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The Role of Financial Services in Climate Adaption in Developing Countries

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  • Holger Hoff
  • Koko Warner
  • Laurens M. Bouwer

Abstract

Finance and insurance industry ("financial services") can play a key role in climate adaptation, by reducing and transferring risks. However, financial services are largely absent from developing countries with their highly vulnerable economies and livelihoods. The financial services sector claims in particular a lack of business opportunities for that. We provide examples of innovative financial tools such as micro-credits, index-based insurance, government supported insurance pools, international re-insurance and adaptation and new partnerships between private sector, governments, civil society and international organisations, that support pro-active adaptation to climate change and disaster reduction, and thus reduce the costs of climate change. In some cases these tools have been introduced successfully in developing countries. Through partnerships with the financial services sector, currently fragmented adaptation activities can be integrated and mainstreamed with development goals and natural resource management. Science can support these partnerships e.g. with climate scenarios and assessments of future risks and hotspots for intervention. Der Finanz- und Versicherungssektor (im folgenden Finanzsektor genannt) kann Klimarisiken mindern und damit eine zentrale Rolle bei der Anpassung an den Klimawandel spielen. Allerdings ist der Finanzsektor gerade in den Entwicklungsländern mit besonders hohen Klimarisiken und hoher Klimavulnerabilität kaum präsent, wofür insbesondere das Fehlen von Geschäftsmöglichkeiten verantwortlich gemacht wird. Wir stellen eine Reihe von innovativen Finanzsektorwerkzeugen wie Mikrokredite, indexbasierte Versicherungen, Versicherungspools und internationale Rückversicherungen und Anpassungsfonds sowie neue Partnerschaften zwischen Privatsektor, Regierungen, Zivilgesellschaft und internationalen Organisationen vor, die pro-aktiv die Anpassung an den Klimawandel und gleichzeitig den Katastrophenschutz unterstützen und damit die Kosten des Klimawandels vermindern können. In einzelnen Fällen sind solche Werkzeuge bereits erfolgreich in Entwicklungsländern eingeführt worden. Durch geeignete Partnerschaften mit dem Finanzsektor können bislang noch fragmentierte Anpassungsaktivitäten zusammengeführt werden. Dabei ist Klimaanpassung mit Entwicklungszielen, Katastrophenschutz und natürlichem Ressourcenmanagement zu integrieren. Die Wissenschaft kann solche Partnerschaften z.B. durch Klimaszenarien sowie Abschätzungen von zukünftigen Klimarisiken und kritischen Hotspots unterstützen.

Suggested Citation

  • Holger Hoff & Koko Warner & Laurens M. Bouwer, 2005. "The Role of Financial Services in Climate Adaption in Developing Countries," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 74(2), pages 196-207.
    • Handle: RePEc:diw:diwvjh:74-2-7
    DOI: 10.3790/vjh.74.2.196
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    References listed on IDEAS

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    1. Azad, Md Javed & Pritchard, Bill, 2022. "Financial capital as a shaper of households' adaptive capabilities to flood risk in northern Bangladesh," Ecological Economics, Elsevier, vol. 195(C).
    2. Nani Maiya Sujakhu & Sailesh Ranjitkar & Jun He & Dietrich Schmidt-Vogt & Yufang Su & Jianchu Xu, 2019. "Assessing the Livelihood Vulnerability of Rural Indigenous Households to Climate Changes in Central Nepal, Himalaya," Sustainability, MDPI, vol. 11(10), pages 1-18, May.
    3. Surminski, Swenja, 2014. "The role of insurance in reducing direct risk: the case of flood insurance," LSE Research Online Documents on Economics 60764, London School of Economics and Political Science, LSE Library.
    4. Raissa Sorgho & Carlos A. Montenegro Quiñonez & Valérie R. Louis & Volker Winkler & Peter Dambach & Rainer Sauerborn & Olaf Horstick, 2020. "Climate Change Policies in 16 West African Countries: A Systematic Review of Adaptation with a Focus on Agriculture, Food Security, and Nutrition," IJERPH, MDPI, vol. 17(23), pages 1-21, November.
    5. W. Botzen & J. Bergh & L. Bouwer, 2010. "Climate change and increased risk for the insurance sector: a global perspective and an assessment for the Netherlands," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 52(3), pages 577-598, March.

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