Climate change is leading to increasing numbers of extreme climate and weather-related events. These are causing rising levels of climate risks, leading to loss and damage. Climate risks provoke havoc, lead to humanitarian catastrophes, and stand in the way of achieving the Sustainable Development Goals (SDGs). Thus, it is of great importance to prevent and minimize risks as much as possible. However, there remains a residual risk that cannot be avoided. This is where risk insurance and risk financing have an important role to play. Climate risk transfer, that is, risk insurance, and risk financing are tools to financially address residual loss and damage by providing financial compensation.
It is not enough to make climate risk insurance available. The extent to which insurance helps to close the gaps in the protection of vulnerable groups against climate risks depends on the way in which insurance is structured.

Recommendations

• In view of the rapidly advancing climate crisis, it is time that humanitarian and development organizations focus more strongly on climate risk management, including risk insurance and risk financing.
• While climate risk insurance is not a magic solution, it can contribute to closing the protection gap of vulnerable communities and countries. However, it cannot be used as a stand-alone, but needs to be integrated in a comprehensive risk management strategy and linked with social safety nets (where applicable), poverty reduction, and the implementation of the SDGs.
• Climate risk insurance and other forms of risk transfer and risk financing, in order to benefit marginalized, resource-poor, and climate-vulnerable people and countries, needs to be designed in a pro-poor (including participatory, inclusive, and transparent) way that makes it accessible, affordable, and valuable to them.
• The climate crisis requires much more than just continuing with business-as-usual approaches. This also applies to disaster risk management and climate adaptation, where transformational pathways are required in the 2020s in order to better protect climate-vulnerable communities from climate-induced havoc and intolerable risk that is imposing far beyond traditional knowledge and community-based adaptive capacities.

It is shown that higher capital costs caused by climate vulnerability, increasing stranded assets due to high climate risk exposure, and higher economic inequality among nations resulting from climate change are not only future risks, but experiences we have seen both past and present. Loss estimations totaling several hundred billion USD per year clearly underline the fact that cli- mate poor and vulnerable countries are facing a huge protection gap that is going to grow further due to rea- sons beyond their control as low-emitting countries. They also show that if left alone by the international community, these countries will be financially over- burdened by the task of tackling current and future climate-induced loss and damage. If the international community does not provide support, climate vulnerable developing countries are very likely to face constantly increasing economic loss, making it almost impossible for them to meet the Sustainable Development Goals (SDGs) and, at worst, increasing the risk of these nations ending up as failed states.

Recommendations

• Address information gaps regarding the financial dimension of loss and damage.
• Establish a financial tracking system so that it will be possible to present an accurate picture of the means of financial support provided.
• Regional risk pools and risk insurance, based on mu-tuality, should widen their approach by introducing elements of solidarity.
• A human rights-based approach should be adopted by all mechanisms that contribute to financially addressing loss and damage.
• From a climate justice perspective, revenues generated by carbon pricing are well aligned with the ac- countability principle, providing the opportunity to redress loss and damage and to apply compensatory justice.

According to the  Global Commission on Adaptation  2019 report  ‘ Adapt now’, climate-related impacts will push more than 100 million people within developing countries below the poverty line by 2030. Without adaptation agricultural growth will decrease by 30 percent and the people facing lack of water one month per year will reach 5 billion by 2050.

ACT Alliance members have ongoing community-based livelihood work providing opportunities to mainstream low-carbon, resilient, sustainable livelihood approaches. The following points suggest measures for how the framework components can be mainstreamed in their current initiatives. 

Recommendations

• Facilitating more coordinated and coherent planning and policy making linking the two agendas, identifying the benefits by closely aligning the two agendas to inform decision making.
• Utilizing the UN system SDGs action online database as the UN system’s repository
  of actions, initiatives, and plans on the implementation of the 2030 Agenda and the Paris Agreement 
• Examining how best to leverage advocacy, policies, and programmes, implementation mechanisms, inclusive multi-stakeholder action, resources, and partnerships for both the SDGs and for climate action so that co-benefits are maximized and trade-offs minimized at all levels 
• Incorporating national planning priorities and objectives in communicating Nationally Determined Contributions (NDCs) to ensure the realization of the potential mutual benefits during the implementation process. There is need for better inclusion of the links between climate action, disaster risk reduction, and the SDGs in their Voluntary National Reviews (VNRs) presented at the high-level political forum on sustainable development.

ACT Alliance wants to promote a development in line with the Paris agreement. That means a low carbon and resilient development path, where nobody is left behind. It is therefore important that programs and activities, supported by ACT Alliance and its members, consider both adaptation and mitigation. 

ACT Alliance has therefore initiated activities to promote mainstreaming of climate change in programmes, and to facilitate experience sharing and best practices. Through these efforts we want to promote the development we are calling for through our advocacy work.