Mobilizing the Private Sector to Finance Adaptation

rice-fields-sumatra-indonesia[1]

Today at COP 22 the Japanese delegation hosted a side event at their pavilion about mobilizing the private sector to finance climate change adaptation. The panelists discussed ways to involve the private sector from regional, business, and public policy perspectives. The panelist from Bangladesh, Dr. Saleemul Huq, then present specific examples of how the private sector has helped mobilize adaptation finance in his country. The World Bank estimates that $70-100 billion will be need annually from 2010-2100 to adapt to the impacts of climate change. It also estimates that the private sector could mobilize $140-240 billion for adaptive measures annually during the same period. However, very few companies are pursuing these adaptive measures, due in large part to the lack of profitability. To mobilize the private sector, governments and international organizations must incentivize investments and enhance monitoring and reporting efforts to ensure sufficient return on investments. The private sector will only finance adaptation measures that are also good for their bottom line.

Dr. Saleemul Huq, director of the International Center for Climate Change and Development at Independent University and lead author of chapters in the IPCC’s Assessment Reports provided an example of a good adaptation measure and a bad, or maladaptation, measure. Both projects involved mobilizing private sector finance to adapt to climate change . But the latter created more problems than it solved. In the good example, a private agricultural business developed and sold salt-water resistant rice to combat the inundation of rice fields by salt water. The company turned a profit and made a vulnerable population more resilient. In the maladaptation example, a private aquaculture company bought up inundated rice fields, turned them into shrimping operations, and then leased the operations to the farmers. These shrimping operations are good for the companies, who turn massive profits, and the government, which taxes the shrimp exports. While this practice is aimed at adapting to an increasingly saline ecosystem, it is highly exploitative of the rice farmers, most of whom lost their jobs after selling their farms, and drastically altered the landscape by making it entirely salt-water based. The company turned a profit but the social and environmental impacts made a vulnerable population more vulnerable. These examples underscore the opportunities and challenges associated with mobilizing private sector finance to adapt to climate change. We have to remember that in board rooms and commercial banks, money talks and altruism takes the backseat.