While it is a certainty that climate change is already affecting society, the exact timeframes and potential impacts are far from straightforward to determine. Further, the most efficient and effective actions to reduce emissions and adapt to climate impacts require complex analysis and planning, often extending beyond the capacity of government entities. A new initiative, the Science for Climate Action Network (SCAN), was launched last month to tackle these challenges head-on. And this actionable climate change data and analysis will provide critical inputs to project developers and investors as they assess the capital preservation and appreciation aspects of potential projects and adjust their investment strategies to better manage risks.
SCAN’s Report Diagnoses a Problem and Makes Recommendations
SCAN, which is funded by the New York State Energy Research and Development Authority (NYSERDA), the American Meteorological Society (AMS), and the Earth Institute at Columbia University, convenes scientists, climate experts, and state and local officials across the United States with the aim to integrate climate science within governmental decision making. Its inaugural report “Evaluating Knowledge to Support Climate Action: A Framework for Sustained Assessment” was initiated by the (now disbanded) Federal Advisory Committee to provide recommendations on how to conduct climate assessment reports in “a sustained, user-oriented process instead of a one-off release.”
The main findings of the report are that practitioners (defined in the report chiefly as individuals in state, local, and tribal governments; non-governmental and civil society organizations; research institutions; and private sector associations) need new types of scientific support to “evaluate climate information in the context in which it is used,” enabling them to take climate adaptation and mitigation actions. The report’s recommendations include creating a new civil society-based ‘Climate Assessment Consortium’, focusing on applied problems in the field, building new partnerships, and developing knowledge and best practices for project implementation.
Why Actionable Climate Information is Needed: Investing to Prevent Maladaptation
The U.S. lacks a comprehensive national climate information system, making it difficult for decision-makers to find definitive information on the climactic impacts affecting their region and operations. For many, even when they can find such information, they may not fully understand how to utilize the information and significantly put it into practice. This lack of common tools, terminology, information and methods not only hampers sound decision-making at the project level, but complicates the risk assessment, due diligence, and valuation processes of investors at the portfolio and system levels.
As a result, maladaptation, defined by the UNFCCC as “changes in natural or human systems that inadvertently increase vulnerability to climatic stimuli,” can become a huge problem. Take Miami, Florida, as an example. While the city has made great strides in raising money for various projects to improve resiliency against rising sea levels, pumps and elevated roads can only do so much; maintaining a dry Miami will require increasingly large-scale and comprehensive measures as sea levels rise further. The absence of these measures may mean that current development is increasing rather than decreasing climate vulnerability. For example, the city may need to revamp building codes and construction practices, as well as resolve the underlying problem of using outdated floodplain maps (that studies show underrate the true risk by two to three times) for zoning and development. Raising and prioritizing scarce public resources to address this and other kinds of adaptation challenges also looms large. Studies have shown that by 2030, over 60,000 homes will experience chronic flooding in Florida; how many taxpayer dollars is it worth to keep those homes flood-free? (For now, construction in Miami is still booming.) As insurers begin to price in these coastal flood risks, homeowners, municipalities, commercial enterprises, and real estate investors may soon face a painful reckoning.
Turning Climate Information into Risk Management and Financial Decisions
Although there is a wealth of climate information available, little of it is presented in usable ways. Coupled with the inadequate understanding of climate science, decision-makers are often unable to incorporate climate risks into their decisions. As with many things, information is power; public and private institutions first need access to comprehensive, high quality, and granular climate information to determine the impacts of climate change. Currently, the sole climate assessment in the United States is the National Climate Assessment, published periodically every few years. It is the most authoritative report on climate impacts within the U.S., and while it does include regional information, it lacks the granularity required for local and state governments to take action – only certain cities or states have the resources to conduct their own climate risk assessments. Furthermore, these climate assessments rarely provide actionable information resulting in investors having uncertainty as to how these climate risks translate to financial impacts, and policymakers and city planners lacking clear data for the potential infrastructure value-at-risk.
Understanding risks is only half the battle, with the other half being the response. A second acute need of local authorities, therefore, is a means to translate climate information into actionable steps, which in turn has a planning component and a financing component. Yes, we can lower the risks of flooding by building levees, but how high will the levees need to be to last 10 years? 30 years? Do we need to relocate facilities entirely? And what is the incremental cost and reduced value-at-risk associated with various adaptation investments? How do investors and project developers assess the risk/return profile of the various investments? Which will best preserve a municipal jurisdiction’s credit rating?
SCAN Seeks to Provide Solutions to Practitioners that Investors Need Too
How do we address these issues? SCAN is working with a wide variety of experts and stakeholders to “advance a sustained [climate] assessment and increase the application of climate science and knowledge by practitioners.” Through such a sustained assessment, SCAN will be able to provide more detailed information on cross-sectoral interactions for climate-related problems, support project implementation with tested methodology, and the proper application and use cases for knowledge and decision-support tools. By including in the discussion financial actors who are involved in municipal finance of infrastructure and other assets, SCAN can help to enable vital investments in resilience and adaptation.
As discussed in the SCAN paper, a sustained national climate assessment is a good first step, but a greater number and more detailed climate information systems, analytical tools, and robust management and decision-making and financing frameworks are still needed. Many emerging entities are stepping up to provide climate risk data and analytics solutions, including a range of private firms: Coastal Risk Consulting, NDGain, Carbone 4, Four Twenty Seven, Acclimatise, Jupiter Intelligence, The Climate Service, Ortec Finance, and Carbon Delta, among others. Further, it is imperative that we build capacity within our public and private institutions to address and manage climate risk, particularly with regards to financing and asset management. Integrating climate impacts into standard risk management, operations, and capital expenditures is a key precondition to improving resiliency. We will be discussing these solutions, which involve management, governance, risk management, and other practice change in planning and finance, in more depth in future posts.