Financing Projects that Address the Physical Risks from Climate Change

I asked the Intentional Endowment Forum, run by a former boss of mine Dr. Tony Cortese, if they were aware of adaptation finance, that is, finance that addresses the physical risks of climate change.

I thought the response from Dr. Maximilian Horster a Partner at south pole group focused on the financial industry was particularly succinct, recapping what those of us in the adaptation finance investigation space are discovering. 

He writes:

“Currently, the investor focus is indeed mostly on transition risk: legislation, regulation, behavioral change, carbon pricing etc and the subsequent effects of asset stranding potential, energy transition and the like. Keep in mind that also here, we only see the beginning of actual stress tests among a – still small – group of investors and for only a few asset classes. Although the uptake is increasing rapidly, we are far from having established consistent standards, benchmarks or best practices.

For physical risks, we are even further away from an investor understanding. Often, data availability on physical climate risk is cited as the big hurdle but that is only half the story: Data on the likelihood of climate related extreme weather events (flooding, droughts etc) exist for most geographies and is used by insurance companies to price liabilities. However, it is not yet utilized for asset management, not even by that very same insurance firms that produce this data.  

What is missing is a mapping of these physical risks to the actual assets (such as production facilities), but also supply chain locations and end markets. We are developing this right now, but interestingly, investor interest is much less than one would think. Main reason is that - according to climate science - the full swing of physical risks are still 15-20 years away and therefore beyond most investors’ investment horizon (“tragedy of the horizons”).

Because of this, we see very few investments into climate change adaptation by mainstream investors. The exceptions are of course the multi-lateral funds under the UNFCCC and other outfits that have a strong focus on climate change adaptation, mainly for rural population and agriculture in developing countries since some time:http://www.climatefundsupdate.org/themes/adaptation.”

Financing Adaptation: The White House and The Global Adaptation & Resilience Work Group Exchange Ideas

At a White House roundtable on resilience investment with the Global Adaptation and Resilience work group and the Council on Environmental Quality last month, experts from government and the financial sector debated what the financial products are that will help people plan for the long term.

An optimistic bunch, there was general consensus that incentives are lining up – climate adaptation is smart business.

But do finance and policy advisors have the information they need to make decisions in the long-term interests of their shareholders and the public?

Three key questions emerged from the conversation, along with several sub issues: 

First, are there maps of climate risk to analyze, adaptation tools that resolve climate risk, and a known set of adaptation projects to use as best practice and to seed the resilience investment pipeline? Several insurance leaders noted that there are existing vectors of risk that the industry uses that are helpful for pricing climate risk. 

At the same time, part of making the environment for investment stable is having a clear awareness of the measure of progress the investment will cause. An initial step is to “weatherize data” showing what the impact of weather is on parts of the economy.  With these short term impacts explained, then it is important to build measurement models to extrapolate into the future.  The customization of predictive risk data is the next frontier in adaptation investments. 

These tools will be most useful when delivered along with narratives about best practice.  Several finance-industry adaptation project examples were shared, including a Nature Conservancy project that is allowing the Government of the Seychelles to swap some of its debt for climate adaptation projects and a Swiss Re project offering small holder crop insurance against drought and floods in Ethiopia.

Second, should the investment industry be focused just on increasing resilient investments – that is investments focused on adaptation projects – or should they also care about increasing the resilience of projects, that is the multi-trillion dollars of investments funded globally?  The focus of these investment leaders was generally on the latter.

Especially since insurance experts use a back-of-the-envelope calculation that basic productivity for a business needs to be restored within 2 weeks (as long as a typical business can stay afloat with no revenue) and full productivity in three months (which is tied to a timeline of when insurance pays for unrecoverable losses), it seems the resilience of all projects is imperative for the markets.  Understanding the local context of the physical changes caused by climate change for market sectors is complex, and private sector leaders are focused not just on the physical risks from climate changes, but also the social risks to their workforce and markets. These human factors are often related not just to the company, but also the communities within which they do business.  Thus, resilience is today’s problem of the commons. Of course, another major insurance issue is that only about 30% of extreme risk loss is insured around the world. 

Third, what is the roles for the US Government in increasing the finance industry’s engagement with resilience?  While it was acknowledged that resilience is generally a shareholder issue, (vs. national security which is a government issue), and the private sector owns and operate a significant majority of infrastructure in the world, it was agreed there is a significant role for government. For instance, participants recommended that climate science risk be baked into codes and standards to motivate the private sector, since the general rule of thumb is that one dollar spent in risk mitigation saves four dollars in the future on recovery.

But the major issue is that the US government is the insurer of last resort, based on the Stafford Act, allowing developers to operate with the knowledge that if you invest now without paying any premium for future risk mitigation, the federal government (in the form of FEMA, the Federal Emergency Management Agency) will ultimately pay for damages incurred that are beyond the capacity of the private insurance market. Repealing the Stafford Act would transform the industry’s viewpoint on climate risk. 

Another recommendation for the government was to promulgate and enforce disclosure requirements for both acute and chronic types of risks.  Tax incentives or rebates could help ensure compliance with a Securities and Exchange Commission asset level climate risk disclosure.  Ultimately, the group agreed that the private sector takes on risks that it wants to take on, designing, building and repairing – all crucial to resilience.  But the private sector is not going to choose to invest in  what they cannot control - regulatory change. 

This is a crucial role for the US Government. Finance leaders will always innovate to get the most out of the market, and policy leaders can help make sure these decisions are in the long-term interests of the public with regulatory innovation.

Earth Hour Sheds Light on 5 Grim Climate Facts

This post originally appeared on http://www.crs.org/stories/earth-hour-sheds-light-5-grim-climate-facts Climate change affects lives each day around the globe. From summer heat waves to drastic floods, it touches the wealthiest individuals living in modern cities and the poorest in developing countries. The effects of climate change can reach far beyond the expected ecosystems, economic sectors and populations.

CRS and our partner in El Salvador are helping farmers like Candido Hernandez Orellana build back harvests ruined by drought. Photo by Oscar Leiva/Silverlight for CRS

On March 19, from 8:30 to 9:30 p.m. local time, cities, landmarks and businesses around the world will turn off their lights for one hour. The goal of this Earth Hour is to highlight climate change dangers.

Climate change is happening now, and predictions for the future are grim.

Below are five of the most shocking climate statistics that you may have been in the dark about:

1. Events influenced by climate change took 12,994 lives in 2015.

This startlingly high number, provided by the International Disaster Database at the Center for Research on the Epidemiology of Disasters, is up from 8,056 in 2014, showing just how dangerous climate change is becoming. There is a pressing need to adapt to climate change in order to protect lives threatened by droughts, fires, heat waves, storms, floods and landslides.

1. The total monetary cost of events influenced by climate change in 2015 was $74.6 billion.

This data from the International Disaster Database highlights the huge economic impact. Besides the social, physical, and environmental needs, among many others, to mitigate and adapt to minimize future damage, there is an increasing economic need as well.

1. 90% of the recorded natural disasters from 1995 to 2015 were influenced by climate and weather.

According to the U.N. Office for Disaster Risk Reduction, the United States had the highest number of disasters, followed by China, India, the Philippines and Indonesia. Resilience and disaster planning are needed to reduce risks and mitigate impacts of floods, heat waves, droughts and other potentially catastrophic climate-related events.

1. With no action, climate change costs and risks will accumulate to an equivalent of an annual loss of at least 5% of global GDP.

A report by Jonathan M. Harris, Brian Roach and Anne-Marie Codur at Tufts University, “The Economics of Global Climate Change,” predicts losses of land area, species and forests; and water supply disruption, increased human health dangers and drought. These changes—affecting biodiversity, agricultural production and human survival—will likely be irreversible. Other, less predictable, effects may include changing weather patterns, rapid melting of major ice sheets and glaciers, and an increasing rate of global warming.

1. The total annual cost of climate change on human health will total about $2 to $4 billion by 2030.

This estimate from the World Health Organization accounts for the detrimental effects of climate change on vital basic resources, such as clean air, safe water, adequate nutrition and protective shelter. WHO also estimates 250,000 more deaths will occur annually between 2030 and 2050 because of climate change.

These numbers underscore the great sense of urgency to act against climate change to protect innocent lives.

Author: Joyce Coffee is managing director of Notre Dame Global Adaptation Index. 

Patricia Holly, a University of Notre Dame student, contributed to this article.

Increasing Water Security: Enlivening Communities in Africa and Asia

More frequent and severe droughts triggered by climate change place significant stress on the regions of the globe already most arid. That’s why South Pole Carbon and HSBC India, in partnership with JBF, are working to empower and bring purified water to locals in Africa and Asia. These two unique projects were entered in our 2014 Corporate Adaptation Prize Contest. South Pole Carbon

South Pole Carbon’s International Water Purification Programme (IWPP) facilitates investments in clean drinking water to boost both climate-change mitigation and adaptation:

1. South Pole Carbon provides poor families with a reliable source of clean drinking water, thus enabling individuals and communities to become more resilient against climate change.
2. It reduces CO₂ emissions by ensuring people don’t have to boil their drinking water.

South Pole offers companies the opportunity to invest in individual projects under the IWPP and to generate adaptation and mitigation benefits, measured in liters of clean drinking water provided and in tons of CO₂ reduced, respectively. Under the IWPP, companies can achieve their Corporate Social Responsibility targets while gaining measurable benefits.

Here are the scores and trends of South Pole’s target countries, according to the 2012 ND-Global Adaptation Index:

• Mexico: 59 (trend: stable)
• Cambodia: 133 (trend: improving)
• Uganda: 137 (trend: stable)
• Malawi: 136 (trend: improving)
• Tanzania: 140 (trend: improving)
• Kenya: 153 (trend: stable)

Source: South Pole Carbon 

HSBC India & the Jal Bhagirathi Foundation

In conjunction with Jal Bhagirathi Foundation (JBF) in India, Hongkong and Shanghai Bank Corporation (HSBC) builds community leadership and leverages innovations to contribute to climate-change adaptation success through potable water harvesting projects in India. As a global commercial bank, HSBC has executed three community-based adaptation projects in Rajasthan’s Marwar region—the world’s most densely populated arid zone. JBF is a nongovernment organization that has been working in the Marwar region of the Thar Desert in Western India since 2002.

Since 2009, the partnership has built on traditional local knowledge and contemporary social and technical innovations to develop, test and replicate adaptive strategies through management of natural resources, especially water.

Source: HSBC India

India ranked 120th on the 2012 ND-Global Adaptation Index with a score of 53.4. Its high vulnerability score and low readiness score makes it the 55th most vulnerable country and the 60th least-ready country. Its advancement by 10 points on the relative ranking since 1999 indicates the impact that corporate investment can make on resilience.

HSBC and JBF seek to improve the adaptive capacity and resilience of local communities:

1. Available potable water year round through localized water harvesting and landscape management enlivens communities.
2. Women who earlier fetched water from long distances in extreme desert conditions are saved from the physical stress, and they can use the saved time and energy for children’s education and development and economic activities that increase family income.
3. Accessible toilets and safe sanitation facilities prevent fecal contamination of scarce water and improve public health, hygiene and environmental conditions.

Key variables are being tracked, including the increased availability of drinking water, the extent of sanitation and the impact on women’s time. On average, each village achieves a 30 percent improvement in water availability annually, translating into an additional 4-to-5 months of water availability per year. The extent of sanitation has increased to 50-to-70 percent from 6-to-25 percent since 2009. This adds 2-to-3 hours of productive activities for the average woman.

Consequently, HSBC and JBF generate an array of benefits to its communities in India:

1. Health improvement through access to safe water and sanitation
2. Women empowerment
3. Education and child development
4. Livelihood security
5. Environmental sustainability

Because the integrated village-models are replicable and scalable in line with India’s national water policy framework, HSBC plans to expand its project in the Marwar region to other water-stressed regions in India, through collaboration among its NGO partners.

Visit the Jal Bhagirathi Foundation website for more of the partnership’s projects in India.

This information was compiled with the help of Sophia Chau, Intern, ND-Global Adaptation Index.

Cocoa Climate Crisis

The International Cocoa organization has reported a 75,000-ton cocoa shortfall for this growing season and that figure is expected to reach the million-ton mark by 2020 unless swift action is taken. While Eastern Europe and Brazil, the biggest cocoa consumers, have registered a surge in chocolate consumption in recent years, extreme weather events have hurt cocoa yields.

Image from IFC

The world’s top producers of cocoa—Cote d’Ivoire and Ghana (59% of the global cocoa supply chain) and Indonesia, Nigeria, and Cameroon (23% together) – are also those hardest hit by drought and flooding yet least prepared to respond to them.

According to ND-GAIN, an index indicating countries’ vulnerability to climate change and readiness to adapt to it, Cote d’Ivoire ranks 154 on a relative scale of 1 to 178 (with 1 being the most resilient); Ghana ranks 102; and Indonesia, Nigeria, and Cameroon rank 99, 140, and 130, respectively.

As a result of cocoa’s unfortunate turn, many cocoa companies, traders and chocolate manufacturers have begun joint projects aiming to boost cocoa yields through sustainability in the supply chain.  Projects have engaged multicorporation collaboration, civil society actors and standards bodies and have generated investments from stakeholder governments. Although some projects have proven fruitful, effective coordination and scalability are still lacking, which provides much opportunity for further collaboration between private and public sectors in the next decade.

Besides climate woes and low adaptive ability, cocoa’s poor performance reflects a supply chain plagued by economic and social issues. Compromised bargaining power of smallholders, income instability and dismal working conditions are prompting many young cocoa farmers to quit in search of livelihoods elsewhere. Other issues include poor or lack of infrastructure (roads, health facilities, schools, and electricity) and a paucity of farmer training capacity. Both would provide public and private sector partnerships with opportunities for positive intervention. Several reports emphasize that yield increase alone will neither alleviate smallholders’ sufferings nor secure supply chains. Thus, the 2012 Cocoa Barometer report called for a holistic approach to solving the cocoa crisis, one going “beyond productivity.”

In the last several years, consumer awareness of these issues surrounding cocoa production has expanded. Major chocolate manufacturers such as Cadbury, based in the United Kingdom, and Mars have committed to certified cocoa production standards that improve cocoa farmers’ security. These standards are specified by internationally recognized standard bodies such as Fairtrade Labelling Organizations International (FLO) and the Rainforest Alliance. Worldwide, companies and stakeholder nations are shifting toward more sustainable cocoa and have engaged a variety of sectors in multilateral programs.

With climate change accelerating, other key commodities popping up on the risk radar include vanilla, palm oil and coffee, among others.  Keurig Green Mountain, Coca Cola, Heinz, Chipotle and other major food companies have all warned that climate change threatens businesses. Clearly, much room remains for progress, but this also provides ample opportunity for multilateral cooperation in building a more sustainable future for people, planet and profit.

Cocoa data and facts from the 2012 Cocoa Barometer report.  Blog compiled by Sophia Chau, Intern, ND-GAIN

Unsung Heroes – Government Statisticians Who Need the Space to Be Honest

At a Social Capital Markets SOCAP 2014 panel in San Francisco in Fall 2014 about Resilience Investing Informed by Global Data I had the pleasure of presenting with Dr. Mirza Jahani, the CEO of the Aga Khan Development Network’s U.S. foundation.  The panel focused on data and the particular issue dealt with how to spend less money gathering data and more money using it to achieve better outcomes. Dr. Jahani’s response – consider government statisticians – made me realize we may be looking at the solution right under the world’s green eye shade. Government statistics bureaus around the world offer treasure troves of both fine statistician and copious amounts of data (much of it on paper – the topic of a future post). These number crunchers know the issues confronting their countries intimately, both quantitatively and qualitatively, from their life experience and work. But they lack the resources to make those data transparent.

As many know, I’m a big proponent of free and open-source data.  But, perhaps I need to shift my emphasis. What if these government statisticians could say what actually was happening in their respective countries and share the data they have gathered directly and without intervention (regardless of the inference the world would draw from it)?    The prevailing belief is that many government statistics are suspect, because some countries lack capacity to gather or verify data and/or countries want to appear better (or sometimes worse) than they are for political or investment purposes.

If they possessed the clout so they could be honest with government data, we users could even say, “This data isn’t bad; let’s use it.” This would save implementers in every sector valuable time and money they can apply to their work on the ground.

From Dhaka Bangladesh to Kathmandu Nepal, from Chicago, USA to Aberdeen, UK, cities have opened up their data to the world, and even inspired titles for appointed posts. Consider “Chief Innovation Officer.” As a result, these enlightened governments gain the reward of better decisions made from better data and also reap a reputational boost for their transparency from citizens, other cities, and businesses and other institutions.

More governments should take a page from this book on how to manage a reputable statistics bureau. They then would empower their statisticians and data miners to give the world their most powerful currency: data.

Corporate Adaptation Stories: Risky Business

With mid-term U.S. elections less than two months away, I have been scanning the news eagerly to locate any references to the significant Risky Business Project report on climate change released in June. I wondered if the report’s critical findings have stoked any passionate fires within any elected officials or their opponents. Alas, political contests this year don’t seem to rest on the future of our country – or any of its political districts – as far as the effects of climate change are concerned.

What a shame. Reflecting its remarkable array of leaders on its advisory board, Risky Business has a well-thought-out strategy: Engage influencers from both sides of the political aisle, inform them with potent data that illuminates how climate change is impacting key sectors of the U.S. economy, and then get them to prod their powerful networks to move on mitigating the effects of pollution and other environmental dangers.

When lawmakers grasp that message (if they ever do), then climate change will move to the front burners and, hopefully, lead to ways to counter the effects that Risky Business convincingly demonstrates already are impacting crime, food, health, infrastructure and other vital sectors.

The report notes that the project aims to highlight climate risks to specific business sectors and regions of the economy and to provide actionable data at a geographically granular level for decisionmakers. “Right now, cities and businesses are scrambling to adapt to a changing climate without sufficient federal government support, resulting in a virtual “unfunded mandate by omission” to deal with climate at the local level,” the report maintains. “We believe that American businesses should play an active role in helping the public sector determine how best to react to the risks and costs posed by climate change.”

Recently, the Columbia Journalism Review asked, “Has Climate Change become a business story?” It observed that The Wall Street Journal and the Financial Times published stories ahead of the report’s release. In addition, leading business publications, including Forbes, Fortune and the International Business Times, ran high-profile articles on their websites the day of the press conference.

Steven Mufson, an energy and finance reporter, wrote about it for The Washington Post, and the Los Angeles Times’ report ran in its Business section. Long-time National Public Radio economics correspondent John Ydstie covered the news and The New York Times was one of the few that covered the event as a science story.

But I’m looking for a different story – one from the corporations themselves – with business leaders talking about their own climate-risk adaptation stories, perhaps galvanized by this report,

In two weeks during New York City’s Climate Week, ND-GAIN will host an event, What’s New:  Corporations Leading Climate Resilience around the World, where corporate officials will relate their story by unveiling the latest innovations in adaptation.

Come meet the winners of ND-GAIN’s Corporate Adaptation Prize and join them and the judges for a lively discussion addressing food security, water access, health, and infrastructure solutions in the face of a changing global climate.

And, of course, kudos to Risky Business for getting the influencers to shape the biggest change crisis of our time.

Another Season of Climate Risk Looms: Southeast Asian Coastal Storms

As the global hurricane and typhoon season begins, a critically important gathering of the World Economic Forum on East Africa has just concluded in Manila, with nearly every session expounding on the tragic consequences and lessons learned from last year's Typhoon Haiyan.

Decision makers from the private, financial, and public and development communities committed to instilling more resilient measures in responding to and handling disasters. They expect to shape regional and industry agendas by addressing Association of Southeast Asian Nations, or ASEAN, opportunities for mitigating resource risks and vulnerabilities tied to climate change.

Among other issues, participants found common ground on such areas as climate smart growth, decision-making in a disruptive world, green and climate-resilient investments that encompass public-private resiliency funds for disaster-prone areas, solutions for climate and resource risks and enhancements of risk awareness and management.

In deliberating, participants considered some of the learnings from Hurricane Katrina, the devastating disaster that struck the Gulf region of the United States nine years ago this August. Its impact on the southeast region persists.

For one specific company, New Orleans' electric utility Entergy Corp., the hurricane caused an estimated $750 million and $1.1 billion in damages, according to an Entergy U.S. Senate testimony. It also galvanized the integrated energy company to transform itself into a true climate-resiliency leader.

Fortunately, the utility possessed a well-rehearsed emergency-response plan that included safety performance drills, a disaster-recovery plan, communications continuity using satellite phones during repairs, and swift internal infrastructure restoration. A learning organization, Entergy adopted lessons from Katrina and responded proactively to Hurricane Rita the very next month. It shut down various operations and reduced staff to keep more employees out of harm's way.

Entergy, of course, serves the Gulf region and can't just get up and move. Since Katrina and Rita, it has invested in wetlands restoration and other community assets to shore up resiliency. As for community resiliency, Entergy ensures a consistent supply of power.

An Example for Others

Entergy's story offers a great example to companies worldwide at risk from coastal storms. What does that risk look like?

In its latest stark report, the Intergovernmental Panel on Climate Change describes significant and worsening environmental risks to the world's poorer countries. And with rising seas, increasing storm intensity and population shifts to cities at the shore, the future promises to be truly tough for millions upon millions of people worldwide.

By increasing risks to human health, welfare, and ecosystems, climate impacts can threaten primary development goals -- reducing poverty, increasing access to education, improving child health, combating disease and managing natural resources sustainably.

The coastal areas, of course, are on the front lines. As tropical cyclone season arrives (and keeps us riveted to the news, worried about frequent tragedies) and continues through November, one startling fact relays their impact. Since 2005, in Southeast Asia alone, more than 172,500 people have lost their lives to tropical cyclones, and economic losses from them exceed more than $122 billion (in 2014 dollars), according to data from Aon Benfield Impact Forecasting.

Southeast Asia at Particular Risk

Of course, the ASEAN region is at particular risk since a disproportionate percentage of the population lives within five meters of sea level, according to the Center for International Earth Science Information Network, or CIESIN. With the exception of Laos, ASEAN countries possess more coastal area -- the percent of land less than 10 meters above sea level -- than 80 percent of the rest of the world's countries. And, again with the exception of Laos, ASEAN countries have more coastal population than 85 percent of the rest of the world.

November's deadly typhoon that leveled Tacloban, the Philippines, is likely to be repeated as coastal storms grow in populated areas in these low-lying coastal zones. Some ASEAN countries are less vulnerable and more prepared than others to adapt to these changes.

ND-GAIN, the world's leading index of country-level climate adaptation, ranks nine of the 10 ASEAN countries (Brunei Darsulum doesn't share enough data to be included in the Index.) From Singapore, at 30th on the Index to Myanmar at 163rd, major variations exist in both vulnerability and readiness to adapt throughout the region. The ND-GAIN data indicates that all of the countries are trending up or are stable. Each could set clear priorities for improvement, including:

1. Improving the quality of trade and transport infrastructure.* 2. Establishing good early-warning systems. 3. Adopting building codes that reflect tropical cyclone threats. 4. Implementing insurance mechanism and financing facilities that recognize these threats. 5. Protecting natural capital such as wetlands along the Gulf Coast, sand dunes around New York City and coastal mangrove swamps in Thailand to cushion coasts from storm surges. 6. Increasing the percentage of paved roads. 7. Establishing redundancies in communication infrastructure. 8. Engaging with stakeholders from other sectors and determining who is active in protecting people, natural resources and infrastructure? Being proactive in seeking allies with similar assets at stake who also want to assist, and offering to engage with them.

This year, nature will make its increasingly destructive annual pass around the globe with its litany of tragic tropical cyclones, monsoons, forest fires and the like. However, each offers valuable lessons that we must recognize and learn from -- for our sake and that of future generations. A great deal is at stake.

Some cities and countries will face economic decline as corporations and others shift their valuable supply chains away from weather-threatened regions. Very simply, climate change rates among the key challenges that developing countries must recognize and respond to in planning for their futures.

*Note: According to the Trade and Transport Infrastructure: Logistics professionals' perception of country's quality of trade- and transport-related infrastructure (e.g., ports, railroads, roads, information technology), from the World Bank's World Development Indicators.

(This blog originally appeared on Huffington Post: http://www.huffingtonpost.com/joyce-coffee/another-season-of-climate_b_5419755.html)

Measuring Country Resilience

For the past several months, my colleagues and I have heard a lot more about both adaptation and resilience*, especially in discussions with ND-GAIN’s corporate users.  This guest blog, by ND Global Adaptation Index's Chen Chen, offers insights into resiliency particularly in the Association of South East Asian Nations. To measure countries’ resilience to rebound from adverse impacts of climate change, ND-GAIN focuses on the adaptive capacities of five sectors that provide communities with life-supporting assets and social services:

• Food
• Water
• Public health
• Ecosystem service
• Human habitat.

Chosen indicators reflect capacities that make social systems persist in a changing climate, based on historical data that scores countries’ performance in each of the five sectors. For instance, in the food sector, countries with a high rate of child malnutrition will possess low resiliency if climate-induced events strike the food-production system. In the ecosystem service system, countries’ engagement in international environmental conventions, such as the International Plant Protection Convention, shows a political willingness to commit to sustainable development and a technical capacity to take actions to ensure the proper functioning of ecosystems. Table 1 illustrates the set of indicators ND-GAIN uses to measure resiliency within these sectors:

Table 1 Indicators of Adaptive Capacity Measuring Resiliency to Climate Change

ND-GAIN analysis over the last 17 years finds that when these indicators are analyzed for 177 countries, lower-income countries will require a century to reach the level of resiliency of OECD (generally upper-income) countries.

ND-GAIN data also helps examine regional resiliency.  For instance, ASEAN has been improving its resiliency to climate change over time from 1995 to 2012. In particular, it has made rapid progress in enhancing resiliency in water and health sectors by strengthening capacities to provide quality services in these areas. See Figure 1.

Standardized scores over time (0 indicates lowest resiliency and 1 indicates highest) for resiliency sectors in Association of Southeast Asian Nations (ASEAN).

Each country’s performance contributes to the trend of increasing resiliency. As illustrated in Figure 2 and considering the health sector, Singapore posts the highest resiliency and continues that strength, while Cambodia and Laos have show more improvement, relatively. In particular, Cambodia displays the highest rate of progress among nine ASEAN countries, contributing greatly to ASEAN’s overall health-sector resiliency improvement. Still, Cambodia and Laos, perhaps, will  require decades at current rates to reach to the current level of resiliency in Singapore.

By analyzing our data to better understand resilience, ND-GAIN helps decision makers inform their supply chain, capital asset, community engagement and policy decisions with the future of lower-income countries in mind.

*Resilience: The capacity to recover quickly from difficulties (Oxford Dictionary)

Climate change a growing concern for companies expanding their footprint

This article originally appeared in The Guardian: http://www.theguardian.com/sustainable-business/hubs-water-climate-change-siting-drought-flood-business Traditionally, the most important factors in choosing a location for a new factory or operation have always been workforce supply and economic incentives. But a new consideration, climate change, is quickly moving up the ranks as a major factor for corporate decision-makers. Recently, as climate-related crises have hit cities across the globe, it's become increasingly clear that companies need to consider the financial impact of a paucity – or an excess – of water.

Operational, strategic and quality-of-life issues factor heavily in the decisions that giant enterprises make about where to locate their much sought after capital projects. As the devastating environmental conditions associated with climate change – including water shortages, severe storms, natural disasters, rising seas and hotter climates – become more pressing, it's clear that these, too, will become key considerations for companies hoping to press their competitive advantages.

As a result, these decisions will begin to dramatically affect both traditional and emerging business, transportation, manufacturing and travel hubs. And as with anything else involving corporations, real estate, jobs and money, there will definitely be winners and losers.

Supply chain links

In the wake of natural disasters, which appear to be getting increasingly severe, a "new normal" has emerged among corporate decision-makers. With some analysts citing the impact of the mutable climate, more companies are adding a climate-change dimension to their strategic supply-chain planning and site selection. Adaptive management of climate risks is playing a growing role in boardrooms and C-suites across the globe, particularly at multinationals.

A report from CDP, the global non-profit that measures vital environmental information, found that 72% of companies surveyed see physical risks from climate change disrupting their supply chain.

For New Orleans-based energy company Entergy, 2005's Hurricane Katrina was a lesson in the potential supply disruptions that could be caused by increasingly extreme weather events. Since then, Entergy has begun incorporating climate risks into its business planning and operating activities; consequently, it has strengthened its power-distribution network, including the sites that are most vulnerable.

Water, water nowhere

Companies often underestimate the importance of water to their business, and few have a comprehensive global process to assess water risk. But this is quickly changing, notably in the west and southwest regions of the US, as drought sinks critical water supplies. Companies in the food and beverage, mining and oil and gas companies sectors especially base their site assessments on high-level projections of water scarcity.

In 2013, the Aqueduct Project, a hydrological mapping initiative at the World Resources Institute, ranked 36 countries based on their water risk. Sixteen, including the UAE, Barbados, Cyprus, Jamaica and Singapore, received a 5.0, the worst possible rating.

But if drought is a consideration, so is flooding, and too much water can also affect site selection. After Thailand's extensive flooding in 2011, losses for badly damaged global parts suppliers alone totaled an estimated $15-20bn, and the flood hurt the bottom line of several multinationals, including Ford, Toyota, Dell, Cisco and Honda. HP, another company that was especially hard-hit, estimated that half of its 7% fourth-quarter 2011 revenue slide was due to the flooding. Not surprisingly, global companies are increasingly assessing the issue of monsoons and other water-related weather events when making decisions about where to locate or enlarge their facilities.

As for the US, it won't be long before severe water-supply problems in states like California and Arizona will begin to affect their popularity as site locations for plants. And look for other states as well as cities with plentiful supplies, such as those surrounding the Great Lakes, to woo businesses with water as their big asset. Already, Milwaukee is leveraging the business potential of its plentiful water supply. It's certainly not alone.

Site selection heats up

Water isn't the only climate issue that is increasingly affecting site selection. Too much heat is also becoming a factor as it becomes clear that fiery temperatures and air pollution can have a major, devastating effect on workplaces and workforces. Air-conditioning alone can't make up for such conditions.

A team of climate-change researchers recently studied 170m hospital admissions and eight million deaths in Germany. After tracking them season by season, day by day, for 10 years, they found that the temperature-and-pollution spikes associated with extreme heat events tended to increase hospital admissions and deaths by 2% to 5% the first day. Adverse health effects and mortality mounted with each day of a heat wave.

Interestingly, the analysis found that extreme cold events typically had a negligible to nonexistent impact on hospitalization and deaths. Distributed across the population of a country such as Germany or the US, the analysis estimates that the cost of a hot day is between 10 cents and 68 cents per resident in terms of health care and lost productivity.

Winners and losers

So, when it comes to site selection and climate, which countries top the list? The Notre Dame Global Adaptation Index (ND-GAIN), where I work, has ranked the climate adaptation performance of 177 countries over the last 17 years, has found that, while the top-ranked countries are often prone to sea level rise, drought and flooding, they are nonetheless able to maintain the security of their water, food, and health systems. They are able to preserve their fundamental ecosystems, and their coastal, energy and transportation infrastructures remain sound, enabling greater social, economic and governmental stability.

The ND-GAIN's highest-ranked country is Denmark, which has an index score of 83.4. Other European countries and Australia round out the top 10, while the US ranks 13th, with a score of 79.

North Korea is the lowest-ranked country, with an index of 34.3, and Afghanistan, Burundi, the Central African Republic and Eritrea fill out the bottom five on the list of countries that aren't likely to draw many foreign industrial and business operations any time soon.

The most surprising low-ranked countries are India, which is number 120, and China, which is number 98. But as two of the hottest spots for global business in the last decade, both demonstrate the impact that corporate investment can have on resiliency. India has moved up 10 points on the relative ranking since 1999, and China has moved between three and six spots during that period.

In real-estate parlance, the desirability of a property is based on location, location, location. And while climate change may still rank below such factors as workforce and incentives, more and more organizations are weighing climate conditions as they determine where they will locate new operations.

Consequently, cities, states and countries that lag on the climate-change index need to launch initiatives, such as public-private partnerships, to strengthen their attractiveness. The private sector, of course, can play an invaluable role in this effort.

This article originally appeared in The Guardian: http://www.theguardian.com/sustainable-business/hubs-water-climate-change-siting-drought-flood-business.