Financial architecture needs to be changed to meet climate challenges

Islamabad: The international financial architecture has to change to meet the entirely new challenges related to the climate change that have caused losses worth $65 billion in the world only in the first half of this year.

The negative impacts of climate change have increased extreme weather events—from historic drought in the Horn of Africa to devastating floods in Pakistan that displaced 33 million people. According to the Global Facility for Disaster Reduction and Recovery (GFDRR) report, Pakistan's agricultural productivity will decline by 8–10% until 2040, with wheat being among the potentially scare food commodities. Pakistan's agricultural productivity, wheat and rice crops would see the harshest effects of climate change in the upcoming years.

An official said that Pakistan has underlined the need to realize the substantial physical risks to the economies from climate change. He said that even if a business' assets such as buildings, equipment, and vehicles remain undamaged by an extreme weather event, these events can lead to productivity loss particularly in agriculture and supply-chain issues. “This year’s heatwave and devastating floods are a reminder that climate change-induced disasters can significantly set back Pakistan’s development ambitions and its ability to reduce poverty,” he said.

According to the reports submitted in the global climate change conference, insurance is likely to become more expensive or even unavailable in at-risk areas of the world. Climate change can make banks, insurers, and reinsurers less diversified, because it can increase the likelihood or impact of events previously considered uncorrelated, such as droughts and floods. The World Bank Group’s Country Climate and Development Report (CCDR) for Pakistan concluded that the country needed fundamental shifts in its development path and policies, requiring substantial investments in people-centric climate adaptation and resilience that would require international support. Minister for Climate Change Sherry Rehman has said, “Right now we are using an out-dated post-war model from the 20th century to

service a fundamentally different future.”