European countries need to mainstream climate change adaptation into development plans to become more resilient, Trend reports with reference to the International Monetary Fund (IMF).
“Long-term risks associated with climate change cannot be completely eliminated, which means government must take decisive action to strengthen physical, financial, institutional and social resilience. A variety of adaptation measures have been introduced to enhance resilience to climate change, but there are still significant gaps that keep the region vulnerable to threats associated with climate change,” reads the latest IMF report.
The report reveals that enhancing structural resilience requires infrastructure and other ex-ante investments to limit the impact of disasters, including “hard” policy measures (e.g., upgrading public infrastructure), and “soft” measures (e.g. developing early warning systems and strengthening zoning and building codes); building financial resilience involves creating fiscal buffers and using prearranged financial instruments to protect fiscal sustainability and manage recovery costs; and post-disaster and social resilience requires contingency planning and related investments ensuring a speedy response to a disaster.
IMF analysts believe that financing climate change mitigation and adaptation efforts will require mobilizing additional resources and reforming public financial management.
“Adapting to climate change is not cheap, and it will require substantial amount of additional upfront resources to invest in physical infrastructure and other key areas to increase resilience and lessen the macro-financial impact of climate change. In this context, green financing could provide valuable resources for sustainable investment projects. The sustainability-linked debt market has reached US$2.5 trillion with net new issuance of US$660 billion in 2020. The most significant component of this market in terms of size and environmental impact is green bonds that are used to finance projects to facilitate climate change adaptation and mitigation. Despite its rapid growth, however, sovereign green bonds remain small—about 1 percent—compared to traditional debt instruments issued by governments,” says the report.
IMF notes that countries with significant climate-related investment needs must improve the institutional framework, including robust and transparent public financial management systems and processes, to gain full access to the global flow of green financing.