Many risks, many opportunities
Making Strides Towards Resilience
However, there is hope. As the diagram above shows, climate change needs to be considered at all levels of decision-making, from portfolio management to project scoping to resilient project design. Smart climate-risk management uses an efficient, tiered approach to identify and address risks at each level. This approach is being championed by the World Bank, the U.S. Agency for International Development, and a growing array of companies. It utilizes rapid climate risk screening at the top level and increasingly detailed risk and opportunity analyses at subsequent levels.
Some characteristics of an effective approach to addressing risks are:
- Effectiveness. It identifies the most important risks and opportunities. Missing or mischaracterizing these risks and opportunities could be have consequences of millions or even billions of dollars.
- Salience. It dovetails with existing decision-making processes, providing decision makers with the information they need, packaged in ways that are easily usable.
- Efficiency. It is rapid and nimble in order to keep pace with the often short time frames of investment decision-making. It should also be tiered in order to first understand the high-level, strategic risks and avoid overspending on analyzing things that are not at risk.
- Credibility and Transparency. It is based on the best available science and its conclusions need to be traceable to credible sources.
These principles can help to ensure that critical risks are identified and appropriate risk mitigation measures are identified and executed. It can also help maximize so-called “resilience dividends.” Take, for example, investments in the wake of hurricane destruction that replace centralized fossil fuel-based energy systems with distributed energy resources (DERs). This approach emphasizes the use of renewables, which doesn’t just support resilient electricity supply in the aftermath of the next major storm, but also increases overall access to electricity.