Blitz Bureau
NEW DELHI: CLIMATE action is costly, but inaction even costlier. Exacerbating climate shocks, which overwhelm public finances, erase livelihoods and neutralise development advancements, has emerged as a big issue in the run up to COP 30 in Brazil. Along with ramping up climate ambition, countries need to focus on mobilisation of finance for adaptation and climate resilience at an unprecedented scale and speed.
There is unequivocal evidence that with every fraction of a degree increase, risks to lives, food, water, and economic stability multiply rapidly. In India, climate related disasters are no longer episodic but a near daily reality, with 322 days out of 365 facing extreme weather instances. During the last two decades, India faced the third largest number of natural disaster events in the world. Torrential rainfall bringing floods and rising heat waves are hitting industry hubs with increased frequency, stalling production, straining infrastructure, and destroying working capital. Such repeated shocks in the most vulnerable regions trigger distress migration, impact health services, disrupt education and exacerbate debt cycles.
Addressing such unprecedented scale of disasters requires immediate and innovative solutions. For Indian economy to guard against these climate impacts, adaptation frameworks and policies must be in place. To its credit, India is approaching this issue with gravity and urgency. Its commitment to net zero is backed by efforts and schemes across sectors. These include regulatory pushes, draft guidelines on climate finance, parametric insurance, climateresilient agriculture, tight green bond directives and climate finance taxonomy. Such initiatives lay the foundation for a conducive environment which ensures transparency and boosts stakeholders’ confidence.
Like any developing country, India is walking a tightrope between climate risk management and economic development. While significant focus has been endowed to adaptation, resilience finance i.e., finance directed towards reducing harms of climate shocks, is in a nascent stage. Few plausible climate resilience approaches include parametric covers for simple and fast payments to affected parties; climate resilient crop and livestock products; emergency cash rails through reliable IDs; concessional, hazard-responsive credit availability for SMEs, and investments in cooling methods and effective water management to ensure that weatherrelated events do not result into life and livelihood threatening setbacks.
India not only faces adaptation financing gap for building resilient infrastructure, but it also needs financial instruments which protect vulnerable communities viz. the SMEs and others. As the country moves towards developing policies and frameworks for climate resilience, insurance and financial regulators may need to introduce policies in a phased manner with a focus on reducing insurance premiums, and recovery time while also reducing burden on the Government treasury.
In the Indian context, the challenges to a robust climate resilience framework are many – from addressing data gaps for hazards, exposure and losses, to non-standard triggers, affordability of beneficiaries in the absence of premium subsidies, integration of IMD alerts, beneficiaries list, cash rails viz UPI, Aadhaar linked DBT, and enabling automatic, real-time disbursement of support. All of these require mammoth scale of planning, technology, intention and execution. Private capital also needs to show willingness, while regulators need to expedite creating simplified frameworks. The silver lining is that India has started work on these fronts with International Financial Services Centres Authority (IFSCA) draft framework for ILS Cat bonds and parametric climate insurance being piloted across the country.
