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Policy Brief

Accelerating Risk-Informed Investments in Climate-Resilient Urban Infrastructure: A framework-based approach

Ahana Chatterjee, Shreya Wadhawan, Savina Carluccio, Niladri Gupta, Deo Raj Gurung, Sana Dharani, Sharmala Naidoo
September 2024 | Climate Resilience

Ahana Chatterjee, Shreya Wadhawan, Savina Carluccio, Niladri Gupta, Deo Raj Gurung, Sana Dharani, and Sharmala Naidoo. 2024. Accelerating Risk-Informed Investments in Climate-Resilient Urban Infrastructure: A framework-based approach. T20 Policy Brief.

Overview

Extreme climate hazards disproportionately impact socio-economically marginalized groups, particularly in rapidly growing urban areas in Low —and Middle-Income Countries (LMICs). To close the infrastructure gap by 2050, an estimated USD 2.8 trillion is needed. To address this, investments must be risk-informed, supported by scientific evidence, research, and innovation, and underpinned by a unified climate risk assessment framework. 

The brief outlines a framework for accelerating climate-resilient infrastructure investments, emphasising risk quantification and a lifecycle approach to enhance resilience. Brazil's 2024 G20 presidency is positioned to advance this agenda by clarifying the value and benefits of climate-resilient infrastructure and building the capacity of stakeholders.

Key Highlights

  • Climate and weather-related disasters have surged five-fold over the past 50 years, causing over USD 250 billion in losses in 2023 alone. The annual average loss (AAL) for infrastructure sectors due to disasters and climate change is currently between USD 301-330 billion (CDRI 2023).
  • Despite the pressing need, investments in climate-resilient infrastructure remain inadequate. Only USD 85.6 billion in FDI was directed towards infrastructure in LMICs through 2020, a fraction of the estimated USD 1.5 trillion required annually to address infrastructure deficits.
  • Rapid urbanisation has led to the proliferation of poorly planned settlements and infrastructure systems in cities, particularly LMICs. By 2050, 84% of the fastest-growing cities are projected to face 'extreme' climate risks.
  • Integrating risk assessments throughout the infrastructure lifecycle is crucial for reducing delays, cost overruns, and economic losses from disasters. Comprehensive risk-informed planning can yield high returns by prioritising resilient design, quality construction, and effective operation and maintenance practices.
  • Developing a unified framework for assessing climate risks to infrastructure is imperative for generating scientific evidence to guide need-based investments. Standardising risk assessment indicators allows for identifying risks and resilience across borders and promotes data capacity building in LMICs, making it the need of the hour.

Key Recommendations

  • Standardise climate risk assessments for critical infrastructure using the IPCC methodology to guide investments, address data gaps, and enable cross-border analysis and solutions. A unified framework for infrastructure-deficient LMICs will enhance data capacity and equitable resource allocation and promote development aligned with international standards.
  • Build the capacity of decision-makers at the national scale to assess and communicate climate risks effectively. Leverage international collaboration to share knowledge, best practices, and innovations, enabling countries to implement resilient infrastructure frameworks. Strengthen urban local bodies' capacity for climate adaptation through partnerships, technical assistance, and policy guidance, ensuring sustainable and effective investments.
  • Transform the financial landscape to prioritise climate-resilient infrastructure by improving risk communication, defining clear metrics, and leveraging innovative tools like green bonds, climate funds, and carbon pricing. Mobilise additional resources and attract private investment in LMICs while fostering global collaboration to enhance infrastructure resilience and align financial returns with environmental goals.
  • Integrate risk assessments into every stage of infrastructure development to reduce delays, cost overruns, and economic losses from climate-induced hazards. This aligns with G20-endorsed Quality Infrastructure Investment principles, ensuring resilient, sustainable infrastructure. Regular risk reviews, green retrofitting, and non-structural mitigation strategies enhance infrastructure quality and resilience against future climate risks.

"The G20 should foster capacity building, knowledge transfer, and harmonisation of global standards to bridge the adaptation finance gap and prioritise climate-resilient investments. By promoting a standardised risk assessment framework and multilevel governance, the G20 can support LMICs in developing bankable projects, aligning finance streams, and enhancing resilience through strategic international coordination."

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