Climate Risk Management
A comprehensive approach to avert, minimize and address loss and damage
Impacts of climate change can already be felt today. Recent climate projections anticipate a significant increase in the frequency and/or intensity of extreme weather events such as storms and floods as well as slow-onset changes, like sea level rise and desertification. These negative impacts of climate change pose a growing risk to the sustainable development of all countries in general, and to least developed countries in particular.
Despite current efforts for mitigation and adaptation, residual risk of adverse impacts of climate change remain. Risk can lead to economic and non-economic loss and damage. Managing risks in order to avert, minimize and address loss and damage is therefore key.
Comprehensive Climate Risk Management (CRM) is a systemic approach that seeks to anticipate, avoid, prevent, and finance risks as well as absorb remaining impacts from extreme weather events and slow onset changes. It thus builds on lessons learnt from climate change adaptation (CCA) and disaster risk reduction (DRR), embedded in a sustainable development framework.
Comprehensive climate risk management aims to reduce and address the negative consequences of climate change along the entire risk continuum: averting climate risks through the reduction of greenhouse gas emissions, minimising climate risks through adaptation and risk management to managing residual climate risks. Against this background, climate risks have to be continuously analysed, reduced, addressed and transferred. The concept of comprehensive climate risk management encompasses the following mutually reinforcing steps and should build on the participation of stakeholders from different sectors and scales:
Climate risk assessments build the foundation to analyse risks and to encompass their potential consequences for people, assets and ecosystems. The magnitude of adverse impacts by climate change depends largely on the global level of emissions in the coming years and decades. In order to keep climate change manageable mitigating greenhouse gas emissions is paramount. Hence, keeping global warming below 2 degrees, as agreed to in the Paris Agreement, is an important step for managing climate risk.
CRM proposes a set of instruments for risk reduction and adaptation that enable stakeholders to take timely action for enhancing preparedness to climate-related extreme events and for strengthening overall resilience (e.g. early warning systems and contingency planning).
To tackle residual risk, risk transfer mechanisms such as climate risk insurance and social protection schemes can foster resilience to climate change by spreading risks across different actors, geography and time. Furthermore, in post-disaster situations resilient recovery contributes to “build back better” and prepare for future climate risks.