Urban Climate Change Adaptation Catalysing the Private Sector

Financing Future Cities, Asian Urban Forum 2011, ADB (Nov 17, 11)

Manju Mary George, Intellecap

2011 Intellecap. All rights reserved

www.intellecap.com

Rockefeller Foundation and Intellecap: Study Questions

What are the vulnerabilities a changing climate poses for the urban poor? Is there a case for private sector participation in build their resilience to cope with these vulnerabilities? What can be done to support private sector involvement?

2011 Intellecap. All rights reserved

Bangkok Floods the latest reminder of the climate vulnerabilities facing Asian cities

2011 Intellecap. All rights reserved

The poor in these cities are the most vulnerable to such risks; helping them adapt is critical

Asian cities are expected to

account for more than 60% of global population growth in the next 30 years creating immense

pressure on urban infrastructure

2011 Intellecap. All rights reserved

Case: Rag pickers and waste management, Surat, India

Poor working conditions

Exposure to toxins and hazardous material

Irregular incomes
Incomes fall by a factor of 4 during the monsoons Exploited by middle men

Poor living conditions

Illegal slums

Pariah of society
No social security Not part of the formal economy

Ironically this is a group that is responsible for cleaning up the city, improving sanitary conditions
2011 Intellecap. All rights reserved

Private sector funds are critical to help build resilience of the Asian cities and their poor
Total: $ 86 bn
Strengthening Disaster

Protecting
poor against climate change ($ 44 bn)

Private sector funds: 1) investment,

Response
($ 2 bn)

2) self-finance,
3) philanthropy

Aid from Climate proofing infrastructure ($ 40 bn) OECD countries (10x of

Govt selfexpenditure (0.5% of GDP of all L&MIC*)

Total: $ 42 bn

current)

Funds required for CCA by 2015

Source of funds for CCA

* Lower and Middle Income Countries. Source: Human Development Report 2007/2008: Funding Climate Change, UNDP
2011 Intellecap. All rights reserved

Private sector businesses and investors have opportunities to create blended financial and social returns

Business Activity Corporation Social Enterprises

Investments Commercial Investors Social Investors

2011 Intellecap. All rights reserved

Business opportunities to build resilience amongst the poor exist across sectors

Reduced Food & Water Security

Water Management

Microfinance

Decline in Sanitary Conditions

Waste Management

Life & Asset Loss Micro-insurance Loss of livelihood Technology Disease and health issues

Affordable Housing Livelihood Promotion Affordable Health care Energy Management

Impact on Energy supply

2011 Intellecap. All rights reserved

Illustration: Rag pickers can ensure better waste management and drainage, while increasing their incomes
Waste Processing/ Recycling
Revenues Waste

Integrated Waste Mgmt. Company

Equity/ Debt

Better Drainage and Waste Management in Surat

Waste Collected/ Segregated

Commercial Capital

Rag Pickers
Regular Income % of profit Credit Support

Increase in Income for Rag Pickers

Revenues Household monthly fees

Waste

Household Collection

2011 Intellecap. All rights reserved

Many social entrepreneurs and investors in India are participating in these emerging opportunities
Kanak Skymet (www.skymet.net)

3 S/Shramik (www.3sindia.com)

GV Meditech (www.gvmeditech.com)

2011 Intellecap. All rights reserved

10

Case: Flood micro-insurance pilot in Jakarta

Climate Change increasing frequency and severity of deadly floods in Jakarta

Need for Micro Insurance Flood Cover

Private sector insurers, Munich Re, Asuransi Wahana Tata, GTZ, piloted flood insurance in sub-districts of Jakarta to provide economical and simple-to-understand flood insurance to low income households. If water level reaches or exceeds 950 cm, a one off payment of Rp 250,000 can be obtained per card

Despite an innovative product, the scheme faced a lukewarm response on account of the following: Design Issue: Flood instances vary; payments not enough Adverse selection: High risk individuals buy insurance; buy at 5-year cycle Basis Risk: Payouts not commensurate to expected loss Poor consumer awareness: unwilling to pay; mistrust of insurance company Feasibility challenges: High transaction costs; low volumnes

Water level measurement Manggarai gate

2011 Intellecap. All rights reserved

11

Many market-making efforts are needed to realise these opportunities

Opportunities in emerging and under-developed pro-poor sectors
Trigger is business opportunity or social impact; resilience not an understood goal No magic bullets need solutions that are context specific, creates redundancies Local issues call for local innovation; social entrepreneurs likely to lead the way

Limited engagement owing to poor awareness of issues and opportunities

Relevant data on poor for business functioning is not widely available Climate change impacts on rural poor more direct and relevant in peoples minds; Urban resilience needs more nuanced approach

Focus on mitigation overshadows adaptation/resilience building discussions

Limited willingness and capacity to pay Funding for enterprises in the space has been limited

2011 Intellecap. All rights reserved

12

Way Ahead: Market making for building resilience to climate change in Asias Cities
Showcase the role businesses have played in urban resilience building
Identify and promote champions among key private sector segments

Demonstrate proof of concepts in vulnerable cities; encourage businesses to engage

Engage the funders patient capital to commercial capital

Integrate resilience building agenda into government and city development plans
Influence policy to create a facilitative eco-system for urban resilience building

2011 Intellecap. All rights reserved

13

Thank You

2011 Intellecap. All rights reserved

There are many more cities across Asia vulnerable to climate change impacts
Surat, the worlds diamond capital, is wedged between the Tapti River and the Arabian Sea. Its in danger of climate change induced floods and seal-level rise.

Climate Change is exacerbating: Poor sanitary conditions Malaria incidence Water scarcity Loss of livelihoods

Photos: blog.ratestogo.com; holidayiq.com. Text: Intellecap research

2011 Intellecap. All rights reserved

15