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The Green Finance Institute has noted a significant gap in the resources allocated to revamp infrastructure to enhance the UK's climate resilience.
The UK's climate policy framework contains substantial deficiencies that impede the progression of funds towards initiatives that can assist in dealing with the effects of high temperatures, floods, storms, and drought in the UK.
A new report from Oxford University's Environmental Change Institute, the Smith School of Enterprise and the Environment, and the Green Finance Institute (GFI) has arrived at the headline conclusion that the UK is not doing enough to combat the increasing physical climate risks. The study points out this failure.
Dr Nicola Ranger, the lead author of the report and head of the Resilience and International Development Programme at the University Of Oxford, claimed that the UK is not sufficiently prepared for climate change, putting lives, livelihoods, assets, and well-being in danger. Financial decision-making needs to consider physical climate risks, which implies that investments in important sectors such as infrastructure, buildings, and agriculture might be misguided, and the UK financial sector may be left vulnerable to systemic financial risks.
Financial institutions, regulators and government all need to take steps to address the current gaps. However, the government must act quickly and with risk awareness to meet the current situation.
Entitled Mission Climate Ready: Unleashing Finance and Investment for a Prosperous Climate Ready Economy, the report emphasizes that the UK is already being hit with considerable costs due to climate change's increasing effects.
For instance, during the sweltering heatwave of last summer, a remarkable 3,000 additional deaths were reported. This year, London witnessed the effects of flash floods, damaging residences and essential establishments such as medical facilities, educational facilities, and Underground stations. The water industry has also been cautioned with persistent alerts that the inadequate investment in new infrastructure has augmented the likelihood of water shortages caused by drought and sewage overflows resulting from strong storms.
According to research, investment into areas like infrastructure, buildings, and agriculture that are affected by climate change could make the UK more susceptible to climate impacts.
It is estimated that only 20% of asset managers and 35% of asset owners are disclosing their physical climate risks, according to the Task Force on Climate-Related Financial Disclosures. Despite this, new buildings are still being constructed to standards that some deem inadequate and unable to cope with climate change in the coming years.
In anticipation of the government unveiling its next five-year plan for addressing climate change this summer, two reports have been released. Experts anticipate the upcoming strategy will be much more ambitious than its predecessor.
For this reason, the GFI is currently requesting the government to embrace measures that could spur increased financial investments into initiatives and structures that would fortify climate preparedness.
The report suggests 25 policy proposals, such as forming a National Office for Climate Readiness and creating public-private partnerships by the end of 2023. These partnerships would devise adaptation plans for varying industries and generate capital that aligns with national climate resilience objectives.
The government should capitalize on its green sovereign bond issuance by issuing an adaptation bond to finance local, municipal, and national adaptation initiatives.
The government should be urged to set a yearly goal of £1bn in private capital for climate-resilient initiatives by the year 2030; the Treasury should take climate adaptation into account when deciding how to spend; and local planning needs to be improved and bolstered by 2030, with the reintroduction of legal responsibility to adjust to climate change for public sector entities in England.
As stated by Emma Howard Boyd, who co-authored the report and held the chair position for the Green Finance Institute, the UK has yet to take advantage of its potential to become a frontrunner in climate resilience.
Britain was seen as an innovator in adaptation following the Climate Change Act; however, the UK's leadership is in danger due to a lack of involvement from the financial sector. With a top-tier insurance market, well-regarded scientific bodies, a burgeoning tech industry, and a globally-recognized banking sector, the UK should be a prime example of progress in this area, just as it has been in the race to net zero. This report outlines how to rectify this missed opportunity and should be considered alongside other climate risks to the UK.
The report emphasizes that the UK possesses enough fiscal resources to increase investment in climate resilience strategies. The Infrastructure and Projects Authority (IPA) estimates that the UK will invest almost £650 billion in infrastructure over the next ten years, including private investment. This is 35 times more than the expenses for adapting infrastructure from the UK's 3rd National Climate Risk Assessment published in the previous year.
The report emphasizes the immense financial capacity that can be activated and the immediate requirement to incorporate climate resilience into economic transactions in the UK.