Climate Adaptation Finance and Investment in California by Jesse M. Keenan

Albert Estrada
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Joined: 2023-04-22 19:24:07
2024-12-25 19:57:30

1 Introduction

This book serves as a guide for local governments and private enterprises 
as they navigate the unchartered waters of investing in climate change 
adaptation and resilience. Local governments and private enterprises in the 
State of California have made tremendous strides in developing an adaptive 
capacity for addressing the current and future impacts of climate change. 
Both the public and private sectors have been united in their challenge to 
not only conceptualize the economic consequences of climate change but 
also to develop a practical set of methodologies and criteria for evaluating 
investments undertaken in the name of adaptation and resilience. Through 
successive adaptation plans and updates for nearly the past decade, the 
State of California has made advances in framing investment challenges 
and interventions in everything from transportation fi nance to disaster 
recovery grants and from life-cycle asset management to structured fi nance 
( CNRA 2009 , 2016 , 2018a ). The 2018 update to the state adaptation plan 
has called for not only advancing innovation in fi nancing models but 
also the incorporation of climate adaptation into existing funding sources 
( CNRA 2018a , p. 88). 
 Advanced in coordination with the California Integrated Climate Adapta-

tion and Resiliency Program (ICARP) Technical Advisory Council (TAC) 
and the Federal Reserve Bank of San Francisco, this guide seeks to provide 
insight into how local governments, as well as private enterprises, may stra-

tegically develop financial models based on a variety of funding sources, 
analytical methods and strategic motivations. In this regard, the challenge 
is not only to fund “climate” projects but also to fund every day projects 
that seek to incorporate some aspects of resilience and/or adaptation perfor-

mance into their design standards and investment underwriting criteria. From 
another perspective, this guide helps provide a methodology for underwrit-

ing resilience and adaptation considerations in projects that serve a variety 
of interests and social equities over a variety of time horizons. Consistent 
with the principles of the ICARP-TAC and its authorizing legislation, it is 

incumbent upon stakeholders to evaluate the distributive costs and benefits 
that shape the social, economic and environmental welfare of vulnerable 
communities. As such, this guide provides methods for ensuring that social 
equity considerations help shape fair and equitable investments. 
 The broad intent is to develop a sensitivity in underwriting and managing 
investments that provide transparency for investors and the general public 
about the nature of trade-offs by and between different options and strategies. 
As will be discussed, these trade-offs may be between investing in short-term 
resilience and long-term adaptation or simply between the conflicts that may 
arise between the built and natural environments. The intent is to empower 
local governments to not only develop innovative finance models but also to 
communicate the value of such investments to the general public, as well as 
those who are the stewards of managing assets. As such, this guide attempts 
to think beyond the immediacy of return-on-investment (ROI) analysis in 
favor of a multitude of quantitative returns and qualitative benefits. 
 How to use this guide 
 This guide is intended to provide a survey of issues, considerations and 
sources of funding that can help guide strategies and tactics for investing 
in adaptation and resilience in California. While this guide is primarily ori-

ented for asset management, public accounting, risk management and trans-

actional fi nance actors within local governments, it may also be insightful 
for actors engaged in community development and investment; state agen-

cies interested in developing adaptation fi nance products or conduits; and, 
private sector fi nanciers and underwriters who recognize the opportunities 
associated with responsible investing in climate change. The intent of this 
guide is not to provide a prescriptive pathway or underwriting process but to 
challenge the assumptions and values of existing modes of analysis, as well 
as to highlight novel ideas and developments that are likely to have bearing 
on future investments. By orienting adaptation fi nance to existing conven-

tions, the guide is intended to refl ect on the proposition that the “fi nance” 
in adaptation fi nance is relatively straightforward. The more fundamental 
challenge is in identifying the sources of funding that will allow for new 
capital stacks that account for the divergent interests and returns associated 
with a new form of investment. 
 Momentum shaping adaptation finance 
 This guide builds off of the work of a variety of California-specifi c resources 
that have sought to mobilize greater analytical sensitivity and issue aware-

ness associated with current and future climate adaptation investment 

Climate Adaptation Finance and Investment in California by Jesse M. Keenan

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