The Economic Imperative of Funding Climate Adaptation in the Global South
The article highlights the importance of funding climate adaptation in the Global South, emphasizing the risk to economies in the Global North. As cities in the Global South face increasing climate-related challenges, the interconnected global system means that these risks will eventually impact trade, supply chains, and productivity in the Global North. Enhanced financial support and innovative funding models are needed to address these challenges and protect investments.
Cities in the Global South, including New Delhi, Manila, and Lagos, face significant climate risks, yet their challenges do not often resonate in the Global North. As extreme weather events such as hurricanes and floods strike closer to home in places like Toronto and Florida, the urgency of adapting to climate change in the Global South may be overlooked. However, neglecting climate adaptation in the Global South poses substantial risks to Global North economies given their interdependence.
According to a risk assessment by Verisk Maplecroft, 99 out of the 100 cities most threatened by climate change are located in Asia. Rising temperatures and increased occurrences of storms, droughts, and floods are degrading economic growth and living standards across Asia and Africa. The 2021 UN Environment Program Climate Change report reported a 20% rise in climate-related disasters in the Global South over the previous decade, further underlining the urgency for action.
The Global North should recognize that climate-related disruptions in the Global South will have economic repercussions for its own cities and smaller municipalities. Industries that rely heavily on commodities sourced from the Global South, such as agriculture and manufacturing, could face increased costs and supply challenges affecting their markets. Thus, it is essential to consider the vulnerability of these regions as part of a comprehensive global strategy for climate resilience.
The importance of Foreign Direct Investment (FDI) to the Global South cannot be overstated. The UNCTAD World Investment Report 2024 highlighted that developing nations in these regions captured approximately $866 billion in FDI, equating to 60% of global investments. Notably, investments from firms like Apple demonstrate the financial stakes involved, as they host substantial production capabilities in these areas seeking long-term economic viability.
Supply chains supplying essential goods to the Global North are at risk due to climate change. Major commodities, including coffee and other agricultural products, primarily originate in the Global South. The looming threats to these industries could destabilize a $40 billion coffee market while contributing to heightened production disruptions in an over $5.6 trillion export market from these regions.
Declining worker productivity due to climatic stresses represents another severe consequence. The International Labour Organization estimates that productivity could drop by 2.2%, equating to lost full-time jobs and billions in GDP – potentially matching the annual GDP of major economies such as Canada. Such losses will impact consumers in the Global North and ultimately endanger returns on investments made in the Global South.
To address these looming threats, significant funding for climate adaptation in the Global South is necessary. Despite the evident need, only $63 billion has been allocated towards adaptation efforts, far below the estimated annual requirement of $212 billion by 2030. The participation of private investors is critical in filling this financing gap, leveraging their financial capabilities alongside public spending initiatives to foster impactful climate adaptation strategies.
Private sector funds must be better accommodated to ensure that investments in climate adaptation yield both social and financial returns, allowing stakeholders to justify their involvement. Innovative funding models akin to Property Assessed Clean Energy (PACE) financing could unlock substantial resources to support climate adaptation while benefiting both economies in the Global North and the Global South. To move forward, establishing clearer value propositions for private investments will be essential for future resilience against climate change impacts.
The article discusses the imperative for climate adaptation funding in the Global South and its implications for the economies of the Global North. As regions in the Global South encounter extreme climate risks, this represents not only a humanitarian concern but also a critical economic issue for the Global North due to interconnected supply chains and significant foreign investments. Climate-induced disruptions threaten to undermine economic stability and productivity across the global market, necessitating proactive funding solutions from both private sectors and governments.
In conclusion, the consequences of failing to invest in climate adaptation in the Global South extend beyond mere humanitarian considerations; they represent a looming economic threat to the Global North. With substantial FDI at risk and a growing awareness of dependency on goods produced in vulnerable regions, it is vital for stakeholders in the Global North to prioritize climate adaptation funding in order to safeguard both their economic interests and the livelihoods of individuals in the Global South.
Original Source: www.orfonline.org
