# Ranking Resilience: Economies Adapting to Climate Risk

An episode of [Switched On](https://invisiblenetwork.ai/podcast/1469286286), 20 Nov 2025, 33 min.

Audio: https://podtrac.com/pts/redirect.mp3/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/01a10738-3608-4dec-883c-ae3c00026b36/5b59bd3f-3a21-4dcb-bfd6-b39a00bcd8b6/audio.mp3?utm_source=Podcast&in_playlist=6d114f63-833d-4b78-bbf5-ae3c00026b44

Climate is reshaping the global economy. Losses from major weather events are now estimated at $1.4 trillion each year, and as the damaged assets, disrupted supply chains and declines in productivity pile up, climate risk is turning from an environmental issue into a financial one. BloombergNEF has thus developed an Adaptation Preparedness Framework to assess how major economies are preparing for this new reality. Which countries are best equipped to withstand what’s coming, and how are they getting there? On today’s show, Kobad Bhavnagri is joined by Danya Liu, a senior associate on BloombergNEF’s climate risk team, and Natasha Mawdsley, a strategy analyst, to discuss their note, “Ranking Resilience: Assessing Country Climate Adaptation.” Complementary BNEF research on the trends driving the transition to a lower-carbon economy can be found at BNEF<GO> on the Bloomberg Terminal or on bnef.com Links to research notes from this episode: Ranking Resilience: Assessing Country Climate Adaptation - https://www.bnef.com/insights/37695 See omnystudio.com/listener for privacy information.

## Transcript

[0:00] Speaker 1: This is cobobarbenergree and you're listening to Switched on the
[0:04] Speaker 1: podcast brought to you by Bloomberg. Nif the physical impacts
[0:08] Speaker 1: of climate change are no longer distant risks, they already
[0:11] Speaker 1: cost the global economy around one point four trillion dollars
[0:15] Speaker 1: every year For businesses and investors. Those losses show up
[0:19] Speaker 1: as damaged assets, disrupted supply chains, and reduced productivity. As
[0:24] Speaker 1: these costs rise, climate adaptation is becoming as much a
[0:28] Speaker 1: financial issue as an environmental one. A country's readiness for
[0:32] Speaker 1: the climate impacts it will face in future now shape
[0:36] Speaker 1: investment decisions, insurance coverage, and even credit risk. Here at BNF,
[0:41] Speaker 1: we've been examining how well major economy is preparing for
[0:45] Speaker 1: the physical realities of climate change, and today I'm joined
[0:48] Speaker 1: by Daniel lu a Senior Associate on BNF's Climate Risk Team,
[0:53] Speaker 1: and Natasha Maudsley, a strategy analyst, to discuss their recent
[0:57] Speaker 1: note ranking Resilience Assessing Country Climate Adaptation. The report introduces
[1:02] Speaker 1: a framework and scorecard that assess national resilience from risk
[1:07] Speaker 1: assessments and adaptation strategies to project implementation and financial recovery planning,
[1:13] Speaker 1: and together we'll explore how adaptation is being measured, what
[1:16] Speaker 1: it means for governments, investors and companies, and why resilience
[1:20] Speaker 1: could define the next major frontier in global finance. BNF
[1:24] Speaker 1: clients can find this note, along with other climate and
[1:27] Speaker 1: adaptation research by heading to BNF go on the Bloomberg
[1:31] Speaker 1: terminal or visiting BNF dot com to learn more about
[1:35] Speaker 1: how BNF approaches strategy research on the energy transition, including
[1:39] Speaker 1: developments in commodity markets, sector trends, and the technologies shaping
[1:44] Speaker 1: the future. You can find more information at BNF dot
[1:47] Speaker 1: com for those who would like to hear more about
[1:50] Speaker 1: climate adaptation. Later this week, we'll be releasing a bonus
[1:54] Speaker 1: episode where I read an article that I recently penned,
[1:57] Speaker 1: exploring how the adaptation imperative is reached, shaping strategy and
[2:01] Speaker 1: creating new risks and opportunities for business. And Before we
[2:04] Speaker 1: get into today's episode, a quick note for students tuning in.
[2:08] Speaker 1: Bloomberg and EF's summer Internship program is now open for applications,
[2:13] Speaker 1: with roles available in our London offices if you're in
[2:16] Speaker 1: a relevant undergraduate or postgraduate program and graduating in twenty
[2:20] Speaker 1: twenty six or twenty twenty seven. It's a great opportunity
[2:24] Speaker 1: to work on the energy transition alongside our research teams
[2:27] Speaker 1: gain the exposure to the energy, transport and industrial sectors
[2:31] Speaker 1: to apply. Send your CV to Andrew Hill at AHL
[2:36] Speaker 1: two three three at Bloomberg dot net before the end
[2:41] Speaker 1: of December. Now to today's episode, where we explore how
[2:44] Speaker 1: countries are building climate resilience and what it will take
[2:48] Speaker 1: to turn adaptation plans into action. Welcome to the show,
[3:02] Speaker 1: Danielle Hey, Cobed Natasha. Really great to have you with us.
[3:06] Speaker 2: Thanks for having me.
[3:07] Speaker 1: So you've just released this new piece of research called
[3:10] Speaker 1: Ranking Resilience Assessing Country Climate Adaptation, which is kicking off
[3:15] Speaker 1: Benef's new research on the topic of adaptation and resilience
[3:20] Speaker 1: for our listeners. Can we start by just defining what
[3:23] Speaker 1: is climate adaptation and why does it matter right now?
[3:27] Speaker 3: Adaptation is any measure that helps people cope with the
[3:32] Speaker 3: effects of climate change. So it can be structural like
[3:36] Speaker 3: a floodwall. It can be nature based like preserving wetlands.
[3:41] Speaker 3: It can even be process and planning based, so knowing
[3:44] Speaker 3: your emergency response plan before it happens. And it's gaining
[3:47] Speaker 3: a lot of attention now because folks are starting to
[3:50] Speaker 3: realize that we have a lot of baked in effects
[3:54] Speaker 3: of climate change over the past several decades of heavy emissions.
[3:58] Speaker 3: Adaptation and resilience and our collectively have become a very
[4:02] Speaker 3: hot topic, and there's lots of eyes watching to see
[4:05] Speaker 3: which countries will make new pledges, will put more money
[4:08] Speaker 3: forward to finance some of these solutions.
[4:10] Speaker 1: And so why the emphasis on adaptation at dis COP
[4:14] Speaker 1: and at this moment is the world really starting to
[4:17] Speaker 1: feel the impacts of climate change? Are they starting to
[4:22] Speaker 1: affect people's lives more than they have previously, or are
[4:26] Speaker 1: the financial damages becoming more material.
[4:29] Speaker 3: The financial damages are definitely becoming more material. Our colleagues
[4:33] Speaker 3: in Bloomberg Intelligence run this really great climate Damages tracker
[4:37] Speaker 3: where they can segment out by event type, by state,
[4:41] Speaker 3: by country, how much economic damage does climate change and
[4:46] Speaker 3: natural hazards create. For the US, it's amounting to about
[4:50] Speaker 3: three percent of GDP. Globally, we're hitting about one point
[4:54] Speaker 3: four trillion dollars of climate induced economic damages per year.
[4:59] Speaker 3: That's a big number and it's ever growing. So I
[5:01] Speaker 3: think that's causing a lot of renewed interest in trying
[5:05] Speaker 3: to solve the problem.
[5:06] Speaker 1: Wow, three percent already in the United States of JDP.
[5:10] Speaker 1: That's an enormous number. So those losses are they mainly
[5:14] Speaker 1: from major events. So what makes up that huge damage bill.
[5:18] Speaker 3: Well, one of the aspects that we're interested in as
[5:21] Speaker 3: BNF is tracking the indirect effects from climate physical risks,
[5:26] Speaker 3: and I think this Bloomberg Intelligence data set captures that well.
[5:30] Speaker 3: So the primary vector of loss isn't necessarily asset damage
[5:36] Speaker 3: or building damage or property damage. It's the accumulation of
[5:40] Speaker 3: effects surrounding that. So for instance, lost productivity because you
[5:44] Speaker 3: can't go into the office, or lost productivity because your
[5:47] Speaker 3: power lines are down, or lost agriculture, lost crops because
[5:53] Speaker 3: of extreme events, things like that. So it's really the
[5:56] Speaker 3: accumulation of indirect effects that's getting us to such a
[6:00] Speaker 3: large number.
[6:01] Speaker 1: But the US has also faced some very expensive climate
[6:05] Speaker 1: related disasters, right so that we don't know necessarily know
[6:09] Speaker 1: how much is a climate change component, but hurricanes, the
[6:13] Speaker 1: recent LA wildfires, these were all very costly events, right.
[6:17] Speaker 3: Yeah, And you can track some of these through what
[6:20] Speaker 3: was previously the billion dollars disaster data set, and that's
[6:25] Speaker 3: up into the right graph. If I've ever seen one, right,
[6:28] Speaker 3: So the frequency of those very expensive, very costly disasters
[6:32] Speaker 3: has been increasing in the US.
[6:34] Speaker 1: Yeah. So Natasha, if I can bring you in here,
[6:36] Speaker 1: this rapidly escalating damage bill, as Daniel said, one point
[6:40] Speaker 1: four trillion dollars we're up to in the year twenty
[6:43] Speaker 1: twenty four. But what are the big drivers behind that?
[6:46] Speaker 1: How much is climate? How much other components which may
[6:49] Speaker 1: be pushing that damage bill up?
[6:51] Speaker 2: Yeah, I mean, obviously climate change isn't the only driver
[6:55] Speaker 2: of these increasing damages. Obviously there's inflation, but also we
[6:59] Speaker 2: are choosing to build more expensive things in high risk locations,
[7:03] Speaker 2: such as along coastlines along floodplaines, which is also leading
[7:07] Speaker 2: to an increase in damages to properties in these regions.
[7:12] Speaker 2: So it isn't purely climate driven, but we do know
[7:14] Speaker 2: there is a climate change component, and so we really
[7:17] Speaker 2: need to be focusing in on this now to see
[7:19] Speaker 2: how we can reduce these moving into the future. And
[7:22] Speaker 2: I think that is kind of starting to hit home
[7:24] Speaker 2: for people. No matter what we now do on mitigation
[7:28] Speaker 2: to kind of to reduce those climate hazards where there
[7:31] Speaker 2: will still be some residual risk, these extreme weather events
[7:34] Speaker 2: will still occur, and therefore we need to be focusing
[7:37] Speaker 2: on adaptation.
[7:38] Speaker 1: One way or another. This damage build is increasing, although
[7:41] Speaker 1: we don't know the exact proportion of the increase that
[7:44] Speaker 1: has been driven by climate change itself, there's more and
[7:48] Speaker 1: more loss in the economy, so it's something the financial
[7:51] Speaker 1: sector has to respond to. How should investors be sort
[7:54] Speaker 1: of thinking about this climate risk and then the potential
[7:58] Speaker 1: response to that in adaptive.
[8:00] Speaker 2: So there are a number of ways in which these
[8:02] Speaker 2: climate risk can turn into sort of real economic outcomes.
[8:06] Speaker 2: The obvious one would be through damages to things like
[8:09] Speaker 2: property and infrastructure, but as Daniel's mentioned, there are also
[8:13] Speaker 2: a number of other impacts that aren't currently being considered
[8:16] Speaker 2: by companies and by investors who are trying to model
[8:19] Speaker 2: what the total climate risk could be across their portfolio,
[8:23] Speaker 2: across their supply chain. And these are things like impacts
[8:26] Speaker 2: of labor productivity, impacts to human health, which can also
[8:31] Speaker 2: lead to kind of much greater financial outcomes. And therefore
[8:35] Speaker 2: we're trying to encourage a kind of a more holistic
[8:38] Speaker 2: view of what the climate impacts could be and that
[8:41] Speaker 2: need to be estimated through climate risk assessments.
[8:44] Speaker 1: So it's not just about the impacts on buildings or
[8:49] Speaker 1: damage from a storm which may blow the roof of
[8:52] Speaker 1: a house and render it uninhabitable, just saying there are
[8:56] Speaker 1: more economic impacts in that.
[8:57] Speaker 2: Yeah, absolutely, and we are seeing more new methodologies to
[9:01] Speaker 2: be able to look into some of these things. I
[9:03] Speaker 2: think labor productivity is one that we're saying being quantified
[9:07] Speaker 2: more regularly, particularly by governments, maybe less so by corporates,
[9:11] Speaker 2: but trying to think about things like you know, how
[9:13] Speaker 2: much econ am I going to need in the future
[9:15] Speaker 2: to be able to ensure that my staff can work
[9:17] Speaker 2: at an appropriate temperature.
[9:19] Speaker 1: So, Daniel, why is the national adaptation strategy and important
[9:25] Speaker 1: lens to be looking at when thinking about of adaptation
[9:29] Speaker 1: and what it means for an investor.
[9:32] Speaker 3: Well, when you think about the types of climate risk
[9:34] Speaker 3: that you're exposed to, there's always an undercurrent of systemic
[9:39] Speaker 3: climate risk that you, as an individual person or as
[9:43] Speaker 3: an individual company, can't directly alter yourself necessarily, and that
[9:49] Speaker 3: class of systemic climate risk is something that we think
[9:52] Speaker 3: is best addressed at the national level. So a good
[9:55] Speaker 3: example is you can put up little sand barriers around
[9:58] Speaker 3: your factory, or you can and try and construct a
[10:01] Speaker 3: little floodwall around your property. But if the overall city floods,
[10:06] Speaker 3: then there's not much that your tiny little floodwall is
[10:08] Speaker 3: going to do. But if the city can invest in
[10:11] Speaker 3: better drainage or better levees, or any number of solutions,
[10:15] Speaker 3: then that brings up that improves the systemic climate resilience
[10:19] Speaker 3: of an entire region and of all the assets and
[10:22] Speaker 3: the people within that region. So, taking lat lens, we
[10:26] Speaker 3: thought that the national level adaptation progress was a good
[10:29] Speaker 3: way to kind of proxy how larger regions and all
[10:33] Speaker 3: the assets and people within them are moving towards resilience goals.
[10:37] Speaker 1: And so how does that translate. It sort of mentioned
[10:39] Speaker 1: that the city level. If we could take another bite
[10:41] Speaker 1: of that answer, I think and talk about what it
[10:43] Speaker 1: means at the country level.
[10:45] Speaker 3: There's a lot of adaptation efforts that need a very
[10:49] Speaker 3: large orchestration, and a lot of that has to start
[10:54] Speaker 3: originate from a national level policy or a national level strategy.
[10:58] Speaker 3: So it's not enough for individual cities or states to
[11:02] Speaker 3: plan for their own resilience. But because everything is so interconnected,
[11:06] Speaker 3: you have to have this national layer or interregional layer
[11:11] Speaker 3: making sure that they're all speaking to each other and
[11:13] Speaker 3: that the solutions that they're proposing makes sense and don't
[11:16] Speaker 3: bring mal adaptation to other regions. So this high level,
[11:21] Speaker 3: national level orchestration is very important.
[11:24] Speaker 1: Great, So, Natasha Daniel, you've done this analysis to try
[11:28] Speaker 1: and evaluate the state of adaptation preparedness at the country level.
[11:33] Speaker 1: Can you tell us what does that mean and what
[11:35] Speaker 1: is the analysis that you've done? How does it ascertain
[11:39] Speaker 1: how a country is performing?
[11:40] Speaker 2: Well, we've produced two new resources, so firstly an Adaptation
[11:44] Speaker 2: Preparedness Framework and secondly an Adaptation Preparedness Country Schoolcard so BUZSI.
[11:49] Speaker 2: The framework looks at the key building blocks that a
[11:53] Speaker 2: country should put in place in order to build resilience
[11:56] Speaker 2: across the economy. So that's things like putting in place
[11:59] Speaker 2: the right pace policy, so an adaptation strategy with underpinned
[12:03] Speaker 2: by a CLIP budget, a climate risk assessment to understand
[12:06] Speaker 2: which risks you need to adapt to, but also looking
[12:09] Speaker 2: at evidence of projects on the ground to prove that
[12:11] Speaker 2: adaptation is actually starting to happen. And then we've considered
[12:15] Speaker 2: how could we score how a country is performing against
[12:18] Speaker 2: that framework. So we've identified key metrics and data points
[12:21] Speaker 2: that allow us to score the G twenty and Southeast
[12:24] Speaker 2: Asian countries against the framework to get sort of an
[12:27] Speaker 2: overall ranking of how they compare against each other. So
[12:31] Speaker 2: we see this as a useful tool for investors, but
[12:34] Speaker 2: also for governments themselves and corporates to be able to
[12:37] Speaker 2: assess country level preparedness. This kind of complements other existing
[12:42] Speaker 2: asset level climate risk assessments to be able to understand
[12:46] Speaker 2: some of the broader resilience to these systemic risks.
[12:49] Speaker 1: So if we dig in a little bit, Daniel, can
[12:51] Speaker 1: you sort of explain what the pillars are of this
[12:55] Speaker 1: adaptation preparedness framework and how you would think of what
[13:00] Speaker 1: are the key things that a country really needs to
[13:02] Speaker 1: be doing and investors need to be thinking about when
[13:05] Speaker 1: assessing is a country well prepared for the climate impacts
[13:09] Speaker 1: that likely to come.
[13:11] Speaker 3: We identified four pillars. The first is assessing and understanding
[13:15] Speaker 3: your risk. Number two is formalizing a strategy. Number three
[13:21] Speaker 3: is executing on projects, and number four is aligning a
[13:25] Speaker 3: disaster recovery plan with your strategy.
[13:28] Speaker 1: Let's delve a little further so when we talk about
[13:31] Speaker 1: sort of that first pillar about assessing the risks, what
[13:35] Speaker 1: are the things that a country should be doing that
[13:37] Speaker 1: we think are important bell weathers.
[13:39] Speaker 3: Well, this goes into this old adage you can't manage
[13:43] Speaker 3: what you don't track, right, So I think a national
[13:46] Speaker 3: level climate risk assessment is a great example of that.
[13:50] Speaker 3: You need to understand at a hyper local level and
[13:53] Speaker 3: at a national level, how physical risks are expected to
[13:57] Speaker 3: impact your country, your population, in your industries, and climate
[14:02] Speaker 3: assessments make that publicly available so that any actor within
[14:07] Speaker 3: that country or with business within that country can access
[14:10] Speaker 3: it and understand how they'll be impacted and plan for
[14:13] Speaker 3: their own adaptation or risk management as well.
[14:16] Speaker 1: And when people think about adaptation, they tend to think
[14:19] Speaker 1: about building sea walls and sort of physical interventions, mainly
[14:25] Speaker 1: around water. What are some other examples of what actually
[14:29] Speaker 1: building things and building resilience actually are.
[14:33] Speaker 2: So you've already taught to some of the well known
[14:35] Speaker 2: ones from an engineered solutions bucket. A lot of that
[14:38] Speaker 2: is kind of structural protection, but in this bucket we
[14:40] Speaker 2: also consider ways to build resilience across our kind of
[14:44] Speaker 2: engineered environment. So that might be things like storage and
[14:48] Speaker 2: smart grids to improve the resilience of our grids and
[14:52] Speaker 2: our power supply. If we move on to ecosystem based solutions,
[14:55] Speaker 2: these are basically can either be kind of restoring nature
[14:59] Speaker 2: to its kind of a potential to provide you know,
[15:01] Speaker 2: natural flood protections such as from mangroves. But it can
[15:05] Speaker 2: also be sort of natural versions of some of these
[15:08] Speaker 2: engineered solutions. So in urban environments, for example, you know,
[15:12] Speaker 2: just through planting more trees, we can reduce temperatures at
[15:16] Speaker 2: ground level. And then finally, if we look at planning
[15:18] Speaker 2: and social solutions, this can be everything from sort of
[15:22] Speaker 2: improving early warning systems, it can be changing building codes
[15:26] Speaker 2: to use more resilient materials, and also building resilience through
[15:31] Speaker 2: our communities.
[15:32] Speaker 1: And then the last pillar you mentioned in the framework
[15:35] Speaker 1: is about recovery. Daniel, can you expand a bit upon that.
[15:38] Speaker 1: What does that mean and why does that matter?
[15:40] Speaker 3: It's important because the recovery period, the rebuild period post
[15:45] Speaker 3: disaster is a really great time to embed resilience. If
[15:49] Speaker 3: you're going to be building something or rebuilding something from
[15:52] Speaker 3: the ground up anyway, it's a really opportunistic time and
[15:55] Speaker 3: economical time to try and embed some resilient strategies or
[15:59] Speaker 3: some resilient materials. It's also a great way to make
[16:03] Speaker 3: sure that maladaptation is not creeping into the system. If
[16:07] Speaker 3: you're aligning your disaster recovery, which tends to be separate
[16:11] Speaker 3: from climate strategy. If you're aligning disaster recovery, what's climate strategy.
[16:16] Speaker 3: That's a great way to make sure that maladaptation is
[16:19] Speaker 3: not creeping into the system unintentionally.
[16:21] Speaker 1: Maladaptation of it. That's a really great and interesting word. Well,
[16:25] Speaker 1: what does that mean? What is maladaptation?
[16:27] Speaker 3: Maladaptation is anything that brings down the resilience of an
[16:33] Speaker 3: asset or a region, and most of the time it
[16:35] Speaker 3: can be unintentional. So if you have two side by
[16:38] Speaker 3: side factories and one factory wants to elevate itself to
[16:43] Speaker 3: get out of the flood zone and builds this great
[16:45] Speaker 3: slope to protect itself, a maladaptation effect might be that
[16:49] Speaker 3: it is inadvertently increasing the flood risk for its neighbor.
[16:53] Speaker 3: So you want to be careful to avoid those types
[16:56] Speaker 3: of effects because what we care about ultimately is building
[16:59] Speaker 3: up system resilience.
[17:01] Speaker 1: Maladaptation can also be not making bad decisions about where
[17:06] Speaker 1: you build things. You know, we've seen, as we talked
[17:09] Speaker 1: about we're talking about this escalating damage bill that over
[17:12] Speaker 1: the last couple of decades there's been a lot more
[17:16] Speaker 1: construction and location of more and more expensive assets in
[17:19] Speaker 1: vulnerable areas on coastlines, in whether exposed places. What can
[17:25] Speaker 1: governments do to discourage that sort of development and to
[17:30] Speaker 1: stop encouraging it. Is that that's also an important component
[17:33] Speaker 1: in preventing mal adaptation, right.
[17:35] Speaker 3: Yeah, And governments can go as far as to say,
[17:38] Speaker 3: you know, this zone that we've identified is just too
[17:40] Speaker 3: high risk in general for us to sustain any assets
[17:44] Speaker 3: or any population there and mandate some kind of exit altogether.
[17:48] Speaker 3: That's in an extreme case, but there are certainly steps
[17:52] Speaker 3: that can be taken prior to that to encourage people
[17:57] Speaker 3: to move out of hyri zones and therefore reduce the
[18:01] Speaker 3: economic impact of those climate hazards.
[18:05] Speaker 1: Let's pivot to thinking about the results. You know, I'm
[18:08] Speaker 1: really eager to know how have countries performed, Who's sort
[18:11] Speaker 1: of at the top of the later board on this
[18:13] Speaker 1: score card that you guys have produced, who's well prepared
[18:17] Speaker 1: for future climate impacts, and who's not doing so well.
[18:20] Speaker 2: So at the top of our twenty five country let's
[18:24] Speaker 2: we have Canada with a near perfect score across our framework,
[18:28] Speaker 2: actually followed up by Singapore and South Korea at the
[18:32] Speaker 2: other end, we see Thailand, Russia, and Saudi Arabia with
[18:38] Speaker 2: many gaps across a number of key pillars across the framework,
[18:43] Speaker 2: so they're sort of lagging on this scoreboard. Interestingly, I
[18:46] Speaker 2: guess US sits very much in the middle, with a
[18:50] Speaker 2: number of rollbacks as we've seen over this year, for
[18:53] Speaker 2: example for disaster funding and on climate risk disclosure regulation.
[18:58] Speaker 1: The US is ranking sort of middle in the pact
[19:01] Speaker 1: despite having already three percent of GDP down you as
[19:06] Speaker 1: you had mentioned, So what are the things that the
[19:09] Speaker 1: US is getting wrong right now? Dania?
[19:12] Speaker 3: In our assessment, it was lacking two main fundamentals. One
[19:17] Speaker 3: is a centralized strategy on how to build long term
[19:21] Speaker 3: resilience and number two is funding to back that up
[19:24] Speaker 3: and make that happen. Interestingly, the US actually performed quite
[19:28] Speaker 3: well when it comes to getting projects off the ground.
[19:31] Speaker 3: So that data set where we were able to track
[19:34] Speaker 3: the number of engineered resilience projects or nature based resilience projects,
[19:38] Speaker 3: the US did quite well. So there is activity going,
[19:41] Speaker 3: but without a centralized strategy and a long term plan,
[19:45] Speaker 3: you risk again maladaptation or you risk missing out on
[19:50] Speaker 3: key synergies.
[19:51] Speaker 1: And so what is it that's really separating the leaders
[19:54] Speaker 1: and the lag adds Heo.
[19:56] Speaker 3: Well, one thing that we found is that countries that
[19:59] Speaker 3: are are more exposed overall to physical risks tend to
[20:04] Speaker 3: fare better on our assessment of adaptation preparedness, So that
[20:08] Speaker 3: was a positive sign. Countries that are not as susceptible
[20:12] Speaker 3: to physical risks tend to be a little bit lagging
[20:15] Speaker 3: in their preparedness for it, which I suppose makes sense right,
[20:19] Speaker 3: they have potentially fewer economic benefits or incentives to act,
[20:23] Speaker 3: But those two fundamental drivers that I mentioned, a centralized
[20:27] Speaker 3: strategy and dedicated budget for adaptation and resilience. Again not
[20:32] Speaker 3: just dedicated climate budget, but a pool of money specifically
[20:36] Speaker 3: for adaptation and resilience. That's very much key to making
[20:41] Speaker 3: any type of action materialize.
[20:44] Speaker 1: And so governments really have a very central role to
[20:47] Speaker 1: play in adaptation preparedness and planning.
[20:51] Speaker 3: We think the governments have a key role and our
[20:54] Speaker 3: best poised to set that central strategy and set the
[20:57] Speaker 3: long term vision and basically create a blueprint so that
[21:00] Speaker 3: other actors, whether that be the construction industry or whether
[21:04] Speaker 3: that be finance industry, can participate and know how they
[21:08] Speaker 3: can aid this long term journey of building resilience, and.
[21:11] Speaker 1: So one of the biggest roadblocks that are holding governments
[21:14] Speaker 1: back from adapting effectively.
[21:16] Speaker 3: One of the big ones is definitely financing. The financing
[21:20] Speaker 3: is just not there. To date. Most adaptation financing globally
[21:25] Speaker 3: has come from governments, but when you compare that against
[21:28] Speaker 3: what's needed, it's small potatoes. And most of the money
[21:32] Speaker 3: to date has been public financing. But private capital has
[21:35] Speaker 3: a very large role to play too, So there's a
[21:37] Speaker 3: lot of work in trying to attract more private investors,
[21:40] Speaker 3: private capital into this space.
[21:42] Speaker 1: One of the ways that private capital and the private
[21:46] Speaker 1: sector can build more resilience is through the use of insurance. Natasha,
[21:51] Speaker 1: can you talk us through the role that insurance plays
[21:55] Speaker 1: in this framework and a ranking what we found about
[21:58] Speaker 1: insurance as a leave to help increase climate resilience. Yeah.
[22:03] Speaker 2: Absolutely, So we've included insurance under our final pillar on
[22:08] Speaker 2: disaster recovery in terms of building financial resilience to extreme
[22:13] Speaker 2: weather events. Now, this uses data from Bloomberg Intelligence which
[22:18] Speaker 2: looks at the ratio between insured climate losses to uninsured losses,
[22:23] Speaker 2: and there were some quite interesting findings from that. There
[22:26] Speaker 2: are only a number of countries that scored kind of
[22:28] Speaker 2: highly in terms of having majority damages ensured, and that
[22:33] Speaker 2: was Canada, Australia, Japan, and the US and all other
[22:37] Speaker 2: countries had a very low insurance ratio for climate damages. Now,
[22:43] Speaker 2: insurance is a tricky one. Obviously, in developed markets where
[22:46] Speaker 2: the insurance market is functioning properly, it can be a
[22:50] Speaker 2: very important tool to be able to protect assets protect
[22:54] Speaker 2: homes from some of these climate damages. But it's not
[22:57] Speaker 2: going to work everywhere. So in developing countries there is
[23:01] Speaker 2: much less coverage and we have to look to some
[23:04] Speaker 2: sort of other financial models to be able to protect
[23:08] Speaker 2: assets and homes.
[23:10] Speaker 1: And if we think as well about the sort of
[23:12] Speaker 1: building resilience component as well as the engineered projects, which
[23:16] Speaker 1: we talked a bit about, what are the sort of
[23:18] Speaker 1: natural solutions that are being employed successfully and how big
[23:23] Speaker 1: a role do those things have to play.
[23:25] Speaker 2: So we are seeing an increasing role for nature based
[23:28] Speaker 2: solutions or ecosystem based projects as we've termed them here
[23:32] Speaker 2: in the report, So where we can look to projects
[23:35] Speaker 2: which actually hit multiple benefits, so projects which are building
[23:39] Speaker 2: resilients but they're also supporting biodiversity. So looking at natural
[23:44] Speaker 2: versions of some of these engineered protections such as flood barriers,
[23:50] Speaker 2: so using natural flood barriers, so that is kind of
[23:54] Speaker 2: through building up by natural ecosystems that already exist, such
[23:58] Speaker 2: as mangroves, but also you know, building hedgerows around fields
[24:02] Speaker 2: to kind of improve resilience of our agricultural land.
[24:05] Speaker 1: And early warning systems is another component of this, and
[24:10] Speaker 1: they sound like a pretty simple fix which could have
[24:12] Speaker 1: large benefits.
[24:14] Speaker 3: Yeah, you're right, that is a really effective adaptation, and
[24:18] Speaker 3: it's unique because it's almost always universally effective, right, which
[24:22] Speaker 3: is not always the case for adaptation. The UN actually
[24:25] Speaker 3: has a goal to have every single person on Earth
[24:28] Speaker 3: covered by an early warning system by the end of
[24:31] Speaker 3: twenty twenty seven, so we're a few years away from
[24:33] Speaker 3: that goal. However, I believe currently we're only at roughly
[24:38] Speaker 3: one in three people being covered, so a long way
[24:40] Speaker 3: to go, but certainly, yes, early warning systems are a
[24:44] Speaker 3: great return on investment because it allows you to have
[24:47] Speaker 3: time to either prepare for a hazard before it hits,
[24:51] Speaker 3: or to evacuate if need be and minimize the damage.
[24:54] Speaker 1: And Natasha, another component that you guys have talked about
[24:57] Speaker 1: in your work is national risk assessment. Why are those
[25:01] Speaker 1: important and how do they separate leaders from lagouts?
[25:05] Speaker 2: Well, there really are the first step in this process
[25:07] Speaker 2: to building resilience because you need to understand what the
[25:11] Speaker 2: risks are that require adapting to. I would see it
[25:14] Speaker 2: as quite a red flag over country is putting in
[25:16] Speaker 2: place in adaptation strategy without first doing a climate risk assessment.
[25:21] Speaker 2: So these risk assessments should be looking across the economy,
[25:25] Speaker 2: so identifying the most material hazards, so you know, are
[25:29] Speaker 2: you most exposed to floods or is it hurricanes or
[25:32] Speaker 2: is it extreme heat, and then thinking about what those
[25:34] Speaker 2: impacts could be across every area of the economy, so
[25:38] Speaker 2: across the built environment, across natural ecosystems for health, and
[25:42] Speaker 2: to really be able to hot spot those exposures so
[25:45] Speaker 2: that there's the foundations to be able to build an
[25:48] Speaker 2: adaptation strategy to build resilience those impacts.
[25:51] Speaker 1: The country that I think is ranked lowest tier that
[25:53] Speaker 1: you mentioned that the laggard in the thirty or so
[25:56] Speaker 1: countries that have been assessed in this pace of work
[25:59] Speaker 1: is Saudi Arabia. So what's going on over there? If
[26:02] Speaker 1: I think about Saudi Arabia, I imagine that it's already
[26:05] Speaker 1: a country which faces extreme HETE.
[26:07] Speaker 3: I think maybe there's two main factors that play here.
[26:10] Speaker 3: Specifically for Saudi Arabia, their government and their investors have
[26:14] Speaker 3: funneled a lot of money towards renewable energy so mitigation,
[26:18] Speaker 3: but not as much towards adaptation. There's actually a couple
[26:22] Speaker 3: examples of governments that have emphasized energy transition goals but
[26:26] Speaker 3: have not yet put their foot on the pedal on adaptation.
[26:30] Speaker 3: The other aspect for Saudi Arabia and a number of
[26:33] Speaker 3: other countries actually is the level of disclosure. So we
[26:36] Speaker 3: based most of our analysis on publicly available information, and
[26:40] Speaker 3: if the government is not disclosing as much or creating
[26:44] Speaker 3: regular progress reports, then there's not much that we can
[26:48] Speaker 3: incorporate into our assessment.
[26:50] Speaker 1: Well, me's sort of being to talk about which countries
[26:52] Speaker 1: are sort of feeling the hete and where investment would
[26:55] Speaker 1: make the biggest difference. Do we have a sense of
[26:58] Speaker 1: that of who is the most vulnerable country compared to
[27:02] Speaker 1: how well they are prepared.
[27:04] Speaker 3: Yeah. In our report, we put all the countries that
[27:07] Speaker 3: we assessed on a quadrant, so adaptation preparedness low to
[27:12] Speaker 3: high on one axis, and exposure to climate risks on
[27:16] Speaker 3: another axis, and three countries came in to the top
[27:20] Speaker 3: climate vulnerability quadrant, and they were India, Brazil, and Vietnam.
[27:24] Speaker 3: So these are the countries where they are exposed to
[27:28] Speaker 3: high physical risks, but their adaptation progress is not commensurate
[27:33] Speaker 3: with their risk exposure, which leads us to believe that
[27:36] Speaker 3: any progress or any steps taken in these countries will
[27:39] Speaker 3: have the biggest bane for your buck.
[27:41] Speaker 1: There is this narrative now emerging that adaptation is becoming
[27:44] Speaker 1: a bit of an investment opportunity. So what are some
[27:48] Speaker 1: of the upsides that countries who are doing adaptation policy
[27:54] Speaker 1: and preparedness well may experience.
[27:57] Speaker 2: Some of the benefits of building resis billions to climate
[28:01] Speaker 2: change that we've identified are things like a reduction of
[28:05] Speaker 2: climate damages, so or a slow down of the rise
[28:08] Speaker 2: in climate damages. There's also some additional benefits for industries
[28:13] Speaker 2: located in those countries, such as improved global competitiveness, particularly
[28:18] Speaker 2: in industries that are climate exposed, so say in agriculture
[28:22] Speaker 2: or mining. There's also a kind of would be a
[28:25] Speaker 2: lower global risk perception from foreign investors, so might see
[28:28] Speaker 2: a kind of an increased attractiveness from foreign investors. But
[28:32] Speaker 2: also a growth of new markets for adaptation solutions. So
[28:36] Speaker 2: if a country has a strong adaptation strategy in place,
[28:38] Speaker 2: then they need to be investing in these solutions, which
[28:41] Speaker 2: we know will require hundreds of billions of dollars of
[28:44] Speaker 2: investment across our economy, across all sectors of the economy,
[28:48] Speaker 2: and therefore you can expect to see a growth of
[28:50] Speaker 2: these new markets for the technologies and solutions across all
[28:54] Speaker 2: of those areas, that engineered solutions, that ecosystem based solutions,
[28:57] Speaker 2: add some of the social solutions as.
[28:59] Speaker 1: Well, and so on the flip side, countries that you
[29:03] Speaker 1: know that school lowly on our framework, those lag guards
[29:05] Speaker 1: that we're assessing are not very well prepared for future
[29:08] Speaker 1: climate impacts. What does that mean? How should investors or
[29:13] Speaker 1: companies really interpret those results? What is the outlook for
[29:16] Speaker 1: those countries and the ramifications.
[29:18] Speaker 2: Well, it's hard to say because we don't necessarily know
[29:21] Speaker 2: if it's always that nothing is happening or whether and
[29:24] Speaker 2: it's not just being disclosed, but there is a lot
[29:26] Speaker 2: of uncertainty about what the future impacts could be in
[29:30] Speaker 2: those countries, and the economic losses are more likely to
[29:33] Speaker 2: go unchecked in these countries, particularly in the near term.
[29:36] Speaker 3: Yeah, I would say that the opportunity is not just
[29:39] Speaker 3: limited to countries but to private investors as well, which
[29:44] Speaker 3: I think we're starting to see among the financial institutions.
[29:48] Speaker 3: Singapore was a great example of this. Their pension fund
[29:51] Speaker 3: did this study on investment opportunity in the adaptation driven market.
[29:56] Speaker 3: So if you do believe that adaptation will be need,
[30:00] Speaker 3: somebody is going to have to build that and that's
[30:02] Speaker 3: going to generate revenue. Japan was also a great example.
[30:05] Speaker 3: In their adaptation strategy, they specifically called out that Japanese
[30:09] Speaker 3: companies that sell into the adaptation market, for instance through
[30:13] Speaker 3: environmental engineering or construction fields, these companies could find new
[30:19] Speaker 3: markets throughout their region or in other countries as those
[30:23] Speaker 3: countries start to invest more in adaptation and look for
[30:26] Speaker 3: expertise in building it.
[30:28] Speaker 1: So financing is a really important component here, making capital flow.
[30:32] Speaker 1: What are some of the new ideas that are emerging
[30:34] Speaker 1: to make adaptation investable.
[30:37] Speaker 2: Well, obviously governments need to prioritize crowding in private capital
[30:41] Speaker 2: to be able to scale some of these solutions. So
[30:44] Speaker 2: some of the types of mechanisms that countries are deploying
[30:48] Speaker 2: are in sort of green bonds, green debt. For example,
[30:52] Speaker 2: in Japan, Tokyo has recently launched a resilience bond to
[30:56] Speaker 2: fund flood protection, which has been received very well and
[31:00] Speaker 2: has actually been oversubscribed. Other examples are catastrophe bonds, such
[31:04] Speaker 2: as recently used in Jamaica for Hurricane Melissa. Also adaptation
[31:10] Speaker 2: link debt swaps, such as the Barbados twenty twenty two deal,
[31:14] Speaker 2: which restructures sovereign debt to fund resilience building in the Caribbean.
[31:18] Speaker 2: These instruments have remained complex and untested at scale, but
[31:22] Speaker 2: there are kind of emerging examples of where this is
[31:26] Speaker 2: being able to fund adaptation and resilience, and private capital
[31:30] Speaker 2: is starting to flow and there is definitely a great
[31:33] Speaker 2: interest and so I think we'll be seeing a lot
[31:36] Speaker 2: more emerging in the near future.
[31:38] Speaker 1: Natasha Daniel, thank you so much for shedding light on
[31:41] Speaker 1: this really important new topic. All eyes will really be
[31:45] Speaker 1: on the outcome of the COP thirty negotiations. Can they
[31:49] Speaker 1: advance the adaptation agenda at least at the policy and
[31:53] Speaker 1: the international level and motivate more countries, particularly the ones
[31:57] Speaker 1: that on your schoolcard which have not scored so well.
[32:00] Speaker 1: This is a really interesting construct and a new lens
[32:02] Speaker 1: for investors and companies to start to think about their
[32:06] Speaker 1: exposure to future climate impacts. Thank you so much for
[32:10] Speaker 1: joining us, and look forward to the future research that
[32:13] Speaker 1: you can produce on this topic. So thanks very much
[32:15] Speaker 1: for joining us. Natasha, thank you, and thanks as well
[32:18] Speaker 1: to you, Danielle.
[32:19] Speaker 3: Thank you.
[32:29] Speaker 2: Today's episode of Switched On was produced by Cam Gray
[32:32] Speaker 2: with production assistants from Kamala Shelling. Bloomberg NEIF is a
[32:36] Speaker 2: service provided by Bloomberg Finance LP and its affiliates. This
[32:39] Speaker 2: recording does not constitute, nor should it be construed as
[32:42] Speaker 2: investment advice, investment recommendations, or a recommendation as to an
[32:46] Speaker 2: investment or other strategy.
[32:47] Speaker 3: Bloomberg ANIF should not be considered as information sufficient upon
[32:51] Speaker 3: which to base an investment decision.
[32:52] Speaker 2: Neither Bloomberg Finance Lp Nor any of its affiliates makes
[32:55] Speaker 2: any representation or warranty as to the accuracy or completeness
[32:59] Speaker 2: of the information contained in this
[33:01] Speaker 3: Recording, and any liability as a result of this recording
[33:04] Speaker 3: is expressly disclaimed.

Shows are listed from Apple Podcasts' charts and directory, and Podcast Index where it is used. Every show and episode belongs to its publisher and plays from the publisher's own feed; this site hosts none of them.