News headlines of increasing extreme weather events and record-breaking temperatures – the global average temperature for July 2023 was the highest on record for any month since measurements started – are making the impact of climate change ever more visible. How best to adapt, and safeguard business from the growing risk of floods, or droughts, or fire? 

Thinking is evolving about how to define climate adaptation and incorporate it into business planning, says Rachael Barza, the European Bank for Reconstruction and Development’s lead on climate adaptation and nature finance. While adaptation measures used to be considered an expensive add-on, they are now being built into projects from the start. 

“Adaptation has often been seen as a big infrastructure need,” explains Barza, “The way that many countries are defending against challenges like sea level rise are with big things: big sea walls and big engineering projects. Often the big infrastructure projects are a way of retrospectively addressing climate change issues that weren’t considered at the start.” 

“But adaptation is also the routine consideration of these risks in new projects. And that is often a really cost-effective way to build resilience into the future. If you plan ahead now for what’s going to happen in 20-30 years with climate, then you don’t need to go back and do these costly retrofits or repairs.”  

“If you’re planning a road or a bridge or a power plant you need to consider where is it, will it be exposed in the future to more flooding, greater heatwaves, or more winds, and design it accordingly. It may only cost 5-10 per cent extra to increase its design standards to withstand the extremes we expect to come – whereas going back and replacing or protecting all of these assets, once we see that these hazards are getting more severe, is really expensive.” 

“So going forward we in the Bank might not see significant changes in how much we expect to invest in sea walls and canals, but a lot more projects equipped with the best technology to save an extra 10 per cent of water per year in their production, or that have more efficient irrigation, or are now using road surface materials or power line materials that don’t sag and melt in extreme temperatures that they haven’t experienced before, but are experiencing now.”  

But the current shift in focus to mainstreaming adaptation into all financing is also reflected in the EBRD’s work on adaptation.  

In 2023, it invested in an innovative sustainability linked loan with Astarta, one of the leading agro-holdings in Ukraine, supporting them in introducing climate smart agricultural practices and improving soil management. The EBRD also works with a myriad of partner financial institutions, to support householders and small businesses introducing adaptation technologies.  

“Now that all our work has to be aligned with the Paris Agreement adaptation goals, all our projects need to be consistent with resilience to a climate change future. We are recognising the climate risks our clients face and acting proactively to protect them, in future, by mainstreaming resilience planning for all new projects.” 

For the EBRD, 2022 was a record year in numbers of adaptation projects, even if, given the new emphasis on mainstreaming, the total figure of 246 million spent on adaptation across 52 projects looks smaller. 

The new focus has created a need for a new way for MDBs to measure climate adaptation as part of their climate finance tracking procedures. Last year MDBs launched a new adaptation finance tracking approach — a set of principles which each institution then applies.  

Under its applied version of this methodology, EBRD adaptation project are now categorised as either “adapted” or “enabling”. “The adapted ones are where measures are built into a specific investment, for example making a road more able to resist landslides or floods, which makes the whole investment more resilient. The enabling ones offer broader benefits – such as investing in research and development for new types of climate resilient crops – creating a wider system impact than one individual farm being made more resilient.”  In this methodology, the broader “enabling” projects score higher in terms of delivering green outcomes than “adapted” ones.  

“Our ambition is to make adaptation more straightforward. We want it to be something every company can think about in business planning and something we can help them make a real part of their routine thinking,” Barza explains.  

What might the next steps be? 

“What I think we should be doing more of is creative thinking around how to deliver resilience in a better way,” Barza says.   

She points to ways of making resilience planning for a project provide better co-benefits for the entire system the project exists in. “If you’re talking about flooding, because there’s suddenly too much water at once, you can have a pipe that sends the water away – or you can use that water to recharge local aquifers, which can reduce future surface water use and so provide benefits for local ecology. If you’re talking about heat, you can install an air conditioner or you can invest in passive cooling and reflective surfaces and low heat-emitting equipment. If you do that you get environmental benefits from reducing your carbon dioxide emissions, by not running your air conditioners as much and emitting less. It may not look different in terms of investment required, but it will provide much greater benefits overall.” 

Still, she adds: “I would be very happy if we hit a consistent mainstreaming level. I think we’re doing the right things.”