Adapting
A few weeks ago, the World Meteorological Organization (WMO) officially declared that 2023 was by far the hottest year on record. The scale of the change appears to be well beyond the 2°C limit set by the Paris Agreement. We can no longer limit ourselves to mitigation. It is time to adapt, and the challenges are immense. We must accept the reality of climate change and its inevitable impacts, and actively prepare for them. Adapting is everyone’s business, so let’s act!
Adapting regions
Adaptation refers to “adjustments in human and natural systems to actual or expected climate change, to moderate potential damages or to take advantage of opportunities that may arise”.[1] Its aim is to mitigate the impact of climate change on human societies. Recent rainfall in the Three-Lakes and Lake Geneva regions, threatening nearby towns with flooding, illustrates the urgent need for regions to adapt to extreme events, which will increase in frequency and intensity over the course of the century. To adapt, the Confederation and the cantons in the areas concerned have decided to increase the discharge from the Port dam, north of Bern. In 2023, the Confederation also adopted a policy aimed at adapting to climate change and reducing CO2 emissions, notably by granting financial aid to encourage ecological transition.
Adapting businesses
While regions are increasingly at risk, businesses must not be forgotten. For example, the current agricultural malaise illustrates the multiple challenges facing the sector and making its transition inevitable. The decline in agricultural output, closely linked to the effects of climate change and biodiversity degradation, is affecting farmers’ incomes. Soaring cocoa prices in the run-up to Easter are a good illustration of the tangible impact of these climatic phenomena. Strengthening the resilience of farms to adapt to the new environmental situation seems to be a necessary step. Collaboration between the players in the chain is crucial if the agri-food industry as a whole is to adapt and supply chains are to be made more secure. Here again, a system of regulatory incentives tailored to local realities is likely to play a key role.
Financing adaptation
There remains the thorny issue of funding, which will need to be massively increased. The European Taxonomy devotes one of its main sections to it, in the aim of attracting capital. It identifies two types of company: adapted companies that deploy systems to adapt their processes, and enabling companies that offer turnkey adaptation solutions to other players. As responsible investors, we believe we have a role to play in financing adaptation. Analysing the exposure of our investments to physical and transition risks is a first step that must be accompanied by an in-depth qualitative analysis of transition plans.
At LFDE, companies’ transition dynamics are assessed using our proprietary Climate and Biodiversity Maturity methodology. It also includes an analysis of the issue of just transition, which is key to success, as farmers’ anger reminds us. We hope that this subject, which is increasingly driving the sustainable finance community under the impetus of a number of regulations, will lead to massive and rigorous funding and commitment to support society as a whole in the challenge of adaptation.