Description
IFC Climate Risk Management: mainstreaming of climate risk assessment at project appraisal stage and risk mitigation responses in real sector investments
Climate Risk
OECD Expert Workshop on Adaptation Financing and Implementation
Paris, J une 18, 2014
Vladimir Stenek
International Finance Corporation
Adaptation interventions
Adaptation: Gaps and Barriers
Source: Adaptation Market Study, Turkey, IFC and EBRD 2013
• Underlying cash flow values may be significantly altered by
climate related impacts
• Valuation: effects of CC over the investment lifetime
• Operating costs, revenues: changes in price, decreased
productivity, availability, depreciation, etc.
• Insurance: change in costs and availability
• Changes in long-term average conditions
Sources: IFC 2011
Climate Risk and Investments
Financial and Credit
Market
conditions
Project costs
Asset depreciation
Efficiency and
performance
Outputs
Loss contingencies
Strategic and
developmental
Environmental and
Social
Country risk
Legal and Reputational
• Pollution
• Access to water
• Community health and safety
• Workplace conditions
• Wastewater and water quality
• Resettlement, etc.
Sources: IFC 2011, BMI 2010
Financial and Credit
Market
conditions
Project costs
Asset depreciation
Efficiency and
performance
Outputs
Loss contingencies
Strategic and
developmental
Environmental and
Social
Country risk
Legal and Reputational
• “Country risk may be aggravated by climate change impacts,
particularly in economies where GDP is reliant on scarce water
resources, or in smaller economies that are more vulnerable to
catastrophic climate events. “
• S&P, May 2014: “Global warming will harm sovereign
creditworthiness around the world this century, with poorer
nations the worst hit.”
“Given the recent damage to
infrastructure in the recent
flooding - and the massive
clean-up costs necessary to
get the economy back on its
feet - we believe that the
country's investment appeal
will remain unattractive for
the foreseeable future”
Climate Risk and Investments
Sources: IFC 2011
Financial and Credit
Market
conditions
Project costs
Asset depreciation
Efficiency and
performance
Outputs
Loss contingencies
Strategic and
developmental
Environmental and
Social
Country risk
Legal and Reputational
• “Some lawyers are beginning to acknowledge that there is now
sufficient information available on CC for it to be taken into
account in both strategic and operational decision making.
• “If CC impacts are considered reasonably foreseeable by a
court, decisions that do not take these impacts into account
may incur liability in negligence.”
• Illinois Farmers Insurance vs. Chicago municipalities, May ‘14:
“The defendant knew or should have known that climate
change in Cook County has resulted in greater rainfall volume,
greater rainfall intensity and greater rainfall duration than pre-
1970 rainfall history evidenced, resulting in greater stormwater
runoff.”
Climate Risk and Investments
• IFC Climate Risk Management: mainstreaming of climate risk assessment at project appraisal
stage and risk mitigation responses in real sector investments
• 2012 revision of IFC Performance Standards (definition of clients'
responsibilities for managing environmental and social risks) includes
climate risk considerations
• PS1: “The client will establish and maintain a process for identifying the
environmental and social risks and impacts of the project. (...) The risks and
impacts identification process will consider (...) the relevant risks associated
with a changing climate and the adaptation opportunities (...)
Management of financial, E&S related climate, Adaptation
• IFC’s Adaptation Definition for investments and advisory services
De-risking investments
Storm surge height
Seawater flooding, 2050, observed and
accelerated SLR scenarios
Sources: IFC 2011, Escuela Naval CIOH 2010
• Port Muelles el Bosque, Colombia
• USD 180,000 investment in
information:
o mobilized USD 20 million in
private finance for adaptation
o de-risks and protects several
hundred million worth of
infrastructure
Adaptation interventions
Identifying Investment Needs and Opportunities
Source: Adaptation Market Study, Turkey, IFC and EBRD 2013
Enabling Environment for Private Sector Adaptation
• G20 Dialogue Platform on Inclusive Green
Investment
• Gaps: informational, policy, regulatory,
economic incentives
• Practical and implementable interventions
that increase climate resilience and
incentivize adaptation
Enabling Environment for Private Sector Adaptation
Source: IFC 2014
Vladimir Stenek
[email protected]
Thank you!
www.ifc.org/climaterisks
doc_419806617.pdf
IFC Climate Risk Management: mainstreaming of climate risk assessment at project appraisal stage and risk mitigation responses in real sector investments
Climate Risk
OECD Expert Workshop on Adaptation Financing and Implementation
Paris, J une 18, 2014
Vladimir Stenek
International Finance Corporation
Adaptation interventions
Adaptation: Gaps and Barriers
Source: Adaptation Market Study, Turkey, IFC and EBRD 2013
• Underlying cash flow values may be significantly altered by
climate related impacts
• Valuation: effects of CC over the investment lifetime
• Operating costs, revenues: changes in price, decreased
productivity, availability, depreciation, etc.
• Insurance: change in costs and availability
• Changes in long-term average conditions
Sources: IFC 2011
Climate Risk and Investments
Financial and Credit
Market
conditions
Project costs
Asset depreciation
Efficiency and
performance
Outputs
Loss contingencies
Strategic and
developmental
Environmental and
Social
Country risk
Legal and Reputational
• Pollution
• Access to water
• Community health and safety
• Workplace conditions
• Wastewater and water quality
• Resettlement, etc.
Sources: IFC 2011, BMI 2010
Financial and Credit
Market
conditions
Project costs
Asset depreciation
Efficiency and
performance
Outputs
Loss contingencies
Strategic and
developmental
Environmental and
Social
Country risk
Legal and Reputational
• “Country risk may be aggravated by climate change impacts,
particularly in economies where GDP is reliant on scarce water
resources, or in smaller economies that are more vulnerable to
catastrophic climate events. “
• S&P, May 2014: “Global warming will harm sovereign
creditworthiness around the world this century, with poorer
nations the worst hit.”
“Given the recent damage to
infrastructure in the recent
flooding - and the massive
clean-up costs necessary to
get the economy back on its
feet - we believe that the
country's investment appeal
will remain unattractive for
the foreseeable future”
Climate Risk and Investments
Sources: IFC 2011
Financial and Credit
Market
conditions
Project costs
Asset depreciation
Efficiency and
performance
Outputs
Loss contingencies
Strategic and
developmental
Environmental and
Social
Country risk
Legal and Reputational
• “Some lawyers are beginning to acknowledge that there is now
sufficient information available on CC for it to be taken into
account in both strategic and operational decision making.
• “If CC impacts are considered reasonably foreseeable by a
court, decisions that do not take these impacts into account
may incur liability in negligence.”
• Illinois Farmers Insurance vs. Chicago municipalities, May ‘14:
“The defendant knew or should have known that climate
change in Cook County has resulted in greater rainfall volume,
greater rainfall intensity and greater rainfall duration than pre-
1970 rainfall history evidenced, resulting in greater stormwater
runoff.”
Climate Risk and Investments
• IFC Climate Risk Management: mainstreaming of climate risk assessment at project appraisal
stage and risk mitigation responses in real sector investments
• 2012 revision of IFC Performance Standards (definition of clients'
responsibilities for managing environmental and social risks) includes
climate risk considerations
• PS1: “The client will establish and maintain a process for identifying the
environmental and social risks and impacts of the project. (...) The risks and
impacts identification process will consider (...) the relevant risks associated
with a changing climate and the adaptation opportunities (...)
Management of financial, E&S related climate, Adaptation
• IFC’s Adaptation Definition for investments and advisory services
De-risking investments
Storm surge height
Seawater flooding, 2050, observed and
accelerated SLR scenarios
Sources: IFC 2011, Escuela Naval CIOH 2010
• Port Muelles el Bosque, Colombia
• USD 180,000 investment in
information:
o mobilized USD 20 million in
private finance for adaptation
o de-risks and protects several
hundred million worth of
infrastructure
Adaptation interventions
Identifying Investment Needs and Opportunities
Source: Adaptation Market Study, Turkey, IFC and EBRD 2013
Enabling Environment for Private Sector Adaptation
• G20 Dialogue Platform on Inclusive Green
Investment
• Gaps: informational, policy, regulatory,
economic incentives
• Practical and implementable interventions
that increase climate resilience and
incentivize adaptation
Enabling Environment for Private Sector Adaptation
Source: IFC 2014
Vladimir Stenek
[email protected]
Thank you!
www.ifc.org/climaterisks
doc_419806617.pdf