AED 10 billion investment could return more than 12x by 2030

16 Jan 2023, Dubai, UAE – Standard Chartered announced today the launch of its latest research report titled ‘The Adaptation Economy’ which investigates the need for climate adaptation. The report revealed that a AED10 billion adaptation investment to withstand projected climate damage could contribute more than AED 100 billion to the country’s gross domestic product by 2030. 

The research features 10 markets, including the UAE, India, China, and Pakistan, and highlights that the lack of action could cost billions in climate damages and lost GDP growth this decade. Across the entire study, without a minimum investment of AED 110 billion, the markets included in the study face projected damages and lost GDP growth of over AED 1 trillion.

The projection assumes that the world succeeds in limiting temperature rises to 1.5°C, in line with the Paris Agreement. In a 3.5°C scenario the estimated minimum investment required more than doubles to AED 225 billion and potential losses escalate dramatically if the investment is not made.  

Examples of climate adaptation projects include the creation of coastal barrier protection solutions for areas vulnerable to flooding, the development of drought-resistant crops and early-warning systems against pending natural disasters.

India to benefit the most from adaptation investment

Among the 10 markets in the study, India is projected to benefit the most from adaptation investment. The market would require an estimated AED 40 billion to prevent climate damages and lost growth of AED 500 billion in a 1.5°C warming scenario – equal to a thirteen-to-one return for the Indian economy of investment in climate adaptation.

Meanwhile, China could avoid an estimated cost of AED 410 billion by investing just AED 30 billion. And Kenya, which requires the least investment, could avoid costs of an estimated AED 8 billion by investing AED 730 million in adaptation.

The case for adaptation

Even if the world’s nations manage to achieve the goals of the Paris Agreement, measures to adapt to climate change must be pursued alongside the global decarbonisation agenda, with the banking sector having a critical role to play in unlocking finance. 

The AED 110 billion investment required for adaptation represents only slightly more than 0.1 per cent of combined annual GDP of the 10 markets in the study and much less than the estimated AED 347 trillion emerging markets require to transition to net zero using mitigation measures, as outlined in Standard Chartered’s Just in Time report.

The Adaptation Economy also surveyed 150 bankers, investors and asset managers and found that, currently, just 0.4% of the capital held by respondents is allocated to adaptation in emerging markets where investment is needed most. 

However, 59% of respondents plan to increase their adaptation investments over the next 12 months. And on average, adaptation financing is expected to rise from 0.8% of global assets in 2022 to 1.4% by 2030.

Rola Abu Manneh, Chief Executive Officer, Standard Chartered Bank UAE, said: “The UAE is at the forefront of fighting climate change with a solid commitment to achieve its Net Zero target by 2050; therefore, setting an example not only on a regional level, but on the international level as well. Adaptation is a shared necessity, and as our research highlights, a lack of action would probably create a shared societal burden of exponentially increasing costs.” 

She added: “The financial sector has a crucial role to play in directing capital towards adaptation and creating the proof points to demonstrate that investing in adaptation can be a commercially viable attractive proposition for the private sector and would reflect positively on the overall economic growth.'