Capital available, but not flowing: ASFI sets out priority actions to unlock investment in climate adaptation and resilience.
Australia is facing rising climate risks, but the financial system is not yet set up to fund adaptation and resilience at the scale required.
The Australian Sustainable Finance Institute (ASFI), the peak body for Australia’s sustainable finance sector, has today released ‘Priority Actions for Financing Adaptation & Resilience’, a report drawing on insights from a cross-sector convening held during Climate Action Week Sydney.
The event brought together senior representatives across banking, insurance, investment and Government to highlight the escalating physical climate risks that Australia is facing, and the need for a whole-of-finance-sector response to generate more investment. As evidence shows, every $1 invested in resilience initiatives delivers approximately $9.60 in losses is avoided [1].
ASFI’s Chief Executive Officer Kristy Graham said the convening underscored the need for stronger coordination between public and private sectors, to mobilise capital into climate adaptation and resilience.
“Across the system, there is no shortage of capital,” said Graham. “The challenge is ensuring the right structures are in place. “Mobilising investment in adaptation and resilience is a shared endeavour that requires ongoing, deliberate collaboration between the public and private sectors.”
From policy settings and market frameworks to investible project pipelines, for capital to be deployed at scale we need Government leadership to set direction and establish an environment in which capital can flow.”
ASFI’s report identified four interconnected areas shaping the flow of capital into adaptation and resilience, spanning how outcomes are valued, the strength of market infrastructure, the ability of projects to attract investment and how capital is mobilised across the system.
Physical climate impacts are already affecting productivity, infrastructure, asset values and insurance affordability. Natural disasters cost the economy approximately $38 billion each year and are projected to rise to at least $73 billion annually by 2060[2]. These pressures are expected to intensify, with analysis indicating the home insurance protection gap could widen from around one in seven homes today to one in four by 2050[3], increasing exposure for households, lenders and governments.
Addressing these challenges will require coordinated action across policy, finance and project development, including improved valuation approaches, clearer market signals, stronger project pipelines and mechanisms to mobilise capital at scale.
Expanding the Australian Sustainable Finance Taxonomy to define adaptation and resilience activities will be a key enabler, supporting more consistent identification, assessment and financing across the system.
“What’s emerging is a shift from viewing climate risk as a future issue to understanding it as a current financial system challenge,” said Graham
“There is private capital available for adaptation and resilience, but it will not flow at scale without the right enabling conditions. Government has a critical role to play in setting direction, establishing a supportive policy and regulatory environment, and providing early‑stage support.”
“Private capital won’t just flow by itself into this area - If we want capital to flow, we have to build the channels for it.”
[1] National Adaptation Plan, Department of Climate Change, Energy, the Environment and Water
[2] National Resilience and Adaptation Strategy 2021-2025, Department of Climate Change, Energy, the Environment and Water