Role of public-private partnerships in climate change adaptation

The adaptation imperative in India

If left unchecked, the repercussions of climate change in India – the most populous country in the world – could be quite alarming. As per the Global Climate Risk Index 2022, India ranks seventh out of 180 countries in terms of the impacts of climate change.^,3  But what lies ahead for the country? India faces average annual losses of USD 87 billion due to extreme weather events such as heat waves, intense cyclones, floods and droughts.⁴ Climate change can impact both the society and the economy. The World Bank estimates that about 160–200 million people will be exposed to lethal heat waves annually by 2030, with 34% of the population at risk of losing their jobs due to heat stress-related impacts.⁵

With more than 80% of India’s population living in districts vulnerable to climate-induced disasters,⁶ and over 75% of India’s districts⁷ iidentified as ‘hotspots’ for extreme climate events, adaptation is a necessity for India. India’s updated Nationally Determined Contribution (NDC) recognises this and has included a target to enhance adaptation investments in sectors vulnerable to climate change, particularly agriculture, water resources, the Himalayan region, coastal regions, health, and disaster management by 2030.⁸

Although India has invested in building a conducive policy framework for adaptation through different missions such as the National Mission on Sustainable Habitat, the National Water Mission, the National Mission for Sustaining the Himalayan Eco-system, the National Mission for a Green India, and the National Mission for Sustainable Agriculture under the National Action Plan on Climate Change (NAPCC), and allocated financial resources through the establishment of the National Adaptation Fund for Climate Change (NAFCC), there is a long road ahead. 

The current adaptation responses are incremental and sector/geography-specific, and are not commensurate with the magnitude of the problem. India’s response to increasing climate risk is driven mostly by the government and funded by public finance sources. As a result, resource constraints plague adaptation efforts given the country’s huge development needs. Only 8% of the estimated requirement of INR 4.4 lakh crore per annum is being met as per the data available for 2019–20.⁹ Some factors that further limit climate adaptation efforts include:

• inadequate data collection or limited data availability which could hamper understanding of climate patterns,
• technological constraints, such as lack of access to advanced monitoring systems or data processing tools, and
• limited institutional capacity, especially at the local level, means that there may be lack of expertise or awareness to develop and implement initiatives tailored to the needs of the community. 

Businesses are not immune to the effects of climate change.¹⁰ Climate variability and extreme weather events are reported to have impacted the financial bottom lines of leading fast-moving consumer goods (FMCG) and automobile sector companies in India in 2023.¹¹ According to the Reserve Bank of India, climate change could cost the Indian economy 2.8% of its GDP by 2050 and around 3% to 10% of its GDP annually by 2100 in the absence of adequate mitigation policies.¹² These statistics point towards the need for businesses to play a greater role in mitigation and adaptation action.

Despite the increasing interest in climate action among businesses, the needle on adaptation efforts hasn’t moved. Some of the key factors that contribute to limited action on adaptation include:¹³

• Perception that physical climate risk is not a risk or that it can be managed: Such complacency can stem from a lack of direct experience with extreme climate events or a misconception that technological advancements would fully mitigate those risks.
• Emphasis on immediate reduction of emissions: Continued efforts on the reduction of greenhouse gases overshadow adaptation measures due to their direct cause-and-effect relationship with climate change. A recent study conducted by the Organisation for Economic Co-operation and Development (OECD) demonstrates that adaptation is not given the same priority as mitigation with adaptation investment declining by USD 4 billion (14%) in 2021 and its proportion of total climate finance falling from 34% to 27%.¹⁴
• Difficulty in developing an investment case: Adaptation projects require significant upfront investments while their benefits are often intangible and realised over long periods of time. Since it does not always provide direct investment benefits for the investors, adaptation projects are not the popular choice for investors.
• Long-term planning requirements: The long-term planning and investment needed for adaptation projects may be at odds with business cycles that prioritise tangible, short-term gains and outcomes.