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| People affected by floods in Thailand in 2011 Photo by: GAIN / GAIN |
As a former World Bank managing
director, minister of finance and business leader,Dr. José Daboub has sat on
all sides of the table when it comes to solving the world’s toughest
challenges.
His tri-sector background seems to
make him uniquely suited to his current role as CEO of Global Adaptation Institute,
or GAIN, whose mission is to support public and private investment in
developing countries to help them adapt to global changes, particularly climate
change, urbanization and population shifts.
“My experience in the private sector,
government and development organizations taught me that if we leave a major
problem in the hands of government or multilaterals alone, progress will be
very slow,” he said during an exclusive interview with Devex Impact at GAIN’s
Washington D.C. headquarters. “To accelerate progress and focus on results, the
private sector must be involved.”
To help companies, governments, and
other agencies identify the risks and potential rewards of climate adaptation,
GAIN has released the second annual update of its index that measures
countries’ vulnerability to climate change and readiness to adapt to those
changes.
Aggregating data from a variety of
sources, the GAIN Index measures a country’s vulnerability in six separate
areas, including health, water and agriculture, and examines readiness in terms
of economic, governance, education and social factors. The Index organizes the
world’s nations into a matrix of
four color-coded quadrants.
Dr. Daboub talked with Devex Impact
about how companies and development agencies are already using the Index to
guide their decision making.
What are the most striking findings
from the GAIN Index for the private sector?
Among our highest-level findings is
that there are about $100 billion worth of investment opportunities for the
private sector in climate adaptation over the next 40 years. That is big. The
areas for investment are food, agriculture, energy, water and coastal
protection. These investments will be primarily driven by the private
sector, but there are great opportunities for public-private partnerships,
especially in those infrastructure-related projects.
Another striking finding is while the
majority of countries have shown progress on adaptation, some of the countries
making the most rapid progress come from the developing world, including
countries like Rwanda, Georgia and Estonia. The message is that even poor,
land-locked or fragile states can make the choice to remove obstacles to
investment.
How are companies using this
information?
The Index provides a map, a navigation
chart, for the decision-making making process. It helps companies prioritize
areas for investment, according to your appetite for risk. More importantly,
the data allows you to see how your investments are not only giving you a
return, but are also helping save lives and improve livelihoods in developing
countries.
Just recently I met with a group of
C-suite executives from different companies, and one described how he explains every
new venture or country expansion to the company board. When he makes that type
of presentation, of course, he brings financial information – those numbers are
easy for him to pull together, they do that type of work every day. But that
executive said two members of his board are always asking: How does this
project match our efforts on corporate social responsibility? Another director
wants to know: How are we building sustainability and development in that
country?
If two out of ten members of your
board are asking those questions, you better have an answer. This executive
told me he did not at that time have a tool to help them make his case in an
open, transparent and scientifically sound way. That’s what the GAIN Index now
provides for him.
This also applies for small and
medium-sized enterprises. For example, we are surveying small enterprises in
Mexico through Technológico de Monterrey. For those businesses, it’s about
recognizing that as the world changes quickly, you need to learn to adapt.
As natural disasters continue to take their toll, you need to build much
stronger value chains, distribution chains and logistical processes. You need
more information available to you.
What industries are most interested in
these findings?
All the big companies in the food
industry, including Nestlé, ADM, Cargill, Coca-Cola, PepsiCo, are all paying
attention in a much more systematic way to the five sectors of climate
adaptation: food, agriculture, energy, water and coastal protection. For many
years they have been paying attention to these issues, but in the context of
developing new products and opening new markets. Now, they are looking for the
perspective of: “What if such-and-such natural disaster takes place, and my
suppliers can’t deliver their product?”
A scenario like this played out last
year with the floods in Thailand. Thailand is one of the world’s largest manufacturers
of hard drives. The factories couldn’t function there for about two
weeks, and that drove up prices of consumer electronic goods around the world
for months, because hard drives were in short supply.
Now imagine companies not being able
to source food or inputs for medicine because of a natural event. That’s why
companies are involved. Nestlé is investing to help farmers adapt to changing
conditions. That helps the farmers themselves, but also Nestlé’s supply chain.
Bayer CropScience is researching ways to make plants more resistant to climate
changes. The re-insurer Swiss Re is working with Oxfam to insure small farmers
against weather changes.
Which quadrants are most relevant for
companies?
It depends what kind of business you
are in. If you are in the business of natural resource extraction, you don’t
really have a choice about where to invest: You have to go where the resources
are. In those cases, a company expanding into a new country can look up the
vulnerability of that country and how ready that country is to accept your
investments. For example, a company in Columbia recently built a power plant
near a river, which has flooded twice in three years. They didn’t take into
account the effects of climate change the risks of being close to the water. So
for a company that is expanding into China, no matter what, the Index can help
them become aware of the country’s major vulnerabilities and determine whether
those represent a challenge or an opportunity for their business.
For companies that can choose where to
do business – where to build parts of a car, or where to grow food, for example
– the quadrants help sort out levels of risk. Many companies are drawn to the red quadrant, which
includes countries like Pakistan, Myanmar and Honduras. These are the most
vulnerable and the least ready for investment, but some companies, knowing that
the greatest risk may yield the highest expected return, want to invest there.
Companies with a long-term vision will
look first at the blue quadrant. Those countries have great challenges but are
adopting new solutions. These include countries like Botswana, Costa Rica and
Saudi Arabia. They are highly vulnerable to climate change in terms of its
effect on health, water, infrastructure and education, but they’ve also adopted
reforms to reduce corruption, build institutional capacity and make the country
ready for investment.
How do you avoid becoming bogged down
in the political debates about climate change, particularly here in the US?
We don’t get into discussions about
why climate-change is occurring. Spending time debating that issue will not
lead to solutions. We minimize the polarization by helping people understand
adaptation is urgent because it is already taking place. Our argument is: Look
at the flooding that just took place in New Jersey and New York, or the drought
in India, or the flooding in Thailand and the Philippines – these events tell
us that climate change is already happening. It doesn’t matter why. You need to
be prepared, and there’s no excuse for not doing something.
In the U.S. we’ve had a chance to make
that argument on both sides of the aisle, and it seems to be an area of
comfort. In September last year, we met with 300 members of the European
Parliament, and it was the same thing: Adaptation was the flag that everyone
felt comfortable associating with.
We believe the Index will become the
tool of choice to guide government investment in climate-change adaptation.
Right now, if you have $100 to help 10 countries, the easiest thing to do is
divide it in 10 equal parts, and that’s often what happens. With our matrix,
donor agencies can prioritize. The countries in the red quadrant clearly need
more help. The blue sector is more attractive for the private sector. The
countries in the yellow sector can wait a bit. Those in the green quadrant are
good for risk-averse investors, and those countries can do a lot on their own.
What new data are you planning to
include in the future?
We’ve consulted with the private
sector, civil society organizations and the scientific community. They have
requested three things, and we are responding.
First, we will offer more granularity.
Right now, the Index looks at the country level. Adaptation actually takes
place at the local level. Companies want to zoom in and not just look at India,
but also Mumbai. We are starting to provide that granularity for Mexico, where
we are looking at 10 cities in five different states.
Second, we are creating a tool to help
companies and organizations respond to “What if?” scenarios. A donor
agency, for example, could look at what would happen if they invested all their
resources in a particular country in a single sector like health care. It will
be a way for companies and governments to decide where they can get the highest
return on their investment.
Third, we are developing a knowledge
portal that will provide a basic diagnostic for looking at the community around
you. This will be a tool for the business-development director of a company, or
a mid-level bureaucrat at a ministry of the environment, or the head of a local
NGO. They want to know what the problems are in their community, and what they
can do from an adaptation perspective. The knowledge portal will answer common
questions and share stories of success.
All these new features will help
achieve the mission of raising the level of awareness about the urgent need to
adapt to climate change, especially in the most vulnerable countries, in part
through investment from the private sector.
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This article is produced and published by Devex Impact: a global initiative by Devex and USAID that focuses on the intersection of business and global development and connects companies, organizations and professionals to the practical information they need to make an impact.
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