Funding climate adaptation in the Global South is essential for the economic health of the Global North, given mutual interdependencies. Extreme climate risks threaten investments, disrupt supply chains, and reduce productivity across regions, which in turn affects living costs and economic stability in the Global North. Urgent action must be taken to mobilize private capital for effective climate adaptation funding, benefitting both areas in the long term.
Climate adaptation funding in the Global South is vital for the economic stability of the Global North. Cities such as New Delhi, Manila, and Lagos are at high risk from climate change, yet the Global North often overlooks these impacts until they are felt directly. Extreme weather events have caused substantial economic losses in North American cities, yet it is essential to acknowledge and address the increasing risks faced by Global South economies.
Reports indicate that Asia and Africa are the regions hardest hit by climate-related disasters, which have surged by 20% in the last decade. The Intergovernmental Panel on Climate Change has found that extreme heat waves have significantly increased since the 1950s. The interdependence between regions means that the Global North cannot afford to ignore the effects of climate change elsewhere, as these events can rebound economically.
Foreign direct investments (FDI) from the Global North are significantly exposed to risks in the Global South. Developing countries received $866 billion in FDI, a large portion of which goes to cities vulnerable to climate threats. Major companies, such as Apple, have invested heavily in these regions, indicating that their economic health directly correlates with prosperity in the Global South. A decline in investment due to climate risks may adversely affect returns in the Global North.
Global supply chains are also at stake, as many critical goods originate from the Global South. For example, coffee production is largely concentrated in these regions, and climate change threatens both quality and yield. The Global South accounted for over $5.6 trillion in exports in 2021, and any disruptions in production can escalate costs, ultimately affecting consumers in the Global North.
Furthermore, climate change can lead to a decrease in workforce productivity, particularly in labor-intensive sectors prevalent in the Global South. The International Labour Organization estimates losses of 2.2% in global working hours, amounting to $2.4 trillion annually, equivalent to the GDP of major economies. This slowdown in economic growth in the Global South indirectly impacts the economic stability of the Global North through reduced productivity and diminishing returns on investments.
To mitigate these consequences, the Global North must actively engage in funding climate adaptation efforts. Though private investments in these activities remain critically low, significant resources sit idle within institutions, highlighting the potential for mobilization. An effective funding model could include creating frameworks similar to Property Assessed Clean Energy (PACE) financing to enhance investments in climate adaptation in the Global South, ultimately ensuring mutual benefits for both regions.
The need for climate adaptation funding in the Global South arises from increasing climate-related calamities that threaten economic growth and societal welfare. Cities facing extreme risks frequently do not prioritize climate issues until they have significant repercussions. The Global North, although currently experiencing climate impacts, must recognize that the economic health of the Global South is interconnected with its own, emphasizing the significance of investing in adaptation measures.
In summary, enhancing climate adaptation funding in the Global South is critical for safeguarding the economies of the Global North. The increasing frequency of climate-related disasters necessitates a proactive approach to protect investments, maintain supply chains, and bolster productivity. A collaborative effort involving private capital and innovative funding models can ensure the economic resilience of both regions in facing climate challenges.
Original Source: www.orfonline.org
