As climate adaptation rises, will mitigation suffer?
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As climate adaptation rises, will mitigation suffer?

As banks focus more on climate adaptation across their businesses, are they conceding that mitigation efforts are futile?


Climate adaptation seems to be having a moment.

At quite a few banking and business events that I have attended so far in 2024, it has featured large on the agenda. Corporates are more likely to call it building resilience into their physical operations, but the theme of insulating institutions and countries from increasingly wild weather events – storms, hurricanes and rainfall – is beginning to share the climate spotlight with mitigation efforts.

Every month, I message contacts about the stories I am working on. Sometimes I throw in some speculative topics as well – just to see if they resonate. In March, I thought adding climate adaptation might lead to some sustainability specialists offering their views. Perhaps an energy company wanting to talk about how it was adding resilience to its transmission efforts (and it did, thank you Actis)?

What I wasn’t expecting was a response from a global rates and FX strategist.

Macquarie got in touch offering an interview with Thierry Wizman, whose official title is global FX and interest rates strategist. I’ve spoken with Thierry many times – for example, about the US treasury market’s plumbing and the outlook for the Argentine economy and peso – but never climate.

I went back to my Macquarie PR contact to confirm this was about financing and climate adaptation.

“That’s right,” came the reply.

Baseline shift

Wizman’s interest isn’t fleeting. He had, in fact, written a paper on the financial perspective of climate adaptation, along with Marianna Kozintseva, a former colleague and now PhD, Visiting Faculty at the Sim Kee Boon Institute for Financial Economics, Singapore Management University.

My first question to Thierry is, obviously, why?

“Climate change is going to eventually shift the baseline for GDP and welfare, and countries need to start thinking about that now – and how to fill that deficit,” Wizman tells me. “We are thinking seriously about mitigation and adaptation, but [in this report] we focus on adaptation, in part because mitigation is being dealt with through international regulations and other mechanisms. Now the question is: how do you get countries to spend more on adaptation?”

Thierry Wizman, Macquarie

He argues that mitigation efforts are a public good: reducing the expansion of carbon-dioxide levels in the atmosphere will benefit everyone.

But even if all emissions ceased today, the IFC says that the world will still be around 1.8 degrees hotter than pre-industrial levels. Some level of climate change – and extreme weather events – is therefore already baked in.

And dealing with this – building resilience into infrastructure, building specific projects such as sea and flood protection, adding in new energy capacity as heat waves lead to soaring demand for air conditioning, or even financing the changing use of agricultural land – will require finance to drive local adaption needs.

There are many sides to this. The first is national risk: for example, taking an insurance approach to damage caused by climate events, and Wizman points to group risk pooling or climate catastrophe bond approaches that could be taken by small Central American countries.

Another is project-finance opportunities: adaptation driving construction or projects that will be opportunities for investors and companies alike.

And there is also the macro perspective: trying to identify which countries are most exposed to risk events as well as negative trends from climate change – for example, lower agricultural yields have GDP and foreign-exchange implications.

Ultimately, he argues, the scale of financing that will be needed to address the adaptation challenge will require the creation of sovereign climate funds.


Wizman isn’t the only macro voice talking about the importance of adaption. Ray Dalio, founder of Bridgewater Associates, has also been speaking publicly about the shifting emphasis to adaptation finance for broadly these same reasons.

The fact that such voices are beginning to focus on this issue shows how far the mainstream has incorporated the underlying climate-change premise.

On the face of it, this is good news. It shows that the argument has largely been won, the science accepted. But at the same time, it creates another problem, and one potentially just as dangerous as any climate denier.

If we move too far on from the mitigation challenge, and instead begin to focus on adaptation, then the underlying problem itself may just keep getting worse.

And at some level of increased temperature, there is no adaptation possible at all.

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