Building Financial Resilience to Climate Impacts
A Framework for Governments to Manage the Risks of Losses and Damages
Governments are facing significant climate-related risks from the expected increase in frequency and intensity of cyclones, floods, fires, and other climate-related extreme events. The report Building Financial Resilience to Climate Impacts: A Framework for Governments to Manage the Risks of Losses and Damages provides a strategic framework to help governments, particularly those in emerging market and developing economies, strengthen their capacity to manage the financial implications of climate-related risks. The goal of the framework is to support sound public financial management strategies that take into account budgetary and financing constraints, and to foster broader actions at the national and international levels.
The report examines the role of governments in identifying and assessing climate-related physical risks and their impacts on public finances, and reporting climate-related fiscal risks to promote transparency in public financial management. It discusses how to mitigate those risks through protecting households and businesses, and developing integrated multipronged financial strategies to fund government expenditure needs. Finally, it calls for promoting integrated strategies to strengthen financial resilience at the country and regional levels, and for mobilising development co-operation to strengthen global climate financial resilience.
Foreword
In a world with mounting impacts of climate change on livelihoods and the broader economy, governments play an increasingly critical role in managing the adverse impacts. As the climate changes, and losses and damages increase, governments are required to increase their resilience and develop strategies for dealing with financial risks of climate change. With a focus on the impacts of climate-related disasters including extreme weather events on the fiscal framework of central governments, this report proposes policy solutions on how governments can reduce, manage and address these climate-related financial risks. It offers a strategic framework that elaborates on the role of governments in the identification and assessment of climate-related physical risks and their impacts on public finances, the mitigation of those risks through investments in risk reduction and risk management, and the development of financial strategies to fund government expenditure needs. The report and its recommendations take into consideration the differences in fiscal resources and borrowing capacities that may exist across countries, assessing the adequacy of different financial and budgetary tools for climate risks of varying frequency and severity and in different national contexts.
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