By Devyani Parameshwar, Intellcap
While mitigating the future rise in global temperature has received much attention worldwide, support to help those vulnerable adapt to the inevitable impacts of rising temperature has been limited. The estimated annual cost of adaptation is USD 100 bn, and bilateral and multilateral funding pledges form just a fraction of this amount. Given that donor and government funding is neither sufficient nor sustainable, there is an urgent need to engage private capital and enterprise in climate change adaptation.
Asian cities are expected to account for more than 60% of global population growth in the next 30 years. The bulk of this growth is expected to come from tier two and three cities and towns that are least equipped with the infrastructure to cope with increased population pressure. As a result, a large number of poor people in urban areas will be highly vulnerable to the changing climate; many already are. Efforts to build resilient cities are thus critical now, and through the development and provision of resilient and inclusive products and services the private sector can participate.
In order to explore business models with the potential to build the resilience of the urban poor, Intellecap, an inclusive business advisory firm, is partnering with the Rockefeller Foundation and the Asian Cities Climate Change Resilience Network (ACCCRN). The initial report based on a study of vulnerabilities and opportunities in four Asian cities identified nine key sectors with clear business opportunities in the area of climate adaptation and resilience: micro-insurance, affordable healthcare, waste management and sanitation, water management, affordable housing, off-grid renewable energy, microfinance, information and communication technology and livelihood promotion.
Other key findings include:
- Resilience-building businesses can provide products and services that improve infrastructure, access to scarce resources and basic services such as healthcare and finance, make available information that aids in disaster preparedness and contribute to livelihood promotion to enhance income or improve cash flow predictability.
- As climate-linked vulnerabilities are largely localized and individual solutions typically address only one or two vulnerabilities, business responses will require specific and local innovation. Low awareness of both issues and opportunities in building urban resilience has so far limited private sector involvement. Also, urban impacts of climate change are difficult to isolate and understand as they are entangled with poverty and urbanization.
- To catalyze business activity, there is a need to create champions or nodal bodies to coordinate activities across stakeholders and market makers to support market development, bring stakeholders together and foster partnerships. Businesses will also require building additional capacities to operate successfully.
- Although private capital already invests in and lends to viable businesses across the nine sectors identified, the challenge is to stimulate enterprise activity in more vulnerable geographies and models that engage with the base of the pyramid population.
Developing the right solutions is thus challenging, and while opportunities to monetize these exist, a supportive eco-system is required to catalyze private sector activity in adaptation and resilience building. Patient capital to support innovation and proof of concept is essential (grants, guarantee funds, concessional debt), and more adaptation funding needs to be earmarked for use as debt or equity by businesses. In addition, supportive policy by way of tax breaks for serving the urban poor, subsidized access to utilities, reduced red tape in acquiring permits for land use and setting up operations can go a long way in encouraging private sector market entry.
In an effort to further the dialogue around private sector roles and opportunities, the Rockefeller Foundation, ACCCRN and Intellecap organized a workshop for business leaders, impact investors and experts on June 27, 2011 in New York. The group discussed ongoing private sector initiatives and identified future actions that could engage the private sector further on this topic. For more information on the event including presentations and video clips, visit the Rockefeller Foundation website.