Editing IPCC:AR6/WGII/Chapter-11 (section)

==== 11.3.8.3 Adaptation ====

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Banks, insurers and investors increasingly recognise the risks posed by climate change to their businesses ( ''high confidence'' ) ( [[#Paddam--2017|Paddam and Wong, 2017]] ). Collaborations between banks, insurers and superannuation funds in Australia and New Zealand are driving efforts aimed at achieving the Paris Agreement goals, including the New Zealand Centre for Sustainable Finance and Australian Sustainable Finance Initiative ( [[#AFSI--2020|AFSI, 2020]] ; [[#TAO--2020|TAO, 2020]] ; NZCFSF, 2021). Company directors, including superannuation fund directors, have legal obligations to disclose and appropriately manage material financial risks ( [[#Barker--2016|Barker et al., 2016]] ; Hutley and Davis, 2019). Financial regulators are aware of climate risks for financial stability and financial institutions ( [[#RBNZ--2018|RBNZ, 2018]] ; [[#RBA--2019|RBA, 2019]] ) and are closely supervising climate risk disclosure practices ( [[#TCFD--2017|TCFD, 2017]] ; [[#RBNZ--2018|RBNZ, 2018]] ; [[#APRA--2019|APRA, 2019]] ; [[#CMSI--2020|CMSI, 2020]] ; [[#IGCC--2021b|IGCC, 2021b]] ). In Australia, regulatory action ( [[#APRA--2021|APRA, 2021]] ) includes issuing prudential guidelines for financial institutions on managing climate risk, aligned with guidelines developed by the Climate Measurement Standards Initiative ( [[#NESP%20ESCC--2020|NESP ESCC, 2020]] ). In New Zealand, the financial sector (climate-related disclosure and other matters) amendment bill aims to ensure that the effects of climate change are routinely considered in business, investment, lending and insurance underwriting decisions ( [[#NZ%20Government--2021|NZ Government, 2021]] ).

Banks and insurers are beginning to undertake climate risk analyses ( [[#CRO%20Forum--2019|CRO Forum, 2019]] ; [[#Bruyère--2020|Bruyère et al., 2020]] ) and disclose their risks ( [[#Paddam--2017|Paddam and Wong, 2017]] ; [[#ANZ--2018|ANZ, 2018]] ; [[#CBA--2018|CBA, 2018]] ). For example, the agricultural banking sector has analysed climate risk and embedded climate adaptation financing into its risk scoring and lending practices ( [[#CBA--2019|CBA, 2019]] ). However, the overall number of disclosures continues to lag expectations, suggesting the need for mandatory climate risk disclosure in Australia ( [[#IGCC--2021a|IGCC, 2021a]] ).

Climate adaptation finance is not evident ( ''medium confidence'' ). There is an adaptation finance gap (Mortimer et al. 2020). Private sector initiatives are beginning to emerge through large scale projects or public–private partnerships, such as the Queensland Betterment Fund ( [[#Banhalmi-Zakar--2016|Banhalmi-Zakar et al., 2016]] ; [[#Ware--2020|Ware and Banhalmi-Zakar, 2020]] ). Addressing investor pressure ( [[#IGCC--2017|IGCC, 2017]] ) could increase investment in adaptation. However, ongoing policy uncertainty in Australia continues to be the key barrier to allocating additional capital to invest in climate solutions for 70% of investors ( [[#IGCC--2021a|IGCC, 2021a]] ).

Current and future insurance affordability pressures could be addressed by increased mitigation, revisions to building codes and standards and better land use planning ( [[#ACCC--2020|ACCC, 2020]] ; [[#Actuaries%20Institute--2020|Actuaries Institute, 2020]] ). In New Zealand, insurance signals are motivating the government to address adaptation funding mechanisms ( [[#Boston--2018|Boston and Lawrence, 2018]] ; [[#CCATWG--2018|CCATWG, 2018]] ). Some insurers offer premium discounts to customers with reduced risk ( [[#Drill--2016|Drill et al., 2016]] ), with increasing premiums reflecting known risk and no cover for some hazards in risky locations ( [[#CCATWG--2017|CCATWG, 2017]] ). Special excess payments are available for flood hazard so customers take responsibility for part of the claim, with increasing premiums to reflect known and foreseeable risk and downgrading cover from replacement value to market value ( [[#Bruyère--2020|Bruyère et al., 2020]] ). Retreat by private insurers from risky locations could increase the unfunded fiscal risk to the government ( [[#Storey--2017|Storey and Noy, 2017]] ), creating moral hazard ( [[#Boston--2018|Boston and Lawrence, 2018]] ). The litigation risk from failing to take adaptation action ( [[#Hodder--2019|Hodder, 2019]] ) could affect financial markets and government policy settings, creating cascading impacts across society ( [[#Lawrence--2020b|Lawrence et al., 2020b]] ) [[#CRO%20Forum--2019|CRO Forum, 2019]] ). For some climate risks, national governments act as ‘last resort’ insurers ( [[#CCATWG--2017|CCATWG, 2017]] ), but this could become unsustainable ( [[#CRO%20Forum--2019|CRO Forum, 2019]] ).

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