Newsletter: How will we pay for climate adaptation?

 

 

Extreme Storms Highlight Need for Disaster Preparation and Recovery Financing

The need for climate resilience financing could not be more visible than it has been in recent weeks. While Hurricane Harvey has weakened after dumping unprecedented amounts of rain on southeast Texas, residents in Houston and along the Gulf Coast are looking at a long recovery from widespread flooding. Around the world, monsoons in Bangladesh, India, and Nepal have affected over 41 million people, killing at least 1,000. These examples highlight the rising costs of intensifying extreme weather events.
Yet, funding and policies to aid preparation for and recovery from disasters are not keeping up. At the U.S. federal level, the National Flood Insurance Program is in debt (in part from payouts following Hurricane Katrina and Superstorm Sandy), and is facing a deadline for reauthorization. As it stands, the Program’s current access to funds is unlikely to be enough to cover the impending claims from Harvey’s damage. One proposal for restructuring the program would make repeatedly-flooded homes ineligible for federal coverage, even though 1.3 million households in the U.S have made multiple claims since 1998, and Houston specifically has seen a 500-year flood in each of the last three years. The storms have created a new urgency for lawmakers to address how cities are rebuilt for climate resilience.

DC Water’s Environmental Impact Bond to Finance Green Infrastructure

With calls from the federal government for states and cities to take on a greater portion of disaster relief costs, Washington, DC’s Water and Sewer Authority (DC Water) issued the country’s first Environmental Impact Bond in September 2016 to construct green infrastructure to manage stormwater runoff and improve water quality. Under the $25 million bond, payments are tied to performance: if the green infrastructure reduces stormwater runoff by more than 41.3% during its first 12 months, DC Water will pay investors Goldman Sachs and Calvert Foundation a one-time additional payment of $3.3 million. However, if runoff reductions are less than 18.6%, investors will make a one-time Risk Share Payment of $3.3 million. Read the US Environmental Protection Agency’s summary of DC Water’s Environmental Impact Bond.

San Francisco’s Innovative Tax for Flood Protection and Wetlands Restoration

In the San Francisco Bay Area, voters approved the San Francisco Bay Clean Water, Pollution Prevents, and Habitat Restoration Measure (Measure AA) in June 2016, levying a $12 parcel tax to support programs protecting the wetlands and shoreline around the Bay. This is the first parcel tax in California history to apply throughout a multi-county region, and serves as a useful example of how such a tax can be used to address sea level rise issues through nature-based solutions. Measure AA will raise approximately $500 million over 20 years for the San Francisco Bay Restoration Authority to grant in support of projects that will implement wetlands restoration efforts that provide multiple benefits including flood protection. Potential projects for the Restoration Authority to fund include the creation of sea level rise resilient tidal marshes, shorelines, and sea walls around the Bay. The first round of grants will be announced in early 2018, with the hope that these funds can be leveraged for additional state and federal funding. Read more about the San Francisco Bay Restoration Authority.

Promoting Investments in Adaptation Through Technology Transfer

To demonstrate to market and financial institutions the viability of climate resilience investments in Tajikistan, the European Bank for Reconstruction and Development has partnered with the Climate Investment Funds’ Pilot Program for Climate Resilience to implement the Tajikistan Climate Resilience Financing Facility (CLIMADAPT). CLIMADAPT offers loans through local partner financial institutions to businesses, farmers and households to develop and use technologies to improve water and energy efficiency and land management practices. Projects under CLIMADAPT promote building of climate-resilient supply chains, and include modernization of technologies designed to address Tajikistan’s main climate change-related challenges of water and energy shortage, and increased soil erosion. Learn more about CLIMADAPT.

The Role of Blended Finance in Promoting Climate Resilience

 

At the PROADAPT Symposium in April 2017, Emilie Mazzacurati moderated the panel “The Role of Blended Finance in Promoting Climate Resilience,” focused on methods to create new funding mechanisms to leverage public and philanthropic funding to raise private capital for environmentally-beneficial projects. Virginie Fayolle from Acclimatise kicked off the discussion by highlighting how blended finance can be an important way to direct money towards specific projects, locations, and sectors that might not otherwise see private sector interest.Stephen Morel from OPIC noted, however, that blended finance brings certain challenges, thus requiring mechanisms to support private investor engagement in three broad categories: technical assistance, risk underwriting, and market incentives. Stacy Swann from Climate Finance Advisors drew attention to the facts that the more climate resilient a project is the more finance opportunities it is likely to present and that a project that does not take climate risks into consideration probably is not bankable.

 

Joan Larrea from Convergence closed by speaking about externalities and how transactions can have a public good element as well as a financial return. One example was a grant awarded to The Nature Conservancy to help the government of Seychelles, which was extremely indebted but also had a strong interest in protecting its coral reefs and fisheries. By helping to reshape the government’s debt profile and getting returns for their investors, they were also able to extract commitments from the Seychelles to implement certain activities that over time would protect their reefs and designate new protected fishery zones.

Watch the full panel video

Meet The Team: Daniela Vargas Mallard

Yvonne BurgessFour Twenty Seven is proud to welcome Daniela Vargas Mallard as a Senior Analyst. Daniela leverages her dual background in business strategy and environmental sustainability to collaborate in the development of Four Twenty Seven’s products integrating financial, climate and socioeconomic data for investors and corporate users. Her work supports ongoing research, product development, and business strategy, as well as other special projects. Prior to joining Four Twenty Seven, Daniela spent two years as a Business Analyst at McKinsey & Company, where she worked in projects across multiple sectors, ranging from public health to oil and gas, and across geographies, from South Africa to Brazil, with a particular focus on corporate and government strategy.

Learn more about Daniela’s experience.

Join the Team!

Four Twenty Seven is hiring! We are looking for Business Data Analysts and Business Development Managers for Europe and the US: see the position descriptions.

Upcoming Events

Join the Four Twenty Seven team in the field at these upcoming events:

  • September 11-13: EcoAdapt’s Resilience Ecosystem Workshop (by invitation only), Silver Spring, MD: Nik Steinberg, Director of Analytics, will present on Four Twenty Seven’s work on climate and health.
  • September 12-13: AgriFin 2017 Forum, London, United Kingdom: Yoon Kim, Director of Advisory Services,will speak about integrating climate risk into financial decisions at the Financing Low-Carbon Resilience Agriculture global forum hosted by the World Bank.
  • September 18-24: Climate Week NYC 2017, New York, NY: Four Twenty Seven CEO Emilie Mazzacurati will participate to the Global Adaptation and Resilience Investors Working Group (9/18) and the Sustainable Investment Forum (9/19).
  • September 25-27: PRI in Person 2017, Berlin, Germany: Meet with Emilie Mazzacurati to discuss the integration of climate risk in financial markets.
  • September 27-28: Deutsche Asset Management Client Conference (by invitation only), Berlin, Germany: Emilie Mazzacurati will present on Four Twenty Seven’s groundbreaking work on modeling climate risk for public equities.
  • October 10-13: SOCAP 2017, San Francisco, California: Meet with Four Twenty Seven team members to discuss impact investments and adaptation finance.
  • November 7-17: COP23, Bonn, Germany: Join members of the Four Twenty Seven team at side events at the UNFCCC’s 23rd Conference of Parties.

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