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What role can (does) the private sector play in adaptation?

As adaptation measures reduce climate vulnerability and increase “climate resilience”, the role of the private sector in adaptation becomes more and more prominent (Biaginia & Miller, 2013). The role of the private sector can be broadly divided into 1) engaged and effective in responding to climate change effects 2) greater and more frequent investments into climate-resilient technologies, and 3) engage in climate financing. This essay addresses three measures that will steer private sector into engaging in climate adaptation. These three measures are to increase awareness about the significance of climate change, to include the private sector in national and international adaptation efforts and lastly, to engage the private sector in developing climate resilient technologies.

Importance of engaging the Private Sector in Developing Country Climate Change Efforts: Firstly, engaging the private sector in climate change financing is significant for mobilizing financial resources and technical capacity (Biaginia & Miller, 2013). The UNFCCC has mobilized US$100 billion for climate change financing by 2020 and some advocates mention that significant proportion of this budget should come from the private sector (Biaginia & Miller, 2013).  Secondly, private sector usually ends up dominating many decisions that are key to adaptation such as agricultural and water management, infrastructure development and such (Biaginia & Miller, 2013). Since private sector dominates the decision making, they should be responsible for developing and disseminating products and services that increases the resilience of current agricultural, water and infrastructural resources (Biaginia & Miller, 2013). Lastly, the private sector should engage in adaptation policies and interventions because there are financial risks associated with climate change, which should concern profit, oriented private companies (Biaginia & Miller, 2013). A study called “Physical risks from climate change: A Guide for Companies and Investors on Disclosure and Management of Climate Impacts” (Ceres 2012) revealed that more than 160 companies in Thailand were damaged because of 2011 floods which hindered 25% of the country’s garment production (Biaginia & Miller, 2013). Many agribusinesses and food companies lost $56 million due to droughts in 2010 in Thailand. The negative impact on drought followed by the flood resulted in 4% decline in Thailand’s GDP (Biaginia & Miller, 2013).

Actions Needed to Engage the Private Sector in Developing Country Adaptation Efforts

There are three measures that are required for the private sector to fully and meaningfully engage in adaptation measurements. As mentioned, these 3 measures are:

  1. Increase awareness and significance of climate change and effective adaptation interventions.
  2. Include the private sector in national and international adaptation efforts
  3. Engage the private sector in developing products and services to reduce costs and impacts of climate change

Increase awareness about the significance of climate change: An OECD study (Agrawala et al, 2011) revealed that businesses are aware of the gradual and extreme changes that come along with climate change; however, they presume these events to be far in the future (Biaginia & Miller, 2013). The private sector needs to start increasing their knowledge and awareness of realities of climate change – its significance, risks, and response measures (Biaginia & Miller, 2013).

Include the private sector in national and international adaptation efforts: The study revealed that private sector’s approach towards climate change is highly influenced by international organizations and partnerships (Biaginia & Miller, 2013). For instance, the United Nations Environment Programme’s Finance Initiative Climate Change Working Group has influenced several financial organizations to market their engagement in climate change adaptation (Biaginia & Miller, 2013). The government can also provide economic incentives to strengthen public-private partnerships (Biaginia & Miller, 2013). The public-private partnerships can ultimately help manage and share the climate information (Biaginia & Miller, 2013).

Additionally, as mentioned earlier, private sector plays a role in climate financing. The UNFCCC want to mobilize $1000 billion annually for climate change mitigation by 2020 and wants some of the money to be funded by private sector (Biaginia & Miller, 2013). Private sector financing can reduce risks, and provide much more stable funds rather than just depending on public funds (Biaginia & Miller, 2013).

Engage the private sector in developing products and services to reduce costs and impacts of climate change: The increase in climate risks represents a business opportunity to develop products that can help provide resistance against climate change effects. The private sector can provide technology that aid adaptation policies (Biaginia & Miller, 2013). One of the interventions that has high priority is the need for regional weather and climate networks (Biaginia & Miller, 2013). The private sector is perfect for finding a network that can provide the necessary weather information that is needed for early warning of extreme weather forecasts (Biaginia & Miller, 2013).

Secondly, the private sector can potentially help do research and development for adaptation technologies that foster resilience (Biaginia & Miller, 2013). An example of existing adaptation technology is the Global Environment Facility’s (GEF) program where it deals with clean energy and technology transfer (Biaginia & Miller, 2013). Additionally, the Clean Technology Fund is a multi-donor trust fund that subsidizes loans to private companies who are producing new energy technologies (Biaginia & Miller, 2013). Another pilot program uses biotechnology to produce drought tolerant crop varieties (Biaginia & Miller, 2013).

Lastly, the private insurance companies can engage in promoting climate risk awareness by charging higher interest rates on insurance products and thereby, promoting risk-reducing behaviors (Biaginia & Miller, 2013). Insurance companies can compensate the victims by offering differential premiums where the higher the likelihood of damages due to climate change and extreme weather, the higher the cost (Biaginia & Miller, 2013).

Conclusion: This paper has illustrated that engaging the private sector in climate change adaptation is a high priority and the way that private sector get involved is via 1) increase awareness about the significance of climate change, 2) to include the private sector in national and international adaptation efforts and, 3) to engage the private sector in developing climate resilient technologies. For these strategies to be successful, there are certain conditions that need to be already in place. Tools for risk assessment and management need to already be advanced so that it can be used by the private sector for planning, strong public-private partnerships need to be established, and economic incentives need to be provided to the private sector for their involvement (Biaginia & Miller, 2013).

How can we build adaptive capacity?

Although the challenge of climate change is universal, the capacity to adapt, deal with climate change effects, and build a resilient society is not. Many developing countries and even rural communities within the developed countries are extremely vulnerable and have limited capacity and scope to plan and implement adequate policies (Cinner et. al., 2018). Vast research essentially says that in order to build capacity, we need to know 1) the type of capacity building, 2) the mandate of the activities and programs, 3) who is leading these programs, 4) who is funding the programs, 5) who is the foreign consultancy involved, 6) the extent of ownership over the project by the recipient country, 7) is the capacity building mandate sustainable or does it fall apart after the consultant concludes the program in the recipient country (Cinner et. al., 2018). That being said, evidence suggests that adaptive capacity is not just about having necessary resources at hand and sustainable practices, the willingness and capability to adapt is integral to building adaptive capacity (Cinner et. al., 2018). This essay will discuss 5 disciplines that are significant in building adaptive capacity.

  1. The assets that people use in times of need
  2. The easiness of changing strategies
  3. The ability to organized and act collectively
  4. The ability to recognize and respond to change
  5. The ability to determine whether to change or not

Assets: Assets are financial, technological or public resources that civil society has access to which can be individually owned or collectively (public good) (Cinner et. al., 2018). Research shows that people are generally able to adapt better when they have assets. Assets help in adaptation because assets help improve productivity through new technologies, increase access to resources (Cinner et. al., 2018). For instance, assets can help vulnerable communities build resilience via micro-credit loans as well as social investments such as healthcare (Cinner et. al., 2018). However, one thing to note is that sometimes social factors such as gender inequality or caste system can deter building adaptive capacity since it prevents from reaching the most vulnerable (Cinner et. al., 2018).  

Flexibility: Flexibility refers to the simple fact that individuals who are more flexible are better able to adapt to adaptive capacity policies (Cinner et. al., 2018). For instance, in a coastal context, individuals who are more flexible are able to adopt more sustainable fishing strategies or be open to better fishing grounds (Cinner et. al., 2018). Flexibility also refers to being open to exploring different occupational sectors in response to climate change impacts (Cinner et. al., 2018). At the macro level, flexibility of organizations and institutions to set and accommodate rules, boundaries, policies placed because of climate change effects are extremely significant (Cinner et. al., 2018). That being said, there are a number of challenges associated with flexibility (Cinner et. al., 2018). For instance, asking communities to find alternative livelihood projects is difficult due to social and cultural reasons (Cinner et. al., 2018). Further, this isn’t a conducive option for low-income households due to the fact that there are insurmountable costs and risks associated with establishing new livelihoods (Cinner et. al., 2018).

Social Organization: Social organization refers to how society is organized, enforces collective action and knowledge sharing. Formal and informal relationships between individuals, communities and organizations can help people build adaptive capacity and deal with change (Cinner et. al., 2018). For instance, recovering from a natural disaster requires people to help each other in a state of emergency, which required solid social relationships (Cinner et. al., 2018). Trust and social cohesion helps in collective action towards confronting barriers to effective adaptation (Cinner et. al., 2018). Governments, development agencies, and civil society organizations can build bonding social capital by involving individuals in adaptation strategies via community events, recreational activities and even spiritual gatherings (Cinner et. al., 2018). Social connections also help in gaining access to resources, information and technology that facilitates adaptation. Issues with social organizations include when we have unequal social structures (Cinner et. al., 2018). Hence, the elite individuals have access to social connections but they leave out the wider society (Cinner et. al., 2018).

Learning: The way individuals process new information and new changes about climate change refers to learning. Learning can be experimental or experiential but requires access to critical information such as market prices, weather forecasts and such (Cinner et. al., 2018). Learning to adapt to climate also requires peer-to-peer networks that allow individuals to share their knowledge and experiences, which will result in a better appetite for building adaptive capacity (Cinner et. al., 2018).

Agency: Agency is one of the most important factors in building adaptive capacity as it refers to individuals having power and freedom to mobilize resources to build resilience and share their future (Cinner et. al., 2018). Agency is dependent upon people’s own willingness to respond to climate change effects (Cinner et. al., 2018). Building agency requires incorporation of local and traditional knowledge and skills from both policy and science disciplines, empower people through participatory processes and lastly, removing barriers that restrict people from having agency (Cinner et. al., 2018).

In conclusion, to this day, extremely ad hoc policies and practices have been documented and practiced when it comes to building adaptive capacity. In order to build adaptive capacity in order to build resilient communities and combat climate change effects, there still need to for collective commitment towards adaptation implementation, better definition of adaptation in a way that it is widely accepted, increase in financial resources for adaptation, solid reporting system of adaptation interventions, substantive assessments outlining effectiveness of adaptation policies, better stakeholder management and lastly, a commitment to building adaptation capacity keeping the long term in mind (Khan, 2017).

By Miha Alam ( University of Waterloo) ,Canada

Work Cited:

Khan, M.R. (2017) Capacity Building for Climate Change: Lessons from Other Regimes. Adaptation Watch Weekly Briefing. 

Cinner, J. E., Barnes, M. L., Cohen, P. J., Hughes, T. P., Lau, J. H., Morrison, T. N., . . . Marshall, N. (2018). Building adaptive capacity to climate change in tropical coastal communities. Nature Climate Change, 8(2), 117-123.

Biaginia, B., Miller, A., (2013). Engaging the Private Sector in Adaptation to Climate Change in Developing Countries: Importance, Status, and Challenges. Climate and Development 5(3),  242-252.











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