Climate Bonds Initiative is an international organisation working to mobilise global capital for climate action. It promotes investment in projects and assets necessary for a rapid transition to a low carbon and climate resilient economy. Sean Kidney (pictured), CEO and Co-Founder, recently spoke at the ICMIF Centenary Conference in a session examining the business benefits for cooperative and mutual insurers of adopting an integrated approach to sustainable investing and transitioning to net-zero as a business. This guest blog is reproduced with the kind permission of Climate Bonds.

This summer made it clear — we are living in the era of climate impacts. Rising sea levels, floods, and extreme temperatures showed the world that we have to prepare for the ecological, economic, and social impacts of climate change. In order to meet the challenges of the next century, we need to invest in resilience.

While the world still has time to avert catastrophic climate change, we are already seeing the effects that rising global temperatures will have on our societies and our planet. Near-term actions that limit global warming to 1.5°C would substantially reduce the impacts of climate change but cannot eliminate them all. The world needs to invest in resilience, preparing our societies, ecosystems, and institutions for the effects to come.

Our infrastructure needs to be fit for emergencies, prepared for fires and floods. Our ecosystems need to be protected to preserve critical biodiversity. And our societies and institutions need to support vulnerable communities, addressing the inequalities that lead to instability.

It’s a big agenda, but it’s a vital agenda.

That’s why Climate Bonds is launching our new Global Resilience Programme, aimed at mobilising capital markets to accelerate the urgent and necessary transition to resilient societies. We need rapid and robust investment to build resilience of physical, social, ecological, and financial systems in the face of climate change.

Resilience: Essential to a sustainable future

We are facing a century of volatility, accelerated and exacerbated by the changing climate. This summer, we saw impacts that we weren’t expecting to feel for another 25 years — extraordinary heat in China and North America, floods in Pakistan, and droughts across Europe showed us that we are already living in the era of climate impacts.

These impacts, however, aren’t limited to rising temperatures and sea levels. We are already seeing profound economic impacts from climate change. Biodiversity collapse, directly tied to human activity, increases the likelihood of further global pandemics. Dry riverbeds prevent commerce and transit, and displaced communities create economic and political instability.

The IPCC AR6 Report released in early 2022 delivers a stark warning that the window of opportunity to secure a “livable and sustainable future for all” is rapidly closing. Global greenhouse emissions remain stubbornly high while the physical impacts of climate change become more inevitable. The world needs to prepare for the impacts of climate change. In short, we need to build resilient societies if we are going to preserve a world our children will want to live in.

The global community has solidified its climate ambitions, but enormous gaps remain in facilitating and financing the necessary action to fulfil these ambitions. While public sector financing is insufficient to meet the capital requirements alone, there is more than enough private capital in the world to fund the necessary transition to more resilient societies.

We simply need to get it flowing in the right direction.

Building resilience through sustainable finance — Climate Bonds’ Global Resilience Programme

The sustainable debt market, with its variety of thematic labels, has become a prominent vehicle for channeling demand from investors toward climate action. However, financial instruments clearly designed and labelled to support resilient investments are still scarce. One major barrier is the absence of clear, evidence-based definitions of what constitutes a resilience investment.

In order to meet the urgent need for resilience investment, Climate Bonds has set out three goals for the Global Resilience Programme: to identify credible, science-based investment opportunities that build resilience, to mobilise finance towards credible resilience measures, and to accelerate the speed and growth of resilience investments through a supportive policy and regulatory environment.

By providing the market with clear definitions and rulesets, the current universe of green investments can be expanded to include those that build resilience. This expansion will include not only investments that reduce the direct physical impacts of climate change (eg flood barriers, early warning systems, etc) but also investments that address the underlying vulnerability of people and ecosystems to climate change (eg healthcare, housing, gender equity, deforestation, etc).

Central to the Climate Bonds strategy is to use clear science-based green definitions backed by institutional investors as a tool to mobilise governments and the public sector to act. More than USD1.9tn of green bonds have been issued to date and this number is expected to continue to grow exponentially. Yet, demand continues to far outstrip supply. There is a tremendous opportunity to tap this demand in order to scale-up capital flows towards investments in resilience.

Climate Bonds’ new Global Resilience Programme is built on three pillars designed to facilitate the rapid mobilisation of investment needed to meet the climate crisis: science-based rulesets, market development, and policy action.

Science-based rulesets: Defining resilience

Climate Bonds’ Global Resilience Programme will develop guidance to enable sovereign, sub-national, and corporate debt issuance to finance projects that support global climate resilience. The first phase of the programme will focus on developing a Climate Resilience Taxonomy, designed to direct sustainable finance towards credible resilience projects. The second phase will involve the development of detailed criteria for all relevant sectors, enabling certification of resilience focused instruments across the entire economy.

Market development: Driving investment towards resilience

The Global Resilience Programme will also provide training, technical assistance, and investment tools to kick-start markets and create a global movement around resilience finance. In addition, Climate Bonds will strategically engage investors — both to educate and inform, but also to ensure that definitions, reporting, and transparency are useful and actionable for investors.

Policy: Turning ambition into action

The Climate Bonds Global Resilience Programme will aim to embed resilience definitions into national and regional taxonomies. Climate Bonds is currently advising numerous countries, including the EU, China, and India, on developing and mobilising sustainable finance markets. This new programme will put forward actionable policy recommendations to policymakers and regulators around the world.

Last word

While immediate and dramatic action is needed to reach 1.5C targets and avert catastrophic climate change, investment in resilience will be essential to ensuring a sustainable future. Climate Bonds’ new Global Resilience Programme will aim to mobilise the tremendous potential of the sustainable debt market to support resilience efforts around the world, reducing the effects of climate change and supporting vulnerable communities and ecosystems.