Index aims to guide adaptation investment

LONDON (AlertNet) —Channeling private investment toward climate adaptation will be crucial to supplement public funds and raise the tens of billions of dollars needed each year, say the authors of an index intended to help guide that investment and highlight investor opportunities.

The Global Adaptation Institute (GAIN) Index, launched in 2011 and updated this month, evaluates the vulnerability of countries to climate change and their readiness to withstand its impacts, based on a wide range of data, from efforts to control corruption to variations in crop yields.

The data and rankings are intended to provide a factual base for public and private investors to make good decisions about where to most effectively invest money, according to Juan José Daboub, a former managing director of the World Bank.

“The goal of this is try to bring everyone to the same table,” said Bruno Sanchez-Andrade Nuño, GAIN’s director of science and technology. According to Nuño, all of the data and formulas used to draw GAIN’s conclusions can be found on the site’s website.

Daboub said that the leaders of countries most affected by climate change support investment to defend against it, but are unable to raise the necessary capital, even though “the problems are already in front of us.”

Countries face a combined $30-100 billion annual cost to adapt to climate change, he said. Richer nations have promised to provide $100 billion a year in financing for climate change adaptation and mitigation of emissions in poorer and climate-vulnerable nations by 2020, but the source of much of that funding remains unclear, experts say.

CLOSING THE FUNDING GAP

“The only way that gap can be sealed, in our opinion, is through investment by the private sector” – which is where the GAIN index comes in, Daboub said.

The index evaluates each country based on six “vulnerability” criteria and three “readiness” criteria. The criteria for vulnerability are food, health, water, infrastructure, and – as of this year – ecosystems and habitat. Those for readiness are economic, governance, and social readiness. Each criteria has its own set of subcategories as well.

The GAIN Index compiles this information and assigns each country a spot on the GAIN Matrix. The matrix’s four quadrants each have a color which is then applied to the countries within each quadrant. Each color, according to Daboub, is designed to attract a different type of investor.

The private sector is most likely to look at the blue quadrant, countries with high climate change vulnerability but also high readiness, he said. Example countries include Namibia, Saudi Arabia, and the Dominican Republic.

Such countries “are enhancing their legal systems, they’re combating corruption, they have more flexible labor codes, they respect contracts,” Daboub said.

Development agencies are most likely to look at the red quadrant, which represents countries with low readiness and high vulnerability, such as Bangladesh and Iraq, the index suggests. Local investors are likely to look at countries like Mexico and Brazil in the green quadrant, which represents countries with low vulnerability and high readiness.

And non-governmental organisations will look at all four, said Daboub. That includes the final, yellow quadrant that contains countries with low readiness and low vulnerability, such as Iran and China, according to the index.

Tom Mitchell, the head of climate change at the UK-based Overseas Development Institute and an adviser on disaster risk management for the Climate and Development Knowledge Network, agreed that high vulnerability and low readiness countries get more attention from investors.

“Countries that are slightly more stable, but also highly vulnerable and least ready, tend to be the traditional aid darlings,” explained Mitchell. “They tend to do quite nicely.”

But Mitchell expressed skepticism toward the numerous climate change indices that have been appearing.

ARE INDEXES CREDIBLE?

“There has been a real struggle for credibility in these kind of exercises,” he said. “Whose methodology is right? What’s missed out? And certainly there’s a degree of competition.”

He also said that, in some instances, countries competitively use climate change indices to get more resources.

“We have anecdotal experience of a country looking to highlight their increased vulnerability to be pushed up the table in order to make a claim” for more resources, Mitchell said.

An index such as GAIN’s is not the “be all and end all” guide to decision making but it can help bring input to the topic and highlight possible methods of understanding it, Mitchell said. He also spoke to the benefits of private sector support for adaptation, even if he’s “seen very few examples of that really happening.”

Private sector support for adaptation is likely to be a good thing, he said, “if that private sector support is genuinely interested in supporting the adaptation of the poorest and most vulnerable.”

Jon Christianson is an AlertNet Climate intern.