Risk Management

The Wrong Direction: Countries at Risk from Climate Change Face Shrinking Resiliency

In its latest stark report, the Intergovernmental Panel on Climate Change describes significant and worsening environmental risks to the world’s poorer countries.  Indeed, the situation is so severe in 11 countries that any amount of corporate investment right now isn’t likely to improve their situations should global shocks strike, including climate change. The countries – Algeria, the Congo, Cuba, Ethiopia, Honduras, Libya, Madagascar, Nepal, Nicaragua, Syria and Venezuela – all rank below 100 on the  University of Notre Dame Global Adaptation Index, a measure of a country’s vulnerability to global challenges in combination with its readiness to improve resilience.

The critical issue for these countries remains their preparedness to accept investment in adaptation or resiliency. In countries such as Yemen, Syria, and Nepal, political instability and violence are trending downward, decreasing investment readiness.  In Venezuela, it’s the rule of law; in Nicaragua and Madagascar, it is a dearth of education opportunities. And in Libya, it’s the lack of a voice and accountability.

Many of these countries already have experienced weather extremes. Consider Syria’s drought that forced 800,000 farmers to migrate to the cities in recent years, or the unprecedented flooding in Nicaragua in 2013. Will they prove to be resilient to the next climate disruption?  It’s not likely.

They must focus on their governance, social systems and economic structures to turn their readiness trend around and increase the likelihood that they can attract private and public investments to help them endure their vulnerabilities to climate change.

 

Climate Adaptation as a Business Opportunity –ND-GAIN as a tool to help

There are some incredibly positive sustainability trends baring themselves out today:

  • Sustainability is becoming more a part of the ethos of the c-suite
  • Non-profit and public/private partnerships are growing in impact
  • Sustainable growth is being fueled by innovation in business/technology

Yet these hopeful trends are paired with a more sobering theme:   climate risk

This year, 4 out of top 10 global risks derived from World Economic Forum’s global risk perception survey, http://www.weforum.org/reports/global-risks-2014-report,  relate to climate disruption

3.Water Crisis

5. Failure of Climate Change Mitigation and Adaptation

6. Greater Incidence of Extreme Weather Events

8.Food Crisis

 

These risks share space with other risks such as high unemployment, fiscal crisis and political and social instability.

More specifically, one statistic from CDP’s supply chain survey, https://www.cdp.net/CDPResults/CDP-Supply-Chain-Report-2012.pdf,  really caught my attention:  more than 70% of corporate respondents saw risks to their supply chain from climate disruption.

And indeed, these risks are baring themselves out. 2011’s unprecedented flooding in Thailand alone resulted in $20B economic losses, Honda’s losses totaled more than $250 million when flood waters inundated an auto assembly plant, and  - to take another climate impact - General Motors calculated that a one-month disruption at one of its production facilities in Mexico hard hit by drought, could result in a loss of $27 million in net income.

But, as with any business risk, known risk can spell opportunity.  Vulnerable sectors crucial to human health and prosperity that also can be greatly improved by innovation – such as food, energy, and water –  are prime for investments that help us adapt to climate risks.

The US Military calls climate change a threat multiplier and instability accelerant, and some suggest that climate change fueled conflicts in Chad, Darfur, Yemen and Syria.

And it is not just civil conflict:  A report from the World Bank, http://climatechange.worldbank.org/sites/default/files/Turn_Down_the_Heat_Executive_Summary_English.pdf, says that many important development advances of the 20th Century, such as food security, global health and poverty reduction, may be undermined by climate change.

Recently, the Notre Dame Global Adaptation Index produced an analysis that showed it will take more than 100 years for lower income countries to reach the resilience of OECD or richer countries.

While I am concerned for all of us that unprecedented climatic variations are making the world more vulnerable, I reflect on the positive business trends and am certain we can apply our innovation, leadership, and partnerships, to building resiliency.

In fact, there are countless examples of corporate-lead climate adaptation around the world that are helping to decrease the impacts of droughts, superstorms, fires and floods caused by climate disruption.

Leading companies are leaning in, showing the importance of adaptation for their value chains by applying themselves to those vulnerable sectors crucial to human health and prosperity.

Increasing resiliency in food:

- Monsanto is developing new drought-tolerant corn varieties through the Water Efficient Maize for Africa, project, in partnership with the African Agricultural Technology Foundation the Bill and Melinda Gates Foundation, the Howard G. Buffett Foundation and the U.S. Agency for International Development.

- The global reinsurance firm Swiss Re is helping farmers in Ethiopia tackle current and future precipitation uncertainty, providing insurance against climate-related losses.

- PepsiCo is rolling out its i-crop precision-farming technology, enabling farmers to monitor, manage and reduce their water use while maximizing potential yield, in collaboration with the Columbia Water Center of the Earth Institute at Columbia University.

Increasing resiliency in infrastructure:

- Engineering firms such as AECOM and CH2MHill are integrating adaptation into coastal and energy infrastructure systems to protect future generations living in urban areas.

- Ushahidi, a small nonprofit software company, uses the power of crowdsourcing software to distribute real-time information including about roadways and transportation, during disasters in lower income countries and around the world.

Increasing resiliency in water

- Unilever, in partnership with the UN Global Compact and the World Food Program, is spearheading local water use reduction, freeing-up water previously used for clothes washing for other applications in India.

- Ecolab is creating water efficient technologies for commercial and industrial infrastructure that are more resistant and resilient to climate change.

But how do we join these proactive companies on finding market value in resiliency?

As companies are starting to realize that their bottom line is intimately connected with climate disruption, the private sector wants to know where do we get relevant information to inform our leadership?

There are many valuable tools out there.

The ND-Global Adaptation Index, http://index.gain.org, ranks the 193 UN countries annually based on how vulnerable they are to droughts, super-storms and other natural disasters and, uniquely, how ready they are to successfully implement adaptation solutions.

We measure the countries’ vulnerability of health, food, water, and infrastructure and the social, governance and economic readiness of the country to take on investment, thus informing many elements of our value chain.

Using 17 years of data, we examine over 50 indicators for each country in the index, and some real winners emerge from these hundreds of thousands of data.

It’s no surprise, European and North American countries are among those most prepared for climate risk.

And many developing countries are making the most and the fastest improvements – as companies invest in these growing markets.

The BRIC countries are doing better than the global resiliency average.  And there are some surprises, like Rwanda, which has moved up  the rankings 40 positions, primarily by improving its economic, governance and social readiness measures, making it a more viable investment opportunity.

Many companies may find the greatest business opportunities in more vulnerable countries with a high demand for adaptation products and services, but also high readiness based on a transparent, safe and fair investment and regulatory environment.

We can use the ND-GAIN matrix to examine countries in our supply chains, consumer markets, capital assets and community engagements to better understand our relative risks and opportunities.

I’ve found that one of the reasons climate adaptation is resonating with the private sector is that it is a very personal issue.  The indicator of climate adaptation success is not an ethereal Metric Ton of CO2e.  Adaptation is about direct impacts to our most important assets - our employees, our customers and our communities and their prosperity yesterday, today and tomorrow.

We have the opportunity to save lives and improve livelihoods for millions around the world while improving our market positions by matching the power of data, with corporate innovation, leadership and partnership.

Adaptation provides collateral benefits to

  • Mitigate greenhouse gas emissions
  • lift more out of poverty,
  • strengthen economies,
  • prevent civil conflict,
  • buttress food security,
  • protect natural resources and
  • ensure a brighter future for generations to come.

I encourage you to ask yourself the climate adaptation question of your work to create business opportunities out of resiliency that offer rewards for humanity.

(This is the One Great Idea presentation I gave at the Greenbiz Forum today).

Poor Countries Are Losing Ground in the Race to Adapt to a Changing Climate

The World Economic Forum released their 2014 Global Risk Report with a write up crafted by WEF’s Global Agenda Council on Climate Change based, where Juan Jose Daboub (the Global Adaptation Institute’s founding CEO) is co-chair.  I drafted the original write up which resulted in this piece: The year 2014 is likely to be crucial for addressing climate risks, a point made by United Nations (UN) climate chief Christiana Figueres at the Warsaw Climate Change Conference. Countries made only limited progress on issues such as emissions reduction, loss and damage compensation, and adaptation. Greater progress is urgently needed to create incentives and mechanisms to finance action against climate change while efforts are made to keep temperature rise below 2 degrees Celsius.

Even as governments and corporations are called upon to speed up greenhouse gas reduction, it is clear that the race is on not only to mitigate climate change but also to adapt. Droughts, super-storms and other natural disasters are increasingly causing systemic risks around the world.

Failure to adapt most strongly affects the most vulnerable, especially those in the least developed countries. They tend to lack the infrastructure and capacity to deal with extreme droughts and floods, reduced crop yields and increased stresses on energy and water supplies.

According to the latest Notre Dame-Global Adaptation Index, it will take more than 100 years for the world’s poorest countries to reach the current adaptive capacity of higher-income OECD countries. The World Bank estimates the cost of climate change adaptation for developing countries at US$ 70-100 billion per year through to 2050.

Gradually, however, promising models are emerging of collaboration between the public and private sectors and civil society to strengthen resilience to climate change. An example is the US$ 3 billion Southern Agricultural Growth Corridor of Tanzania (SAGCOT), intended to create the infrastructure to nurture new value chains. Through techniques such as rainwater harvesting, efficient irrigation and crops that can produce more nutrients for the same input of water, SAGCOT aims to increase food production in a way that is both environmentally sustainable and benefits small-scale farmers and the rural poor.

Such innovative and ambitious projects, unlocking investment funds through public-private partnership, showcase the kind of multistakeholder collaboration that will be needed across all sectors to meet the twin priorities of climate change mitigation and adaptation.

Sources

ND-Global Adaptation Index http://news.gain.org/post/69787249752/2013-nd-gain-data-show-worlds-poorest-countries-lag

Scherr, S. J., J. C. Milder, L. E. Buck, A. K. Hart, and S. A. Shames. 2013. A vision for Agriculture Green Growth in the Southern Agricultural Growth Corridor of Tanzania (SAGCOT): Overview. Dar es Salaam: SAGCOT Centre. Available at http://www.ecoagriculture.org/documents/files/doc_483.pdf

World Bank. 2010. Economics of Adaptation to Climate Change: Synthesis Report, Washington DC: World Bank. Available at http://climatechange.worldbank.org/sites/default/files/documents/EACCSynthesisReport.pdf

 

Expert View: Five Issues that Promise to Heighten National Security Risks in a Changing Climate

At last month’s ND-GAIN annual meeting, Brigadier General (USMC RET) Stephen Cheney, the American Security Project’s CEO, laid it on the line.  For the military and for the world, climate change risk is real and grows every day.  And the military knows from experience that waiting for certainty on future predictions can prove disastrous. Reflecting on climate impacts with national security significance, a panel spelled out five repercussions of a changing climate.  Cheney himself laid out four risks:

  1. Sea level rise in Asia will displace millions of people.  In Bangladesh alone, more than one million of its 160 million people will need to relocate. Relocations cause tensions that historically have erupted into civil conflict in which the U.S. military has responded..

  2. Forest fires, such as the one in Russia that elevated wheat prices and perhaps sowed the seeds of the Arab Spring in the Middle East, will put more natural resources at risk, causing scarcity-driven conflicts. (In an earlier post, I noted that the U.S. Defense Department estimates that 6,000 square kilometers of African land for agriculture – roughly the size of the West Bank and Gaza[1]will disappear by 2060 so the bargain over food resources will worsen.)
  3. Extreme weather events, such as Super Typhoon Haiyan that ravaged the Philippines will require military response for humanitarian aid.
  4. Arctic ice melt will trigger a tussle over territory, leading to conflict between the nations that claim ownership.

The fifth effect of a changing climate with national security implications was offered by Marcus King, associate professor of George Washington University’s The Elliott School of International Affairs. His was a promising trend – that water scarcity has fostered more incidents of cooperation than conflict.  For instance, he mentioned the agreement by Jordan, Israel and the Palestine Authority to rejuvenate the Dead Sea.

He noted that the Pentagon refers to climate change as an instability accelerant, and cited projections from the Intergovernmental Panel on Climate Change and others that by 2030, global demand for water will exceed the water supply by 40 percent.  Already, in the tinder box of the Middle East, water trends are alarming.  In Syria, 800,000 farmers were forced to move to cities because of a two-year drought and, in Yemeni, aquifers could be depleted by 2020.  For Egypt, which relies on neighboring countries for all of its fresh water, conflicts driven by water could erupt as Egypt’s neighbors consider building dams for their energy security.

As Roger-Mark De Souza, director of the Wilson Center of Population, Environment, Security and Social Change foretold, with 1.5 billion, or more than one-in-five, people worldwide living in conflict or post-conflict areas, climate vulnerability will worsen crises.


[1] Approximately 6,020 square kilometers, The World Bank

 

Climate on the Davos Agenda

I’m thrilled that the World Economic Forum has placed climate change squarely on the agenda for next week’s forum at Davos.  It makes sense since its 2013 Risk Report noted climate change, combined with economic upheaval, as a top hazard to the global economy. This emphasis for the Forum is particularly important. The convening of corporate and private sector leaders has played a lesser role in the global climate change efforts, which primarily have been driven  by the United Nations.  Fortunately, it appears the private sector, through the power of the Forum, is going to play a bigger role in this discussion. Perhaps that will turn the UN efforts toward more action.

Next week, all World Economic Forum participants can attend sessions specifically dealing with adaptation and resiliency, including:

  • An ideas lab on adapting to climate change
    • A discussion of the role of business and supply chains in making sustainability a mainstream issue
    • A plenary on the interaction of the climate and development global agendas toward 2015
    • A conversation about building resilience to natural disasters linked to extreme weather events and climate change

I’m eager to see the direct and indirect impact of The Forum’s climate adaptation conversations.

Beyond Davos 2014, World Economic Forum will participate actively in the Climate Summit at the UN in New York on Sept. 23,  the UN Framework Convention on Climate Change Conferences of the Parties in Lima, Peru, in late 2014 and subsequent convening.  This work reflects a set of robust Forum partnerships. The lead is Dominic Waughray, a member of ND-GAIN’s Advisory Board.

 

Turn Tragedy in the Philippines to Adaptation Action

I mourn with my Philippine kaibigans about the incalculable death and destruction wrought by Typhon Haiyan on that beautiful country and its people.  I lived and worked in the Philippines in the mid-1990s while at the U.S. Agency for International Development. I consider the country my second home.  I feel a deep sadness that so many lives were lost. Yet, I do not feel hopeless.  I know that  ways exist to increase the Philippine’s resiliency, and the solutions lie within the country, the corporate sphere and the development community. When a climate-related disaster strikes, I turn to ND-GAIN to help provide me with answers to how to prevent future calamities.   It probably isn’t a surprise to those who have seen the Haiyan destruction that the Philippines ranks 99 of 176 countries on the ND-GAIN index..  When looked at from the perspective of the country’s vulnerability to climate disruption and its readiness to adapt, it is in the highly vulnerable and not-ready quadrant of the Readiness Matrix. It possesses a great need for investment and innovation to improve readiness as well as a great urgency for action.

Since 1995, however, the Philippine’s’ relative GAIN score has headed in the wrong direction, initially ranking 87th of 176 countries.   Several factors related to ND-GAIN account for this deterioration, including the growing perception that political unrest will trigger a destabilized government or an actual coup by unconstitutional or violent means. Other factors: its rate of population growth in urban centers and the natural-disaster risk for populations living in cities of more than 750,000 people.  If they reflected awhile that they rank with Burundi, Cote d’Ivoire and Iran in terms of their political stability and nonviolence score, they might strive to strengthen the institutions that hold the government accountable.

Several initiatives could help the Philippines in the near and longer term.  First, simply assume that decreasing the country’s exposure to extreme events involves reducing greenhouse gas emissions, and that the Philippines always will lie in the eye of the storm during typhoon season regardless of the extent of climate change.

The real opportunity lies in decreasing Filipinos’ sensitivity to climate disruption, increasing their adaptive capacity and boosting their economic, social and political readiness. These will increase their resilience and keep them on a path to market growth, human thriving and a caring and outward-looking world view for which they’re famous.

Based on ND-GAIN, here are three places from which to start. None are easy, but all generate hope for both the Philippines and the global community:

  • Shore up the political stability of local, regional and national government.
  • Increase the percentage of paved roads to trigger more expeditious travel on islands within the archipelago during the monsoon season.
  • Improve sanitation facilities and access to water to strengthen the population and decrease disease while freeing up community energy for commerce.

The Philippines is nababanat, or elastic, as well as resilient, and Filipinos face many more typhoons ahead.  Working together, we can save lives and improve livelihoods there and in other vulnerable regions.  As an adaptation professional deeply immersed in questions of how, I employ ND-GAIN to guide the way.

 

National Security: A driver for climate adaptation prioritization?

I got involved in the corporate sustainability space through civil conflict. In Vietnam, actually, while investigating innovations in water infrastructure service delivery sparked by a community fight over access to water in Haiphong. That escalated into a major conflict that left two water workers dead before the People’s Committee came to its senses and considered a new way to approach fair water access. That was two decades ago. Yet that question of water and conflict continues to erupt and spill over from small-town skirmishes to all-out wars.  Noted journalist Tom Friedman has written about it in an April 2012 column, The Other Arab Spring, and a May 7, 2013, column, Postcard from Yemen. And I’m hearing rumblings from my Notre Dame colleagues who suggest a rear-view mirror look at Darfur reveals that the conflict that forced people off their land was less about sectarian strife and more about lack of access to water. My colleague Peter Annin has written a book with the provocative title of “Water Wars.”

When I think about water conflict, though, I ask myself if we know more now than we did about the relative vulnerability to water risk. It turns out that we do know a lot more.  For instance, examining countries on a short fuse in water-stressed regions of the world through the ND-GAIN index, it’s apparent that the Sahel and the Horn of Africa both show significant water vulnerability. Indicating that are such barometers as the projected change in precipitation and percent of population with access to improved water supply. Their vulnerability could possibly be having an impact on other  susceptibilities, such as food and health and wellness.

It is plausible that climate change is causing internal and cross-boundary migration that is affecting security around the world. At the recent New York Climate Week, Brigadier General Steven Cheney, CEO of the American Security Project, noted that 70 percent of global militaries consider climate change a threat to security.  He identified regions such as S. Asia Bangladesh, India and Pakistan, Mali and the Middle East as “tinder boxes” for various  reasons that concern flooding and drought, which are triggering competition for resources.

 

The U.S. military is taking a close look at this. A 2011 Defense Department Report,  “Trends and Implications of Climate Change for National and International Security,” firmly recommends to “institute water security as  a core element of DOD strategy” since “the availability of water underlies all other elements of human security.”

Percent changes in length of growing period changes to 2050.

 

So what  specifically do you analyze and consider to determine if a war or significant conflict is caused by climate change?   One approach involves looking at countries that are less vulnerable, or that have become less vulnerable over time, than their neighbors or peers and measure the degree of conflict in them.  In Africa, according to ND-GAIN, countries like Tanzania and Zambia have become less vulnerable over time.

The upshot? Investing in adaptation could be one way to mitigate civil conflict.

Post Script October 23. 2013.  Thanks to Josh Foster - a wiki of all things climate adaptation - for sharing the following with me from Science:

QUANTIFYING THE INFLUENCE OF CLIMATE ON HUMAN CONFLICT

A rapidly growing body of research examines whether human conflict can be affected by climatic changes. Drawing from archaeology, criminology, economics, geography, history, political science, and psychology, we assemble and analyze the 60 most rigorous quantitative studies and document, for the first time, a striking convergence of results. We find strong causal evidence linking climatic events to human conflict across a range of spatial and temporal scales and across all major regions of the world. The magnitude of climate’s influence is substantial: for each one standard deviation (1σ) change in climate toward warmer temperatures or more extreme rainfall, median estimates indicate that the frequency of interpersonal violence rises 4% and the frequency of intergroup conflict rises 14%. Because locations throughout the inhabited world are expected to warm 2σ to 4σ by 2050, amplified rates of human conflict could represent a large and critical impact of anthropogenic climate change.

Science 13 September 2013: Vol. 341 no. 6151 1235367

 

Ranking Country Sustainability for Investor Decisions

As we know, decision–makers rarely if ever look at climate risk in isolation, which is why I’m glad that Marc Klugmann brought another great article from Fast Company’s Ben Shiller to my attention.  Mark is a founding strategic advisor to GAIN, and thus he is on the lookout for other indices that rank country vulnerability. RobecoSAM offers us a good one and a reminder of the importance of looking at a chromatic list of indicators when making sustainability decisions.

The article,The 59 Countries That Are Most Prepared To Handle An Uncertain Future is particularly interesting to us at ND-Global Adaptation Index, where we are currently pouring over 2012 data in preparation for launching the 2013 index in December. Comparing their index to ND-GAIN’s 2011 data we see that there is a great deal of consistency.  For instance eight out of ND-GAIN’s top-ten are in their top ten (The difference ND-GAIN includes New Zealand and Ireland in our top ten, not Canada and US).

ND-GAIN – which includes measures of governance, economics and society along with health, infrastructure,water, etc. and RobecoSAM’s sustainability data are complimentary and help corporations, governments, and charitable organizations prioritize investments in:

  • New Markets, Products & Services
  • Targeted Development
  • Risk Mitigation
  • Corporate Social Responsibility

Ultimately, indices like these help address crucial investor questions, such as:

  1. Are you solving a big problem, preferably one that is worth a lot of money and is recognized today?
  2. Is your solution differentiated, compelling and sustainable?
  3. Does your venture have an understandable and relevant business model given your solution and the problem it addresses?

Stay tuned for a blog post next week that digs into some of these questions from the perspective of adaptation risk.

 

 

 

The Auto Industry's Real Climate Risk

An article caught my attention last week from the Auto Industry Action Group, entitled “How Climate Action May Impact the Auto Industry.”   Initially, I thought it might tell the story of an industry that has seen significant disaster-related setbacks taking charge to prevent future problems. Actually, it proved to be a polemic about how to protect the industry from climate-related regulations.

 

Like the finance industry, which gained important business-continuity planning lessons from 9/11 and more recent disasters for example, Goldman Sachs’ stellar disaster-recovery preparations that enabled it to keep its lights and power on in lower Manhattan after Hurricane Sandy). I presumed that automakers were also familiar with risk mitigation, drawing lessons from disruptions to their supply chain after Japan’s devastating 2011 earthquake, tsunami and nuclear disaster.

 

I bet there are a few leaders in the auto industry who are assessing the realities of the climate-change issue  and are mulling risk evaluations that, for instance, include a look at the relative vulnerability by country of origin of their major suppliers – China Japan, Korea and Mexico.  As of 2011, Japan and Korea possessed a similar level of readiness, and Mexico and Japan’s vulnerability matched, but China was the least prepared and most vulnerable of all of them. (Check out the vulnerability/readiness matrix here to compare countries.)

Others closer to home may be thinking about these risks. The environmental choir, namely The American Sustainable Business Council, published an interesting article about small business risks from climate adaptation.

I can only assume that many car dealerships, which stand at the tail end of the industry’s value chain, consider themselves small businesses. Without climate-adaptation leadership, they could find themselves in trouble.  Among several compelling statistics noted in the article, an estimated 25 percent of small- to-mid-sized businesses don’t reopen after a major disaster, and 57 percent of small businesses have no disaster-recovery plans.

These small businesses represent our American jobs and the backbones of our communities. As climate-related risks grow at home and abroad, we should make it a priority to find the right tools to help all business owners manage for a dramatically changed future.

 

Three Steps to Better Decision-Making

Three Steps to Better Decision-Making Many tools are available for corporate and development decision-makers to help them plan and devise their business strategies.   Corporate leaders I speak with say they use the Consumer Confidence Index, Corruption Perceptions Index, and Human Development Index among other well-regarded tools, to help relay complex information quickly to their boards of directors and C-Suite peers.  The ND-Global Adaptation Index joins these business barometers to provide quick insights into a country’s climate vulnerability and readiness to adapt.  And since risk experts view climate change as ranking among our principal threats to business, the tool proves to be a timely resource for strategic planning.

As you seek to protect your investments and supply chains while identifying fresh market opportunities, it will pay to absorb how the ND-Global Adaptation Index can assist you.  A quick tour offers three steps (each requiring just a minute) that can generate actionable information about country-level vulnerabilities from climate change and the readiness of countries to absorb and use new investments. By taking the tour, you’ll be able to apply climate savvy to the decisions you make this year.

The Index, free and open source, employs a layered structure, starting with the so-called GAIN ranking

3. The GAIN ranking orders every country by aggregating all measured factors into a single score. It allows a quick look at combined vulnerability and readiness. View the full rankings to find your countries within the index and compare their GAIN ranking with one another.

 

2. The GAIN Matrix shows the evolution of vulnerability and readiness over the past 15 years. It allows deeper insights into country risk and opportunity.  Add your countries to watch their evolution.

3. The GAIN Country Profiles provide you with all of the data and their sources, organized by specific vulnerability and readiness measures such as water availability, food security and education level.

So if you want to use the Index to size up your supply chain, you can examine a cross-section of the data most germane to your supply chain with just a few clicks on the rankings page. Here’s a snapshot for water, http://index.gain.org/ranking/vulnerability/water for example. Simple, fast, insightful.

Check it out, then tell me what you learn about your business through using this tool.

 

A Full-Time Focus (and Idea Exchange) on Corporate Climate Adaptation

A Full-Time Focus (and Idea Exchange) on Corporate Climate Adaptation After five years of focusing peripherally on climate change adaptation, I have thrown myself full time into that passion and pursuit. I’ve joined the Global Adaptation Institute, now known as the Notre Dame Global Adaptation Index (more on that shift in a future post).  I’m on a listening tour, of sorts, during my first few months. And I hope we can make the most of the “exchange” part of this blog’s title.  Please send your feedback as I share my beginner’s-mind thinking on our work.

For those of you new to ND-GAIN (see past blogs about it here and here), the following may bring to life the value of this index tool for assisting you in your decision making:

  1. ND-GAIN is the world’s only index that measures the vulnerability of each nation to climate change and its readiness to adapt, making it an important tool for preparing for disasters, developing infrastructure, and managing ecosystems around the world.
  2. ND-GAIN provides the private sector with the means to gauge adaptation-related opportunities in developing countries. With this ability, the private sector can address the critical needs of vulnerable populations while identifying new markets well-suited to their business model, products or services and investment-risk profiles.
  3. ND-GAIN helps policymakers identify the easiest-to-achieve avenues – the low-hanging fruit – for rapidly improving a country’s investment attractiveness to the private sector as well as to motivate and create incentives to employ  the best public policies.
  4. ND-GAIN helps international organizations rank their resources based on need and effectiveness

Our mission is to enhance the world’s understanding of the importance of adaptation and facilitate private and public investments in communities most susceptible to climate change.

We envision building resilience to climate change and other global forces as a vital component of sustainable development and market growth.

To accomplish this work, we need your input.  I look forward to hearing from you.

Joyce E. Coffee, managing director at ND-Global Adaptation Index

 

Urbanization and climate adaptation – how at risk is your supply chain?

Maplecroft, a global risk and strategic consulting firm in the U.K., noted recently that “resilience to major weather ….events is not improving in some of the world’s most important growth markets, leaving large sections of their populations, essential infrastructure and economies at ‘extreme risk.’” That view aligns with that of Notre Dame Global Adaptation Index.  The open-source GAIN Index underlines that climate change, population growth, urbanization and resource scarcity jeopardize urbanizing nations.

Why should we care?  Because we care about humanity and should make it a priority to help the most vulnerable adapt.  And because supply chains and investors are exposed to greater risk than anticipated as natural disasters exacerbate other political and societal risks.

Maplecroft describes an interesting contrast.  Its Socio-Economic Resilience Index ranks the U.S. at 169th and ‘low risk,’ even though it features in the “20 most at-risk countries for exposure to hurricanes, tsunamis, extra-tropical cyclones, storm surges, flooding, volcanic risk and wildfires.“  The Philippine’s socio-economic resilience to natural disasters, meanwhile, ranks No. 65 and ‘high risk’ Because, while it has registered strong economic growth over the last four years, “better disaster resilience has not materialized,” which keeps its index ranking unchanged.

The WEF Global Risks 2013 Eighth Edition posits that the twin threats of economic upheaval and accelerating climate change will collide during the next decade, delaying adaptation efforts while exposing nations to unpredictable financial loss from disasters. It contends that denser cities are more threatened by higher temperatures, exacerbated drought, storms and heat waves, although rural areas certainly are vulnerable from many of these weather-related events.  I do see a big climate risk derived from the ongoing population shift toward coastal zones.

In the CDP Supply Chain Report 2012-13, “Reducing Risk and Driving Business Value,” 70 percent identify a current or future risk related to climate change.  Seventy-three percent say they feel that climate change presents a physical risk to their operations.  More than half of the supply-chain risks identified due to drought and precipitation extremes already are affecting respondents’ operations or are expected to have an effect within the next five years.  According to the survey, the primary impacts will be a reduction/disruption in production capacity and increased operational costs.

Since 2011, the World Economic Forum has been leading a Supply Chain Risk Initiative to consider safeguards for global supply chains.  Among other priorities, it aims to:

  • More explicitly assess supply chain and transport risks as part of procurement, management and governance processes
  • Develop trusted networks of suppliers, customers, competitors and government focused on risk management
  • Improve network risk visibility, through two-way information-sharing and collaborative development of standardized risk assessment and quantification tools
  • Improve pre- and post-event communication on systemic disruptions and balance security and facilitation to bring a more balanced public discussion

 

Combining those with a Ten Point Checklist for Making Corporations Resilient and Asking the Climate Question: How to Create a Climate Adaptation Plan, would deliver a robust execution plan.

So, as you consider your supply chains, you might want to ponder if food shortages, fragile states, variable water supplies and the vagaries of emerging economies have affected it before, since these geopolitical, societal, environmental and economic factors are likely to be stressed simultaneously by climate change in the future.

Especially since these issues are likely to take priority for limited resources, it is worth considering how climate adaptation can be a collateral benefit of actions aimed primarily at nearer-term economic, geopolitical, societal and environmental factors.  If we don’t, twining these threats with accelerating climate change could collide in the next decade, delaying adaptation efforts while exposing companies to unpredictable financial loss from disasters.

 

North America -In the Eye of the Storm

As the East Coast grapples with the dire aftermath of Hurricane Sandy, a new study by Munich Re reveals that weather-related extreme events have most affected North America in recent decades. Research by the German reinsurer of 30,000 records of natural catastrophes showed such disasters have risen five-fold in North America over the last 30 years. For me, the Munich Re report, “Severe weather in North America," simply becomes the most recent reminder that climate adaptation must be a corporate priority. The report notes that the five-fold increase in weather-related losses in North America the past three decades compares with an increase factor of 4 in Asia, 2.5 in Africa, 2 in Europe and 1.5 in South America.  It also explains:

Anthropogenic climate change is believed to contribute to this trend, though it influences various perils in different ways. Climate change particularly affects formation of heat-waves, droughts, intense precipitation events and, in the long run, most probably also tropical cyclone intensity.

Past exchanges on this blog have been about extreme heat and precipitation, but perhaps the most germane for the moment is our discussion about Corporate Learning from Past Disaster.

It’s too soon to tell if Sandy has had a disproportionate impact on the private sector, but it’s likely that flood damage will net out a major cost to New York City’s businesses, even as Mayor Bloomberg and city officials consider infrastructure improvements to shore up against future storms.

Businesses newly committed to climate adaptation will find resources from peers with their own plans. They also may find good tools from government-backed organizations that discuss what climate adaptation looks like and, importantly, how to create an institutional commitment to climate adaptation.

Two that I especially like are:

“Private Sector Engagement in Adaptation to Climate Change,” a new report from the Organization for Economic Co-operation and Development

Making Cities Resilient:  My City is Getting Ready a guide for the United Nations International Strategy for Disaster Reduction, which I tweaked for a corporate audience here.

It’s likely the storm will prod corporate risk managers and business-continuity planning managers to take stock and begin instituting telecommuting policies, diversifying their supplier chain to other geographies and advising the small businesses upon which they rely about how to develop a resiliency or adaptation plan.

As Hurricane Sandy galvanizes us to examine more closely our climate adaptations, I’m inspired that you, readers, are taking leadership.

Institutional investor vs. individual investor – who is the climate adaptation actor?

Calvert Investments, CERES and Oxfam have just released a splendid guide for companies and investors dealing with disclosure and management of climate impacts entitled “Physical Risks from Climate Change.” I had the pleasure of speaking recently on a panel with Matthew Alsted, Calvert’s vice president of Channel Marketing and Brand Strategy at the LOHAS Forum 2012. He noted that, 50 years ago, individual households owned an estimated two-thirds to three- quarters of publicly traded stocks (U.S.) whereas institutional investors held the balance. Today that ratio has flipped.  This shift is remarkable and reminds me how much we must rely on the good minds at places such as Fidelity and Vanguard (I invest in both mutual fund houses) to encourage corporations to make good climate adaptation decisions.

The guide includes sets of key questions for different sectors that should be required reading for fund managers. They, in particular, should study them since passing along risk decisions to companies isn’t sufficient anymore, in my opinion.  I believe mutual fund investors have an important role in magnifying the opportunities and minimizing the risks of climate change.  As they have with corporate-governance issues, such as favoring the splitting of the chairman and CEO roles, perhaps financial houses could serve as part of the market solution to climate change by expecting responsible climate-risk avoidance.

Why are investors important?  Because from their questioning and probing, they help make climate adaptation material to companies.  The CERES/Calvert/Oxfam report makes clear that information related to long-term climate risks aren’t mandatory disclosures since these long-term risks aren’t deemed material to investors interested in the short term.  Regrettably, as the Colorado fires illustrate, the increase in adverse climate impacts will have a material effect on companies’ assets and operations.

ISC Corporate Services  “Disclosing Climate Risks: How 100 Companies are Responding to New SEC Guidelines” indicates that investors concerned about physical climate risk have actively pursued disclosure from the companies in which they invest and are using tools that track and evaluate companies’ climate-risk disclosures.

That’s encouraging!  I’ll be looking for ways to help more companies do the same.

It’s Time for NATO to Look to the Future Climate

Soon after he became NATO Secretary General in December 2009, Anders Fogh Rasmussen summed up the military alliance’s approach to dealing with the security implications of climate change in three words: “consultation, adaptation, and operation.” Appearing on a panel at a United Nations’ conference on climate change, Rasmussen maintained that the organization has “a real edge” to help tackle any such challenges. Since then, Rasmussen and NATO ministers have shown general disinterest in the subject. His 2011 annual report didn’t mention climate at all. And a two-day NATO science workshop in late April last year on climate change drew mostly academics and little notice. During the upcoming summit in Chicago on May 20-21, NATO heads of state and government will discuss many issues, but climate isn’t expected to be one of them.

What an oversight. Especially since Rasmussen’s predecessor, in a June 2008 speech addressing the future of the Alliance, called on NATO to prepare for a period of global insecurity sparked by climate change. Frankly, it’s time for Rasmussen and the Alliance to take proactive steps toward preparation. That means preparing a new type of “army”—recruits who include climatologists, epidemiologists, geologists, agricultural scientists, foresters, hydrologists, and even cultural historians.

Why? Because climate change is real. Not-so-subtle changes already are afoot on our planet from climate shifts, including extreme natural storms and disasters, higher temperatures, and rising ocean levels. It’s just a matter of time before peoples start squabbling—and worse—over scarce water, food, or other vital resources triggered by mutable climate conditions.

It’s happened before. A largely agrarian period in Europe known as the Little Ice Age (1560-1660) sparked the Thirty Years’ War (1618-1648) among other armed conflicts.  Fought throughout Europe, it was the longest continuous war in modern history, and a recent study, led by geographer David Zhang of the University of Hong Kong, contends that climate change played a major role. Cooler periods in China and the resulting scarcity of resources over the past millennium are also closely linked with a higher frequency of wars, according to Chinese researchers.

Dr. Zhang believes extreme climate events—both hot and cold—could have a disastrous effect on the earth’s ecosystem and may trigger social, economic, and political upheaval—possibly even war. The U.S. National Intelligence Council even evaluated the topic in 2008. Recently, the Mother Nature Network identified seven places where climate change could trigger conflict: Southern Africa, Bangladesh, Western China, Kashmir, the Sahel region of Africa, Central Asia, and Lake Victoria in Africa.  And consider the Maldives, the Indian Ocean archipelago that is disappearing into the water as sea levels rise. Already, Maldives’ president says the government is putting aside income from the annual billion-dollar tourism trade to buy land elsewhere, should the worst happen.

Naysayers, of course, will scorn such talk, especially if they believe climate change is a myth. Still, it was retired U.S. military leaders who asserted in an April 2007 paper on North American climate change that global-warming water problems—either too little or too much—will make poor, unstable parts of the world even more prone to armed conflict, acts of terrorism, and the need for international intervention.

To be sure, the connection between warming and war is extremely complex. But it still might serve NATO well to step up its preparations for when sensitive situations—which may not be far away—arise from changes in climate. NATO offers solutions, and climate change doesn’t have one. It would seem to be a natural shift in NATO priorities as European military conflicts ease.

NATO can play an especially critical role in helping develop methods and tactics to adapt to changing climate conditions and mitigate future risks. The facts bear it out: Adaptive societies face fewer conflicts. So by assuming a much larger role now in preparing for climate change adaptation, NATO could serve to increase social, economic, and environmental resiliency and lessen the risk of conflict.

Are you taking note, Secretary General Rasmussen?

 

Climate and Society - A Look Back at 2011

Happy Lunar New Year!  It’s 4710 on the lunar calendar and, having reflected on the myriad end-of-year/start-of-year lists in my inbox since December began, Jan. 23 seems a good day to reflect on the most thought-provoking events and items concerning corporate climate adaptation in 2011.  Here are my top three – plus a wish for 2012:

  1. Studies show that one-in-five major civil conflicts since 1950 may be linked to climate extremes associated with El Nino. Those big climate disturbances rooted in the tropical Pacific Ocean remind us to prepare for the collateral dis-benefits possible from shifting conditions.
  2. Japan’s multi-layered tragedy – the worst earthquake there on record followed by a meter-high tsunami and concluding with the worst nuclear accident since the 1986 Chernobyl meltdown – prompts us to consider the domino effects of extreme events. It also changes the parameters of corporate extreme-event scenario planning.
  3. Reflecting rising temperatures between 1980 and 2008, farms around the planet produced 3.8 percent less corn and 5.5 percent less wheat than they could have, suggesting that climate change is having an impact faster than we are adapting.

Between 1980 and 2008, climbing global temperatures took millions of tons of wheat off the dinner table, scientists say. Some countries experienced big losses due to weather (red), while in others, wheat production held steady (blue). (Science/AAAS)

My wish for 2012:  That companies boldly embrace the opportunity that climate adaptation sparks – leveraging intellectual property to sell climate-proofed and climate-resistant products.  I’ve mentioned some winners in previous blogs.  Here’s another set:

  • Construction equipment – for clearing debris and rebuilding weather-stricken communities
  • Mold removal – for helping communities cope with basements swamped by overbank flooding or basement backups
  • Power tools – for chopping up felled trees that fall victim to arbor pests that weaken them or intense storms
  • Auxiliary-powered equipment- such as generators and transistor radios for use in power outages during extreme weather

And what are your wishes?

 

Ten Point Checklist for Making Corporations Resilient

The United Nations International Strategy for Disaster Reduction has published an interesting guide:  Making Cities Resilient:  My City is Getting Ready. Its ten-point checklist for making cities resilient begs for a companion list.  I’ve added my two cents by developing a “Ten Point Checklist for Making Corporations Resilient.” http://www.unisdr.org/english/campaigns/campaign2010-2015/documents/campaign-kit.pdf

Ten-Point Checklist
For Making Cities Resilient (UNISDR) For Making Corporations Resilient
1 Put in place organization and coordination to understand and reduce disaster risk, based on participation of citizen groups and civil society. Build local alliances. Ensure that all departments understand their role regarding disaster risk reduction and preparedness. Include climate adaptation in a member of the C-suite’s job description. Establish a cross-function climate adaptation working group and connections with local and regional governments in key geographies in your enterprise – especially operations and supply chain.  Consider collaborating with key members of your supply chain, industry peers and neighboring businesses on climate adaptation planning and execution. Ensure that all departments understand their role regarding disaster risk reduction and preparedness.
2 Assign a budget for disaster risk reduction and provide incentives for homeowners, low-income families, communities, businesses and the public sector to invest inreducing the risks they face. Include budget lines for both proactive adaptation measures and recoup from extreme event.  Include climate adaptation in performance reviews for the C-suite, lieutenants and managers.
3 Maintain up-to-date data on hazards and vulnerabilities; prepare risk assessments; and use these as the basis for urban development plans and decisions. Ensure that this information and the plans for your city’s resilience are readily available to the public and fully discussed with them. Include climate adaptation in your emergency preparedness and continuity plans initially, with annual updates.  Ensure that this information and the plans for your corporation’s resilience are readily available to your leadership team and fully discussed with them.
4 Invest in and maintain critical infrastructure that reduces risk, such as flooddrainage, adjusted where needed to cope with climate change. Invest in and maintain critical infrastructure that reduces risk, such as flood drainage, snow removal, vector-borne disease prevention, and heat mitigation for workers and machinery, adjusted where needed to cope with climate change. Consider supply chain and building decisions with these risks in mind.
5 Assess the safety of all schools and health facilities and upgrade these asnecessary. Assess the safety of all facilities, especially those in locations vulnerable to extreme weather events (coastal, arid) and upgrade or move.
6 Apply and enforce realistic, risk-compliant building regulations and land-use planning principles. Identify safe land for low-income citizens and develop upgrading of informal settlements, wherever feasible. Engage with local governments to ensure that climate adaptation regulations protect residents and economic growth. Identify your most vulnerable employees (age, income, tasks, geography) and plan especially for their safety.
7 Ensure education programs and training on disaster risk reduction are in place in schools and local communities. Ensure education programs and training on disaster risk reduction are in place throughout your enterprise, not just for disaster preparedness, but also for heat exhaustion, vector-borne disease, and the like.
8 Protect ecosystems and natural buffers to mitigate floods, storm surges and other hazards to which your city may be vulnerable. Adapt to climate change by building on effective risk-reduction practices. Protect and enhance ecosystems and natural buffers in and near your holdings to mitigate floods, storm surges, extreme heat and other hazards.
9 Install early warning systems and emergency management capacities in your city and hold regular public preparedness drills. Install early-warning systems and emergency-management capacities in your enterprise and hold regular preparedness drills.
10 After any disaster, ensure that the needs of survivors are placed at the center of reconstruction with support from them and their community organizations to design and help implement responses, including rebuilding homes and livelihoods. After any disaster, ensure the needs of survivors are placed at the center of reconstruction.  See http://climateadaptationexchange.com/crisis-communications-are-you-ready-for-a-climate-related-crisis-in-your-business/ for communications guidelines.

 

Ports: Staying Competitive Through Climate Adaptation

Climate change will impact longstanding infrastructure, such as our ports. And since the vast majority of non-service-sector corporations rely on ports for some part of their supply chain, I encourage you to read Climate Risk and Business Ports, a framework for both evaluating and mitigating the risks of climate change on port operations. Its summary can help us find ways to evaluate risk. The report notes that climate change is likely to impact:

 

• Demand, trade levels and patterns affecting total trade through the port

• Navigation and berthing

• Goods handling

• Vehicle movements inside the port

• Goods storage

• Inland transport beyond the port

• Environmental performance

• Social performance

• Insurance

Suggested solutions include raising causeway road heights, paving unpaved surfaces, increasing bridge clearances, increasing culvert diameters, reconsidering road underpasses, improving drainage, managing refrigeration’s energy intensity, developing trade in climate-resilient commodities, protecting storage areas from flooding and adding additional insurance.

Generally, building to a higher standard is now a viable climate adaptation for long-life infrastructure. Ports that begin now to increase the reliability of their infrastructure can improve their economic performance and attractiveness to investors and users.

A UN Resource for the Private Sector:

If you haven’t yet checked it out, spend some time online with the United Nations Framework Convention on Climate Change’s Adaptation Private Sector Initiative. Most of the material deals with agriculture in emerging economies, and at least a dozen situations posted there deserve a look. The website comprises a treasure trove of case studies from a wide range of regions and sectors. Of course, many relate to agriculture, a UN focus. But you will find other items of interest as well.  I particularly enjoyed:

Tomorrow’s railway and climate adaptation

Hurricane Katrina: A climate wake-up call

Adaptation and the legal sector

 

If any of them inspire you to write a guest blog, let me know!

Can Insurers Drive Corporate Climate Adaptation?

Can Insurers Drive Corporate Climate Adaptation? It’s been a tough year for insurance companies: blizzards in the Midwest, fires in the Southwest, severe tornados in the Southeast, a damaging Oklahoma hailstorm and flooding along hundreds of rivers.

And it makes me ask: Can the insurance industry drive a change in corporate behavior toward climate adaptation?  Judging from the September 2011 report, “Climate Risk, Disclosure by Insurers,” by the non-profit Ceres organization, the answer appears to be not yet.  The report notes that information from a limited number of insurers responding to a National Association of Insurance Commissioners survey found that the vast majority (88%) don’t even have a climate policy, let alone specific climate change–management investment policies in place.

But a changing climate demands that insurers price physical risk differently and manage for those new liabilities that threaten their investment portfolios.  The industry is focusing much of its attention on a narrow set of coastal risks, but as 2011 has demonstrated, extreme weather in the non-coastal U.S. is becoming costlier, too.

So what might it require for the insurance industry to change?  Since every catastrophe leaves lessons learned behind, we could be moving toward greater awareness sparking changes in the insurance market.  With each new extreme event, the disaster scenarios on which the industry models its risk become more realistic. And as a recent Bloomberg article makes clear, those models need to reflect a lot more than just wind, hail and water damage. They also should consider how communities tolerate risk and whether they invite it by allowing buildings to be sited in vulnerable locations.

That’s a concept that Swiss Re, which I consider a climate-adaptation leader, uses to manage its portfolio.  Swiss Re now speaks about climate risk – not climate change – to reflect its understanding that when natural disaster destroys the built environment, it’s not nature’s fault. Rather, it’s ours for building in the wrong place, the wrong way.  It maintains that the insurance industry should focus on “loss mitigation,” encouraging potential customers to keep their property from being destroyed in the first place.  (and by the way, Swiss Re is also capitalizing on climate adaptation as an opportunity: They've developed tailored insurance products, including weather risk insurance, for rural poor in developing countries).

Let’s hope that its influence trickles down to the rest of the market.