Climate change is not only about the environment – it also has major financial and institutional implications. This was the backstory to a recent report on ‘Risk Financing for Rural Climate Resilience in the Greater Mekong Subregion’ co-authored by GPAC² fellow Ornsaran Pomme Manuamorn. The report was published in May 2017 by her former employer, the Asian Development Bank (ADB).
Can you give us more details about your report? Why is it both timely and important?
Rural communities are used to floods, droughts, and storms, but these are expected to intensify with climate change. While most rural households have some means of managing climate risks through diversified farming practices, social capital networks, and reliance on public assistance, they are on the whole ill-equipped to cope with climate shocks, especially extreme events.
In recent years, risk financing has been explored in many parts of the world as another tool to build the climate resilience of rural communities. ‘Climate risk financing’ can be understood as a systematic approach to manage the financial consequences of climate variability and extremes. Climate risk financing combines strategies and instruments like saving, credit, insurance, and disaster funds and can target households, communities, and institutions. However, putting climate risk financing strategies in place requires a comprehensive risk assessment, selection of appropriate financial instruments, and development of institutional arrangements and partnerships.
This report weighs up the potential roles that risk financing could play in strengthening the climate resilience of rural communities in the Greater Mekong Subregion (GMS). The study was conducted in 28 rural communities – mainly located in cross-border forest areas – in Cambodia, the Lao People’s Democratic Republic, and Viet Nam. These communities are part of a development project funded by the ADB, which features regular dialogue and knowledge sharing based on lessons learned from on-the-ground interventions. The report aims to contribute to the knowledge base on rural climate risk financing in the GMS and to feed into more comprehensive feasibility studies.
How do you benefit from the overlap between the work you have done for the report and your PhD dissertation?
Risk financing in the rural context (such as through weather insurance) is something I was working on professionally before moving into my current work and research on climate change adaptation. However, the two fields are getting much closer today as more people think that promoting access to risk financing for vulnerable rural communities is part of a comprehensive strategy to help them better deal with climate change. Here this study on risk financing and my own dissertation on adaptation are related at a thematic level. The insights I gained from this study on climate vulnerability profiles of rural households, rural livelihood strategies, and rural institutions and social relationships, etc. are all very helpful for me to analyse the data base of community-based adaptation projects I am using in my own dissertation. However, the data sets and the methodologies of this study and my dissertation do not directly overlap, so there is still much more new work for me to do for the latter.
Sustainable Development Goal 13, ‘Take urgent action to combat climate change and its impacts’ is high up on the international agenda. How can finance and governance work as complementary tools in achieving this goal?
Tackling climate change requires substantial financial resources – way beyond what is needed for business-as-usual. Financing is definitely a key ingredient of any country’s climate strategy, and this in turn requires a risk governance framework. This approach is embedded in the concept of ‘risk layering’, which conceptually segments climate risk by degree of severity and frequency. This allows for a more efficient allocation of responsibilities and resources to manage and finance risks. For example, the consequences of a high-frequency, low-impact event such as a small localised flood could be dealt with through the resources of households and communities. On the other hand, low-frequency, high-impact events, such as a catastrophic storm, would likely overwhelm the resources of ordinary citizens and require a public financing strategy like a national disaster fund. Financing catastrophic risks also requires public-private partnerships, such as between the government and the insurance sector.
However, it is also important to note that financing is not a stand-alone solution for climate change. Financing strategies should be designed to complement other non-financial risk management measures such as water management infrastructure, early warning systems, and restoration of ecosystems, etc. to help vulnerable communities worldwide manage current climate risks while adapting to future climate change.
You’re an participant in our GPAC² PhD programme; you’ve presented two chapters of your dissertation and now you’ll join a debate on this report and present the progress made in your study. How do you combine your work and research so efficiently?
I am trying to strike a balance and I have found a few strategies that help. First, I try not to disengage from my PhD work for an extended period of time. Once that happens, it’s very difficult to get my head back into the topic. Second, I like travelling and won’t compromise on that. So, I use the upcoming trips as an incentive system. I should make progress on my PhD before every trip!
The opinions expressed here are the author’s own; they do not necessarily reflect the views of UNU.
UN Photo / John Isaac