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.
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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