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In 2018, then United Nations chief Ban Ki-moon and other world leaders created the Global Commission on Adaptation to highlight a problem few were adequately addressing. Nearly 4 billion people live in countries where climate change-related disasters are becoming more severe and more frequent. Adapting to them — even as nations work to lower emissions and slow warming — will cost around $2 trillion by 2030. Who will pay, and how?

The answers to those questions have long been the subject of debate in climate circles. And at COP28 in Dubai, the hope is for the world’s countries to establish the first global goal around adaptation. Because while adaptation is easy to visualize — flood defenses, cooling shelters, heat-resilient crops — the current financial system isn’t putting anywhere near enough money behind it. 

“The adaptation finance gap is growing. If I would give it a score card, I would say it's a failing scorecard,” says Patrick Verkooijen, CEO of the Global Center for Adaptation, which acts as a “solutions broker” for figuring out how to finance adaptation projects.

On this week’s Zero, Verkooijen sits down with host Akshat Rathi to talk through the current negotiations, the business case for adaptation, and what locally-led adaptation looks like. He also emphasizes the risks of a misconception central to the funding gap. Adaptation is “seen as a sunk cost and not as an investment,” Verkooijen says. “And that’s wrong. By not investing in adaptation we're missing economic opportunities at scale.”

Listen to the full episode and learn more about Zero here. Subscribe on Apple or Spotify to stay on top of new episodes.

Our transcripts are generated by a combination of software and human editors, and may contain slight differences between the text and audio. Please confirm in audio before quoting in print.Akshat Rathi  0:00  

Welcome to Zero, I am Akshat Rathi. Today, funding, flooding and floating.

Akshat Rathi 0:20  

Three years after the Paris Agreement was signed, then-United Nations chief Ban Ki-moon saw there was progress on commitments to cut emissions but almost none on adapting to climate impacts.

Today close to 4 billion people live in environments that are highly vulnerable to climate change. 

And so Ban Ki-moon, alongside other world leaders, created the Global Commission on Adaptation to promote solutions and figure out how much it might cost. The answer is around $2 trillion dollars by 2030. 

It’s hard to move that amount of money without a big plan. So after they had the figure, Ban Ki-moon and his colleagues created another initiative, the Global Center for Adaptation to act as a “solutions broker” and to figure out how to finance adaptation projects. 

Now, I’ve said the word “adaptation” a lot already. But what does it mean?

Patrick Verkooijen 1:16  

If you talk about climate adaptation, people really get very tired very quickly, because it's very abstract. But it's about people. It's about a smallholder farmer using drought-tolerant crops. It is about a mother in, let's say, Bangladesh, taking their family to a cyclone shelter. It's very concrete stuff. 

Akshat Rathi 1:35  

This is Patrick Verkooijen, the head of the Global Center for Adaptation and my guest today. While climate adaptation might seem vague, it is easy to visualize. Flood defenses. Cooling shelters. Heat-resilient crops. The problem is, the financial system we have today is not funding it. 

All that might start to change, especially if negotiators at COP28 agree on a global goal for adaptation. The hope is, it would specify the kinds of investments needed to be prioritized. It would also give a strong signal to the financial industry to finally start to fund them. 

I spoke with Patrick at COP28 about how he is trying to close that funding gap, how the money is used, and the future of climate migration. 

Akshat Rathi  2:32  

Patrick, welcome to the show.

Patrick Verkooijen 2:34

Thank you so much. 

Akshat Rathi 2:36

When it comes to climate change, there are many, many issues to try and tackle the biggest and the one that most people talk about is reducing emissions, because that will allow warming to stop eventually, and maybe if we pull CO2 back from the air, even reverse it. But in the intervening period, we're already at 1.3 degrees Celsius of warming, and there's a bunch of warming that we've kind of baked in, which means climate impacts are already worse, and they will continue to get worse. So a second pillar of trying to tackle climate change is to actually adapt to the warming that we have already put into the atmosphere. But we don't talk about adaptation as much on a global stage as we need to. Why is that? 

Patrick Verkooijen  3:21  

That's exactly right. Because adaptation was positioned in the Paris Agreement in 2015 as the second pillar as part of the climate agreement. We have to adapt already today and we are adapting already today. But unfortunately that adaptation in action is not at the scale which required and also at the speed which is required. That is why five years ago Ban Ki-Moon, Bill Gates and Kristalina Georgieva, the head of the IMF, they came together and they said, ‘Well, we have to elevate the political heat under climate adaptation.’ And they launched a so-called Global Commission on Adaptation, that said, ‘Well, if the world were to invest in five key areas — early-warning systems, climate smart agriculture, resilient infrastructure, mangrove restoration, sustainable water management — if the world were to invest in these five critical areas, and would mobilize $1.7 trillion, between 2018 and 2030, the net economic benefits would be in the order of $7 trillion. So what these leaders tried to do is basically change the narrative. You asked, Why is adaptation not front and center? Because it's seen as a sunk cost and not as an investment. And that’s wrong. By not investing in adaptation we're missing economic opportunities at scale.

Akshat Rathi  4:41  

How are we doing with the $1.7 trillion climate adaptation goal by 2030? 

Patrick Verkooijen  4:48  

We are moving forward but not fast enough and not at the scale required. Basically, what we see compared to 2018 is that the adaptation finance gap is growing. So if I would give it a score card, I would say it's a failing scorecard. That is the backdrop of this Dubai Climate Summit, and it has to be addressed and it has to be addressed now.

Akshat Rathi  5:08  

Can you talk through specific examples of where projects in places that require adaptation are being deployed and what they look like? 

Patrick Verkooijen  5:19  

Yeah. So take early-warning systems, we know the facts. Half of the developing world does not have proper functioning early-warning systems. We also know if you're living in the Global South, the risk of you dying of a climate disaster is 15 times higher than in the Global North. So one of the solutions to that sort of imbalance is to have early-warning systems. Which country has been pioneering this? Well actually, that's Bangladesh. Take 1970. In 1970 — most of your listeners may know this — a massive cyclone hits Bangladesh and India. 500,000 people alone died in Bangladesh because of this incoming cyclone. What did they do since then? They had mangrove restoration, they had early-warning systems, they build cyclone shelters. So fast forward, 2019, a similar type of cyclone came into Bangladesh. How many people died? On the order of 20. So if a country like Bangladesh can move forward on adaptation, certainly the rest of the world can. I was recently in Bangladesh, where I met with Prime Minister Sheikh Hasina, and she said, ‘Well, we are investing out of our own taxpayers money $2 billion of financing into climate adaptation, but our investment needs on adaptation is not $2 billion, which we pay ourselves, it's $8 billion per year.’ So there is this massive gap of financing to flow into adaptation. And one of the reasons why the international community is basically coming here to Dubai is to find a way around who will pay for what? 

Akshat Rathi  7:00  

One thing that helps keep the pressure on reducing emissions very clear and persistent is because we have clear targets, right? The 1.5C goal has been translated into reaching net zero CO2 emissions by 2050. Globally, that means every entity can contribute towards reducing those emissions, there's a way to align all the people's work towards one target. Now, adaptation, as we've just talked through, there are many, many different things that need to be done. Because there's going to be more rain or less rain, there's going to be rising sea levels, or there's going to be too much heat, or there's going to be melting of permafrost, like the all kinds of climate impacts that happen, all of which we need to try and figure out how to adapt to. So is there a way in which you could come up with a goal for adaptation that would be clarifying, that would allow all these minds to align just like net zero has done for mitigation.

Patrick Verkooijen  8:00  

And that's precisely the homework global leaders are wrestling with here in Dubai during the climate summit. Because what is expected from them is that they agree on a global goal on adaptation. And what will this global goal on adaptation say? Will it be something simple as it is on mitigation, i.e. a ton of CO2 reduced? No, it’s not, because adaptation is inherently local, and it's multifaceted. So different proposals on the table: one sort of overarching approach is, it's not one goal, it’s a framework.  The negotiators from the Global South came forward with a very concrete proposal. So should we not agree that X billion people in the world would become climate-resilient? But that's at a global level. Others would say, well, actually, that's too abstract. Should we not break it down sector by sector? We just spoke about the early-warning example, should we not have a goal that say by 2027, all countries in the world should have a functioning early-warning system? It's concrete, it’s measurable, and it is very impact oriented. Others would say, well, actually, should we also not have a specific target on finance? Two years ago in Glasgow, the world agreed to double adaptation finance from the base level of $20 billion to $40 billion by 2025. But we know, of course, that that number $40 billion is quite frankly, a tokenistic number, because the investment needs on adaptation in the Global South alone is close to $400 billion a year. So those are all things to play for during this summit. This global goal on adaptation will help us to make the world accountable.

Akshat Rathi  9:53  

Just in your own understanding of where things stand right now, where do you think we will end up with the global goal on adaptation or global goals as it may be? 

Patrick Verkooijen  10:05  

I would say there will be a global framework on adaptation. So I'm optimistic about that. There will be a common understanding of where the world needs to head towards. So that's let's say the annual reporting can also be sort of accountable against a particular agreed framework. But I would think, even more important than a framework or in addition to the framework, the world and particularly countries need concrete plans, they need to see, ‘These are my priority investments. This is what the financing which I will put on the table, this is what I need from the private sector. This is what I need from the international finance institutions.’ It is very important that we move forward with concrete initiatives where financing is flowing. Why? Because at the end of the day, that's the only growth story of the 21st century, particularly for Africa.

Akshat Rathi  11:00  

One reason why adaptation does not get talked about as much is because the warmer the planet gets, the need for adaptation changes. So what you're doing right now for certain things at 1.2, 1.4 degrees Celsius, maybe not good enough when you're at 1.5, or 1.7 degrees Celsius. So what do you do to deal with that problem where you've invested a bunch of money in an adaptation solution that seems to be working for now and for the near future. But then we go past a warming threshold?

Patrick Verkooijen  11:34  

Yeah. So I think that's a very, very important example, indeed because lots of infrastructure in the world still is yet to be built. So I think it's important to take into consideration which climate reality are we actually building against? So that's why we as an organization, we're working with the African Development Bank, the World Bank, the Asian Development Bank, the IMF when they sort of operationalize infrastructure investments, to make sure that climate risks are mainstreamed into their design, different models are taken into a place. How high should this highway be in a 1.2 degree world? What will be the sort of the extra height you need to build in in a 1.5 degree world? What are the nature-based solutions which you can put into place to address these additional climate risks? That's quite complex modeling, obviously, which needs to take into place. But the fact is, many developments to date are not taking into account these variations of climate risks. And that's exactly why climate adaptation is essentially about doing development differently, by mainstreaming climate risk, and that's a very mundane and easy way to say but in reality, lots of development, finance is not taking this into account. So that's a missed opportunity. 

Akshat Rathi  12:55  

So in a way, there's just a lot of low hanging fruit given people don't even think about adaptation that could be used and enable more climate resilient infrastructure being built right now. 

Patrick Verkooijen  13:06  

And if I may, I want to add this, the World Bank recently came out with a report. So actually, if we build an infrastructure, traditional infrastructure, it costs X. But if we were to build resilient infrastructure, in terms of defending against climate risk? Additional costs, indeed, 3%, were 3% more expensive. But what is the economic return on that extra dollar pound or euro invested? It’s a ratio of one to four. That's smart economics. So what I find quite intriguing is that it's also about narrative, right? If you talk about climate adaptation, people really get very tired very quickly, because it's very abstract. But it's about people. It's about a smallholder farmer using drought tolerant crops. It is about a mother in let's say, Bangladesh, taking their family to a cyclone shelter. It's very concrete stuff. And I think that people-centered focus gets lost.

Also a point, which I think is important, what you see now, particularly in Europe, is this sort of this swing to the right. I mean, you see the election results in the Netherlands, we saw before in Sweden, we saw it in Italy. What will it do to the climate debate which a large in particular, what would it do to the poor cousin of the climate debate, climate adaptation? Would it be expected that a country like the Netherlands, which is built on climate adaptation, suddenly drop its investments, say in Africa, say in South Asia, say in the Caribbean? That will be very unwise, because the issues and challenges in Africa on climate change will not stay. If you want to address migration in Europe, you can invest in a lot of walls around you, but it's also a very important investment to address the drivers of this migration. Obviously, not everything is climate-induced, but it is one of the factors. So that's my call also to the right-wing movements, which are basically mushrooming in large parts of the world.

Akshat Rathi  15:05  

And so a lot of those solutions that need to be deployed in the Global South to be able to deal with those problems require money. And let's talk about money. According to your latest climate finance report, only 5% of global climate finance was invested in adaptation in 2021-22. That's about $63 billion. Your latest report says the funding gap is between $130 and $400 billion by 2030 per year.

Patrick Verkooijen 15:34

Per year.

Akshat Rathi 15:35

Per year. What do you see as the best way to try and increase the money that goes towards adaptation?

Patrick Verkooijen  15:41  

Yeah, so taking into account the reality in Ukraine, development finance going down, the cost of living crisis in the West, going up in the rest of the world as well, given the exchange rate depreciation, particularly in the Global South, given a debt crisis, 60% of developing nations are in debt distress. Against that background, it's not realistic to assume that international public finance will be the silver bullet. So where does that money needs to come from? Well, there was a host of sources. 

First and foremost, I would think it's also the public expenditure. In the home country itself, I just gave the example of Bangladesh, it’s investing $2 billion of their own taxpayers money. We need to make sure that that $2 billion is spent wisely on the top priorities in a particular country. Secondly, what is also vital is where is the private sector in all of this? But they're largely absent in the adaptation space, because the return on investment is not always straightforward. If you build a dike, it has clear livelihood benefits, but the financial return is not always there. On the other hand, there are opportunities in the adaptation space writ large, say, I'm a seed company. And if I were to bring to the market, drought-tolerant seeds, there is a market to be gained there.

Let's go back to Africa, because it is the most vulnerable continent. How much finance is flowing from the global north to Africa to date? It's $11 billion a year. How much is needed on an annual basis? If you just look at the national determined contribution and the national adaptation plan, if you just add everything up, how much is that? $51 billion. So already, for Africa alone, it's a $40 billion gap per year. And we will think, ‘Well, actually, that is a lot.’ And it is a lot. But think about the economic benefits, which we don't capture by investing in this. Think about the migration impacts, which will result from this if we don't invest in this. So that cost of action, vis-a-vis the cost of inaction, I think that is why it's so important that we don't leave the climate adaptation debates and agenda to environment ministers alone. They're good people, nothing wrong with them, but the finance community needs to come around this agenda.

Akshat Rathi  18:09

After the break, we hear more about local solutions and the people’s adaptation plan. 

Akshat Rathi  18:24

So one way in which we've been trying to understand climate finance is if you just split it into three types of money, one where, if you invest, you can make profits and so it is where the private sector should be taking the lead, should be jumping up and down to try and make that money. But then there's the middle bucket, which is where it's not yet clear whether you can make a profit from it. But from a government perspective, it's absolutely clear that there is an economic benefit, like building a dike, like building a flood barrier. For that, governments should be able to borrow money in the form of bonds or debt or some instrument, invest now, so that they don't have to then end up paying a lot more money to deal with the impacts in the future. That requires governments to have the ability to borrow money, which as you talked about is a problem right now, because the world is going through a debt crisis, especially in emerging economies, developing countries. Are there specific ways in which that gap can be addressed where developing countries can be allowed to borrow for adaptation finance? 

Patrick Verkooijen  19:29 

So there are these very interesting sort of innovative mechanisms which are basically coming up right now. Take Senegal in West Africa. President Macky Sall put forward a deal with the IMF, right? around the so called RSF, another acronym, resilience sustainability facility. So the IMF said, ‘Well, we know that your economy Senegal is vulnerable to climate shocks and that vulnerability of your economy will eventually translate into financial risks. So what if we, IMF, support, you, Senegal, in mainstreaming climate risk into your economic planning?’ In other words, if you invest your public expenditures on particular sectors, whether it’s transport, whether it’s agriculture, take climate risk into account at the same time. In return, Senegal said, ‘Well, that's good.’ So they received $300 million in terms of credit from the IMF to mainstream climate risk into their public expenditure process, which is great.

But separately, President Macky Sall said, ‘Well, we want to do more. We have lots of debt and our debt is increasing. What if we were to find an agreement with, say, bilateral creditors, Germany, France, China, who say, “You know what? You cancel our debt. And in return of that debt cancellation, we invest that in climate adaptation efforts.”’ This sort of debt-for-climate swaps. So that's an arena, that's a frontier area, where the world should enter into. It's not just about, ‘Oh, taxpayers in the Global North need to pay for climate adaptation in the Global South.’ That's a way too simplistic way, there’s different ways of structuring these financial flows. And at the same time, it's not just about money, it's also about sound policies, you do need to have building codes which take into account the climate shocks not just of today, but also off tomorrow so that you don't build in a sort of a flood prone area and without being protected, so to say. 

Akshat Rathi  21:43 

Now, one of the leaders who was crucial in enabling the Global Center on Adaptation to be formed was Kristalina Georgieva at the IMF. Now, IMF has something called the Special Drawing Rights, these are just basically money, in a way, that global economies have access to and the larger the economy, the more money access they have to the IMF. And there's an idea where they can lend that right.

Patrick Verkooijen 22:09

Un-lend that. 

Akshat Rathi: 22:10

Un-lend that right to a developing country and so that developing country then is able to borrow and lend money. Is that being used for adaptation at all? Is the IMF interested in having SDRs drawn into the adaptation debate?

Patrick Verkooijen  22:23 

Yeah, so the SDR Special Drawing Rights is sort of this, this mechanism, indeed, to mobilize additional financing. They factor on international capital markets. And indeed, Africa needs much more SDRs and have now sort of having very vocal to get more of the SDRs recycled, un lended, by the Global North, in a nutshell. So the IMF, particularly also, I would dare to say, because of Kristalina Georgieva, because of her development background from the World Bank before, from the European Commission humanitarian work before, brought into the IMF’s work adaptation at the center. And that's why this SDR recycling is so important. It is being used as being now even transferred through institutions such as the African Development Bank. I mean, the African Development Bank is, I would say, setting the gold standard, because they said, ‘Well, out of our overall climate finance portfolio, 65% is going to climate adaptation.’ So there are are sorts of ways where current funding to Africa to Asia to the Caribbean can be channeled in a different way. It's not just new money, it’s also using existing financial flows wisely.

Akshat Rathi  23:40 

One other idea has been to try and put a levy on fossil fuel profits or on financial transactions, very small levy that would end up with billions of dollars that would be available for climate finance. Is that something being talked about for adaptation specifically? 

Patrick Verkooijen  23:57

So it's interesting you say it is, let's say carbon pricing, putting a price on pollution is out there for I would say since the early 90s. Obviously, it's currently being discussed here in Dubai around, ‘Well, we need to put indeed a levy on the oil and gas industry because that can then fund loss and damage, right?’ But surprisingly enough, again, here, this sort of re-channeling of finance, extracted from a basically a levy or tax on carbon pollution, to fund adaptation specifically, is a missed opportunity. But there is space also in this. It's just basically how do you utilize the revenues collected from different sources?

Akshat Rathi  24:38  

We should talk about the Global Center on Adaptation and I think the best way to try and understand what you're doing is to recognize that your office in the Netherlands is the world's largest floating office, very fitting for an organization that's trying to deal with adaptation was that by design? 

Patrick Verkooijen  24:57  

It was by design. I mean, what's the best way to showcase that adaptation is possible is to have been hosted in an office which indeed, goes up twice a day, two meters up and two meters downstairs, the largest floating office. And that's also why we were so delighted that President Ruto of Kenya said, ‘So actually, there is a great office in the Netherlands of the Global Center on Adaptation. We, Kenya, will host the Africa office in Kenya, which will be a fully nature-based solution.’ It also speaks to the point that adaptation in different contexts means different things. So obviously, in Kenya is different than in the Netherlands.

Akshat Rathi  25:35  

Your organization was founded only in 2018. So that sort of speaks to the point where even though adaptation has been something that we should have talked about from day one, we're only starting to really focus on it in recent years. What is it that the Global Center on Adaptation is now enabling as an organization that's been created in 2018, and is trying to bring together these various strands that need to be dealt with as we try and deploy adaptation solutions. 

Patrick Verkooijen  26:01  

So the Global Center on Adaptation, or GCA, to use that acronym. What we do on a Monday morning. De facto, three things. One, we've very much focused on the political mobilization, turn up the heat on political leaders. But quite frankly, political leaders speaking without the analytics, without the evidence, without the case studies, without the numbers, is like sort of an emperor without clothes. So our second pillar is very much focused on analytics. Every year, we issue our state and trends on adaptation, which is basically a very concrete operational roadmap. What are the priority areas? Where should you invest in? Who should invest against? What sort of metrics is success being measured against in a particular region, or a sector?

The third pillar, where we all will be judged, not just the Global Center for Adaptation, but any organization. What are we doing on the ground? At the end of the day, that's where the rubber hits the road. So together with the African Development Bank, in 2021, we launched the largest adaptation program in the world, the Africa Adaptation Acceleration Program ,the AAAP, $25 billion over five years. And in the last two years, we have invested close to $7 billion in resilient infrastructure, drought-tolerant crops, climate information systems, in youth, and jobs, access to finance. So it's working, it’s moving. But again, it's not at the scale and speed which is required.

Akshat Rathi  27:33

There's a lot to do on adaptation. But there is an area that is even less talked about, which is, there will be places that become uninhabitable, unlivable, or just disappear because sea levels rise. How do you have those conversations with the countries that will have those regions coming up or are already there?

Patrick Verkooijen  27:54  

Well, we don't have to tell people — the climate impacts if you live in the Global South, because they're living on the frontline of the climate emergency today, they're living it basically in their daily lives, they're moving from, say, the Marshall Islands, already, to say, California, because there is a treaty between between United States and the Marshall Islands for all sorts of other  reasons. So this phenomena of the impacts of climates basically tipping over sort of realities to adapt to it, that is very front and center for those who are living on the frontlines today.

Take, for example, another topic, which we haven't addressed yet, is the psychological impact. I mean, you see, say India, that there is a correlation between the level of suicide and sort of the ratio of droughts of smallholder farmers, right? I mean, that's not the only factor. Obviously, we all understand that. But there is a strong correlation in that regard. So that sort of the implications at a societal level is not just financing, financing is important is not just policies, policies are important. It is also the human, the psychological factors, which need to be addressed. And so this adaptation field, in my view, is so underdeveloped, yet. That's why it's so important that it's really being elevated at all levels.

Akshat Rathi  29:22  

This has been an enlightening conversation, and I look forward to keeping up with the topic and trying to find ways in which that gap can be filled.

Patrick Verkooijen  29:31

Thank you very much indeed. 

Akshat Rathi  29:39  

Thank you for listening to Zero. Apart from this podcast, every day at COP, we publish the Bloomberg Green newsletter, full of all the latest at the summit. Sign up for free at bloomberg.com, there’s a link in the show notes. You can now listen to Zero without ads, just log into Apple Podcasts using your Bloomberg Subscription. 

If you liked this episode, please take a moment to rate or review on Apple Podcasts and Spotify. Share this episode with a friend or with someone who might like to work in a floating office. You can get in touch at zeropod@bloomberg.net. Zero’s producer is Oscar Boyd and senior producer is Christine Driscoll. Our theme music is composed by Wonderly. I'm Akshat Rathi, back soon with more from COP28. 

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