Originally published in BusinessWorld here
Written by Sandeep Bhattacharya, Climate Bonds Initiative and Sourajit Aiyer, South Asia Fast Track Sustainability Communications
As the current Coronavirus situation plagues normal life in Mumbai, India’s commercial capital, and government and civic authorities race to manage its exigencies, citizens hope the crisis dissipates quickly before another challenge hits the city. Come June, once the monsoons start, the threat of flooding would raise its ugly head. This has become an annual feature for its ~18 million residents. Excess rain was only one cause in 2019 (3,475 mm as of Sept, the previous high being 3,452 mm in 1954). The other cause was the city’s flood resilience reduced since avenues for storm water dispersal decreased owing to construction on flood plains, excess use of concrete reducing soil’s absorbing capability and archaic and unelevated drainage, making it susceptible to the back-flow of sea water. Rising sea-level compounds this risk for coastal cities like Mumbai. Given the high probability of flood incidents, action is needed, and fast, over the coming months to build the city’s flood-resilience before Monsoon 2020 even while authorities fight the immediate challenge of the Coronavirus outbreak.
The encouraging news is that losses due to floods can be reduced by investing in resilience and adaptation in flood-prone coastal cities. This includes investing in pre-event adaptation through resilient infrastructure, early-warning systems, flood defences, improved assessment of risks, sea-level rise projections, better preparedness and education of the communities, adapting the land-use and landscapes, training volunteers for emergencies and technologies (like the Malawi Spatial Data Portal that identifies flood-risk regions) and meeting post-event losses by rebuilding damaged properties and restoring livelihoods.
But the challenge is to raise that finance. In multilateral/multi-donor climate finance alone, Climate Funds Update data showed only ~$4 billion out of the $30 billion pledged funds were for pure adaptation. One reason for this rather poor show is the lack of quantifiable financial returns. Unlike clean energy or green transport that earns a visible cash flow, monetising the benefits from adaptation is tough. Measuring the benefits must consider the businesses and livelihoods saved, since a flood has a manifold impact on the region’s factories, offices, crops and services, making it a tough nut to crack!
Nevertheless, some progress has occurred. Fiji’s sovereign adaptation bond in 2017 was a pioneer in Asia. The same year, the city of Miami approved a resilience bond through municipal borrowing to fund flood resilience projects, including flood defences, improved drainage capacity, pumping stations to collect/discharge storm water, etc. While it helped that the interest rates were low, the city had a strong bond rating and it had repaid its previous debt, it still offers an option for peer coastal cities to emulate. Large-scale flood defences apart, pre-event property-level protection can protect the entire community at lower costs. The UK offers some examples, like a coastal town in Essex implementing property level protection with AECOM, the Devon City Council providing grants for property flood resilience measures or Flood Re, a government backed reinsurance scheme, shortlisting coastal counties like Yorkshire and Devon-Cornwall along with Central England for promoting research in property-level flood resilience measures.
However, public monies and levies on residents will not suffice. Mobilizing private-sector institutional funds is vital!
But a challenge to raise private sector capital for adaptation is ensuring the project’s standardisation and compatibility as per a consistent adaptation framework. Many adaptation projects do not necessarily conform to a consistent standard, as there is a gap in terms of a proper investment framework for adaptation. This makes it tough for private sector investors to assess the investments’ impact towards building a climate-resilient economy.
The Climate Bond Initiative’s recently released Climate Resilience Principles aims to close this gap. An Adaptation and Resilience Expert Group, comprising of over 30 specialists from international authorities, was instituted to develop these principles. It aims to provide a robust framework to guide both private and public sector capital on the evaluation and compatibility of climate resilience investments. Applicable to new and existing investment in both built and natural environments, the Climate Resilience Principles would enhance the standards in the global green bond market. Such steps augur well to beef up the confidence of private sector capital (especially capital dedicated to green causes) in adaptation and resilience projects. Subsequent to its release, the European Bank for Reconstruction and Development (EBRD), a member of this Adaptation & Resilience Expert Group, issued a bond which was backed by resilience assets.
Besides this, the Climate Bond Initiative’s Water Infrastructure Criteria, which covers flood defences, storm water management, ecological restoration, water monitoring, water capture and transfer, is also relevant from the perspective of evaluating flood-resilience investments.
At the end, floods affect most people globally. The Natural Disasters report of the CRED said floods affected the highest number of people (50%) in 2018. Rapid urbanization, soil erosion and poor urban planning would only accentuate this risk. Building flood resilience against rising sea-levels would also require planning. Luckily, we do not need to discover this from scratch. Besides the cities mentioned above, the Netherlands, with two-thirds land under the sea-level, holds lessons in engineering and administration for coastal cities, something India’s think-tanks can chew on as a start.
Mumbai – which accounts for 25% of India’s industrial output, 40% of its foreign trade, 60% of its customs duty collections and is home to premier corporates and financial institutions – offers a strong case to invest in flood resilience if a fall-out to the nation’s economy is to be avoided. This is perhaps the most appropriate avenue on which the Brihanmumbai Municipal Corporation eye-popping Rs 61,000 crore cash-pile can be spent. The Climate Resilience Principles augurs well to spur those investments by offering a proper framework to evaluate resilience projects. Over the next few months, while the city battles the pressing issue of Coronavirus, the government would also need to ameliorate Mumbai’s flood-resilience before the next monsoon hits it.