FEATURE: How Bangladeshi businesses can profit from climate resilience
This is part two of a blog series about the role of the private sector and financial institutions in building climate resilience for the poor – as debated at COP22 in Marrakech, Morocco. Mairi Dupar reports. Read part one here: ‘Financing Resilience – Global to local actions can work in step to help the poorest’.
Private money for climate resilience: what’s the ‘sell’? CDKN’s Hammad Raza took on this tough question, by analysing opportunities for private investment in resilience in Bangladesh.
The private sector is Bangladesh’s primary engine of growth. It accounts for the vast majority of the country’s economic activity: some 93% of Gross Domestic Product (GDP).
“The business case for private sector investment in resilience is already clear,” said Mr Raza – because increased temperatures and changing rainfall are already interrupting production and operations.” In a salutary example, Bangladesh’s garment industry lost US$3 million a day when the country was hit by major floods in 2004 and an outbreak of flood-related disease kept employees away from work.
Far-sighted “first movers” in the Bangladeshi private sector are responding to climate change by spotting new business opportunities. These include agribusiness companies, which are researching and developing climate-resilient seeds and fertilisers and already increasing their sales of these varieties. ‘Climate resilient’ in this context means seeds that are tolerant of drought and increasingly saline soils –as rising seas encroach on the country’s low-lying deltas.
Meanwhile, new markets beckon for Bangladesh’s energy industry: although the country’s greenhouse gas emissions are miniscule compared to others, that hasn’t stopped businesses seizing new opportunities or energy efficiency including in the brick kiln industry, in biogas development and solar-powered irrigation pumps.
The attraction in all cases is the profits to be gained in these emerging markets. On the twin motivators for businesses, the World Bank’s Stephane Hallegatte summarised: “We have to answer the question: how to monetise losses? And because private sector investment needs profits, we need the instruments to create the profits that the private sector are looking for.”
Government could do even more to channel private funding to climate-resilient development, Mr Raza proposed. A CDKN-commissioned report by Acclimatise on private sector investment in resilience recommends:
- Supportive government policies for private sector engagement on climate adaptation and clear mechanisms for implementing policy;
- Development of capital markets and capacity to develop long-term financial products;
- Access to low-cost finance for businesses to take action on climate adaptation;
- Access to data and technical support.
A comparative case presented at COP22 by Acclimatise’s Virginie Fayolle showed how targeted government investment can prove catalytic in pulling in private funds for resilience. In urban Jamaica, homeowners are crippled by increasingly scarce freshwater. There are opportunities for integrating smart water efficiency measures (a kind of climate adaptation) “everywhere from the kitchen to the bathroom, in terms of rainwater harvesting and grey water recycling,” said Dr Fayolle – and these are measures that Jamaica’s construction industry could build into new houses from the beginning. However, it took strategic government investment to pay the extra costs of water-saving measures in new houses and convince private companies to get on board.
The Bangladesh and Jamaica experiences show in microcosm why and how private companies could respond even more effectively to climate change impacts. Although low-lying Bangladesh and water-stressed Jamaica, with their sizeable low-income (and therefore relatively vulnerable) populations seem to be at the frontlines of climate change in every way, the dynamics of business and the need for greater awareness about and strategic investment in climate risk reduction are universal lessons that could surely be applied anywhere.
Image: Bangladesh business, courtesy Asian Development Bank.