The Role of Financial Services in Climate Adaptation in Developing Countries
Vierteljahrshefte zur Wirtschaftsforschung, 2005, 2
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.