100 million people could be permanently displaced in the next 55 years for climate-related reasons – that's almost the entire population of Mexico today. People living in coastal areas, who account for a quarter of the world's population, will be hit particularly hard by climate change. And the economic loss caused by climate change will double every 12 years.

These are some of the key findings outlined in the new report "Adaptation and Vulnerability to Climate Change: The Role of the Finance Sector" presented by the United Nations Environment Program (UNEP) in conjunction with 15 leading financial institutions in Nairobi this Wednesday.

The members of the UNEP Finance Initiative (UNEP FI) advocate public-private initiatives to prepare for the effects of climate change. Three main areas of concern are adaptation to climate change, disaster management and sustainable economic development.

"Even if we managed to significantly reduce greenhouse gases now, we wouldn't notice the difference until 2040," says Olaf Novak, head of the Natural Disasters Department at Allianz Reinsurance. "The earth's temperature is definitely going to rise by at least 0.6 degrees Celsius, and if we do nothing, it could rise even more." In fact, new studies suggest that the impact of emissions on our planet is 50 percent worse than was previously assumed.

The effects of climate change will definitely be felt by coastal communities, and 12 of the world's 16 largest cities are on the coast and are still growing. "As far as some coastal towns are concerned, we need to seriously consider whether it is worth fighting the rising sea level, or if it would actually be more sensible to retreat," says Novak. "New Orleans, which has far fewer inhabitants now than it did before Hurricane Katrina, could well be the one to lead the way."

For affluent countries, climate change is likely to be primarily an economic problem – and not an insignificant one either. But "there are still politicians, corporate bosses and private individuals out there who don't take the issue seriously," says Novak.

Yet as the temperature rises, so too does the risk of natural disasters: by five percent each year according to the authors of the report. And the costs? Global economic losses due to climate-related natural disasters are increasing at an annual rate of six percent, so in twelve years' time they will have doubled, and could have reached a record trillion dollars by 2040.

"It is developing countries which suffer most," reveals Novak. "For two billion people, drinking water is already a scarce resource, and temperature rises will cause both the demand for and the cost of clean water to increase significantly." Not to mention the increased risk of drought, erosion, and also floods.

The report makes it painfully clear that if the UN wants to achieve its Millennium Development Goals, to halve global poverty and hunger by 2015 for example, then it must prepare for the impact of climate change.

"The tsunami which hit almost two years ago was just a taste of what nature can do to places where nobody is prepared for disasters," says Novak. "Even in developed countries, state disaster relief arrives too slowly and is reactive rather than proactive, Hurricane Katrina showed that all too clearly."

This is why the infrastructure and economies of regions at risk should be adapted now to future scenarios, for example by introducing micro-insurance schemes, or weather derivatives in Asia and Africa, thus financially protecting those in poor areas from disaster, too. Alternative risk transfer products can often cover risks that cannot be insured by conventional means.

"Nowadays, most people accept the reality of climate change," concludes Novak. "But even if we are unable to prevent it, we still have a duty to adapt to it. Only if we act now will we be able avoid its worst effects and at least limit the impact of others."


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