The Global South faces extreme climate risks, notably in urban centers like New Delhi and Jakarta, which threaten economic interests in the Global North. Rapid climate changes have led to increased disasters, with critical Foreign Direct Investments at risk. These dynamics affect supply chains, particularly in vital sectors like agriculture, and emphasize the urgent need for substantial funding in climate adaptation efforts to protect shared economic futures.
Cities in the Global South, including New Delhi, Manila, Jakarta, and others, are among the most impacted by extreme climate risks. Without immediate and effective climate adaptation measures, these risks can resonate globally, particularly affecting the economic stability of the Global North. Indeed, significant economic losses have already been witnessed in cities like Toronto and regions such as Florida due to climate-induced disasters.
A report from Verisk Maplecroft indicates that 99 of the 100 cities at greatest climatic risk are found in Asia, with these regions experiencing intensified heat waves and extreme weather events. The United Nations Environment Program (UNEP) reported a 20% rise in climate-related disasters in the Global South over the past decade, highlighting the urgent need for adaptation strategies.
While the Global North may prioritize its immediate domestic issues, economic ties between the two regions underscore the interconnectedness of their futures. For example, significant Foreign Direct Investment (FDI) from the Global North is funneled into the Global South—approximately 60% of total global FDI. This investment facilitates vital industries, such as manufacturing and technology, in cities susceptible to climate change.
Risk to investments is a critical concern as climate threats escalate. Notable corporations like Apple, heavily investing in countries such as India for iPhone production, exemplify the exposure of the Global North to climate risks in the Global South. A decline in climate resilience could prompt a decrease in FDI, adversely impacting both regions’ economies.
The Global South’s export of essential goods, including crucial commodities like coffee, further illustrates the economic interdependence. With the coffee industry alone worth about $40 billion, climate change poses severe risks to its quality and yield. Therefore, disruptions in production and supply chains due to climate events can adversely raise business costs and affect consumers in the Global North.
Moreover, productivity and employment in the Global South are increasingly jeopardized by climate change, potentially subtracting $2.4 trillion from global GDP. Reports suggest that climatic impacts could affect working hours and create significant losses in agricultural-driven economies, which, in turn, poses significant challenges for general economic growth and productivity and threatens livelihoods that support Global North markets.
Action from the Global North to fund climate adaptation in the Global South is not only a matter of equitable responsibility but also a sound economic decision. Yet, funding remains insufficient, with only $63 billion allocated in 2021-22 against a projected need of $212 billion annually. As a result, private investments, which could significantly offset these gaps, remain largely untapped, highlighting the need for innovative financing models.
Corporate investments in climate adaptation require a clear capture of value for stakeholders. Despite substantial liquidity available, private capital hesitates to engage due to traditional views that perceive climate adaptation as solely a governmental responsibility. Without effective mechanisms to demonstrate value creation and mitigate risk, private investments in climate resilience remain limited.
Through initiatives similar to Property Assessed Clean Energy (PACE) financing, raising capital and managing it for climate adaptation initiatives in the Global South can be feasible. Comprehensive strategies that clarify the role of private capital in these regions must be developed, incentivizing investments that ultimately safeguard shared economic interests between the Global North and Global South.
The Global South faces extreme climate risks with cities like New Delhi and Manila being severely affected. Climate change not only impacts these areas directly but also poses significant risks to economies in the Global North connected through trade and investment. Effective climate adaptation strategies are essential to mitigate these risks, yet funding remains inadequate to cover the anticipated costs for necessary interventions.
The interconnected economies of the Global North and South highlight the importance of funding climate adaptation in vulnerable regions. The significant economic implications of climate change threaten global supply chains, investment returns, and overall productivity. Addressing these challenges requires a collective effort from both public and private sectors to ensure sustainable development and secure economic futures for all involved.
Original Source: www.orfonline.org
