanisms, and how to make “smart” climate-proofing investments in important sectors.

“Globally — and in Europe — disasters have far-reaching effects, with the vulnerable suffering the most,” writes Antonella Bassani, vice president, Europe and Central Asia, at the World Bank in the reports’ foreword. “Disasters not only have a direct impact on physical assets and infrastructure, but also increase poverty and exacerbate inequality over the long term. When mechanisms to prevent, prepare, respond, and recover from disasters are missing or inadequate, these events can erode decades of development and deeply affect society’s welfare.”

The purpose of the reports is to surface recommendations that can help European countries enhance their climate resilience. For example, the “smart” investments paper suggests policymakers promote and fund research in “critical sectors” — like power, transport, and water and sanitation — to better prioritize investments. The risk transfer paper recommends the development of an EU-level overarching Disaster Risk Finance (DRF) strategy that sets out how much member states should have to pay to cover catastrophic events, and urges improved data-gathering on the casualties of extreme weather events and slow onset events.

Investing in disaster resilience is not only good policy – it also makes economic sense. It is now demonstrated that prevention and preparedness investments deliver multiple benefits to our society, economy and environment which materialise whether a disaster happens or not

The investing in resilience report, meanwhile, breaks down how to go about costing adaptation investments, together with best practices from member states. Moreover, it makes the case for “adaptation pathways”, which map out the linkages connecting national-level climate risk assessments, adaptation investments, and the monitoring of their effectiveness.

“This process is meant to enable the management of climate impacts adaptively and iteratively, thereby supporting ‘decision making under uncertainty’,” the report reads.

The paper pegs the cost of adaptation in Europe at between €34-110 (US$37-120) per person per year. This translates to an annual cost of €15-64bn (US$16-70bn) in aggregate.

The World Bank papers dropped the same week as a separate report from the European Environment Agency, which highlighted the escalating health risks to Europeans posed by climate-related water risks, like floods and droughts. Among other things, it calls for health sectors to consider joined-up responses with other sectors — like disaster management, water and municipal services, and spatial planning — to improve outcomes.

Other Stuff

Mapping Climate Risks in South Asia

What better tool than an atlas for navigating climate-related risks? Asian farmers have their own dedicated tooling for this purpose courtesy of the Bill & Melinda Gates Foundation, Borlaug Institute for South Asia, and national agriculture research systems across South Asia. 

The Atlas of Climate Adaptation in South Asian Agriculture (ACASA) was established in 2022 and has funding through August next year to help millions of small-scale farmers in South Asia “become resilient to climatic vulnerability and change.”

ACASA goes about this task by building up and tying together datasets at the scale of individual villages. These datasets are used to identify climate hazard exposures and present appropriate adaptation options. A wide array of investments, technologies, and practices can be used to build up smallholders’ climate resilience, but ACASA wants to make sure the right ones are being prioritized in the right areas.

ACASA employs multiple econometric and statistical techniques. A recent post by CIMMYT, a Mexico-based nonprofit, highlights its use of “process-based simulation models” which are deployed to predict crop growth and yields under various climate scenarios, and show how these could change following the application of adaptation measures like irrigation and the use of nitrogen fertilizer.

The Atlas is an exemplar A&R intelligence service. Data and modeling may not fulfill Asian farmers’ adaptation needs, but their limited financial resources make the services provided by ACASA supremely valuable. With the insights surfaced by this project, farmers can select the climate-proofing investments and technologies with the most favorable cost-benefit ratios.

Thanks for reading!

Louie Woodall