Category: Natural Catastrophe

Climate strikes
FinanceGlobal ComplianceNatural Catastrophe

Climate change transforms high finance’s relationship with society

Climate strikes

Climate change transforms high finance’s relationship with society

 

Extinction Rebellion’s city centre disruptions and Fridays for Future’s well attended school strikes across Europe inspired by Greta Thunberg have placed climate change firmly in the public consciousness. Now more than ever before, the question is not if something should be done, but when and how. Robert Blood, managing director of NGO tracking and issues analysis firm SIGWATCH, explains how this is already forcing the financial sector to take more decisive action.

In June 2018, Legal & General told Japan Post Holdings (JPH) that it was dropping the company from its $6.7billion Future World index funds. It added that any of its funds that still held shares would be instructed to vote against the re-election of JPH’s chairman. L&G justified the move by saying that JPH had “shown persistent inaction” to address climate risk.

L&G is not alone in taking action on climate risk. BNP Paribas, AXA, Allianz, RBS, Munich Re, ING, Rabobank, Standard Chartered, Barclays and HSBC are all now committed to exiting deals and investments concerned with coal mining and coal-fired power. In the U.S., despite (or arguably because of) an administration that is openly sceptical of the need for climate action, many of the largest banks including JP Morgan Chase, Bank of America, Wells Fargo, Citi, Morgan Stanley and Goldman Sachs have all announced coal exits, as they have begun to do in Australia. Japan’s largest banks and insurers, and their equivalents in Singapore and China, have come late to the divestment game but they too are finally rolling out new coal pledges.

Revival of campus activism

These moves are the consequences of growing pressure from stakeholders, driven by activist groups, for almost ten years. It was in 2013 that US student environmental groups first demanded college endowment and pension funds sell off their shares in fossil fuel-related projects. Their carbon divestment campaign was modelled on the Apartheid campus divestment battles of the 1980s, which aimed to undermine the economy of South Africa by forcing U.S. firms and investors to sell off South African assets. Congress imposed investment bans too. Until the Klerk-Mandela settlement of 1993, South Africa was for almost a decade a pariah state for investors.

While the priority for campaigners has been to drive out coal, the pressure on carbon does not stop there. Under the slogan, ‘extreme carbon’, campaigners have extracted concessions from leading financial institutions on Canadian oil sands, Arctic and deep-sea drilling, shale gas, and related infrastructure such as LNG terminals and pipelines. As these specific sources become demonized, conventionally produced oil and gas becomes more and more dubious. Divestment on the basis of increased risk has a tendency to become a self-fulfilling prophecy. When money flows out of an asset type, the remaining investors are by definition exposed to increased financial risk, and this in turn stimulates additional cycles of divestment. There is a reason why fossil fuels are commonly described by climate campaigners as ‘stranded assets’. Even giants like Shell are now openly reconsidering their futures.

The success of campaigners in getting their arguments heard and taken seriously is a relatively recent phenomenon. In fact, one of the most striking developments in the financial sector of the last decade has been the ‘mainstreaming’ of environmental and social responsibility standards in investing. Until relatively recently, these were the preserve of SRI and ethical funds, often funds that had been set up at the behest of well-funded environmental groups who insisted on strict exclusion criteria.

Now, environmental and social governance (ESG) is embedded in standard fund management practice, helped by pressure from political stakeholders and customers, particularly in relation to the institutions’ own funds, to take intangible risks such as human and indigenous peoples’ rights seriously.

Financial institutions’ increased willingness to listen

The financial crisis of 2008 also played an important part. With the reputation of the financial sector in tatters, leading institutions made a conscious decision to prove their ‘value to society’ by adopting ESG, and engaging with NGOs in a far deeper and more open way than ever before.

Campaigning NGOs have not been slow to exploit investors’ new-found willingness to listen, to push their wider agenda on a wide range of environmental and social concerns. These include human and indigenous rights, sustainability, corporate environmental responsibility and benchmarking, labour standards, animal rights, even the ethics of investing in industrial scale agriculture.

As NGOs become more active and more influential, their campaigning can provide an early warning system for emerging issues for investors. On plastics and shale gas (fracking), campaigning levels rose significantly ahead of public concern, anything up to 12 months prior. This is not very surprising, since activists are effective at getting media attention and this feeds into public awareness. We are now seeing this with ‘green vegetarianism’ – the switch away from meat for environmental reasons like deforestation and climate change (see chart 1). All these correlations show how campaigners can ‘make the weather’ politically.

It will become more important for global financial institutions, as they develop ever more expansive policies and standards under pressure from NGOs and other stakeholders, to track the long-term implications of the criteria they are enforcing.

Pension funds linked to ‘politically sensitive’ workforces such as public sector employees, health and education, are especially vulnerable to this kind of pressure. The campus campaigns of the carbon divestment movement quickly moved on to targeting staff pension funds once they secured the support of a significant number of faculty. In Denmark the state pension funds have been called out by Greenpeace on the same issue. In Sweden, Greenpeace launched a boycott of payments into the mandatory state pension scheme AP3 until it agreed to divest from all fossil fuels and related infrastructure projects.

ESG goes mainstream

With leading financial institutions engaging seriously with campaigners and their concerns, doing nothing is not an option. As more major mainstream funds are managed on ESG principles, investment managers and institutions increasingly have to justify to their peers why they are not doing the same, rather than the other way round. It is no longer a question of, Are the NGOs being fair, but rather, Do the NGOs have the ear of our stakeholders, and are they already influencing rival institutions? They may be small and apparently insignificant compared to a bank or investment fund, but NGOs have become critical players in transforming what society expects from finance.

Robert Blood, managing director of NGO
Robert Blood, managing director of SIGWATCH
Impact Investment Market Opportunities for Wealth Management Sector
Natural CatastropheRisk Management

Impact Investment Market Opportunities for Wealth Management Sector

The report identifies key product and service offerings by major private banks in these regions. It also highlights key strategies adopted by wealth managers, fund managers and governments worldwide to target impact investors. The analysis is based on extensive primary research with key experts in the field to determine current trends and future expectations, enabling financial advisors to remain competitive in the wealth management industry. Impact investments have become a new investment option among HNWIs and UHNWIs worldwide. They have significantly increased in market size, despite their relatively recent development in 2007. JP Morgan and Global Impact Investing Network (GIIN) estimated the market size of impact investments at around US$46 billion in 2013. In the UK market, impact investments valued GBP200 million in 2014, and are set to grow to GBP1 billion by 2016.

While 67% of impact investment funds are headquartered in Europe and North America, 70% of impact investment capital is being channeled towards emerging markets. Microfinance and financial services combined accounted for 42% of global impact investment funds in 2014. This was followed by energy at 11%, housing at 8% food and agriculture at 8%, and healthcare at 6%. Impact investments are becoming more important among European governments and UHNWIs. Demand for socio-economic impact investments is growing in emerging economies. Limited availability of developed social enterprises is a barrier for impact investment growth.

Different investment types – ‘finance first’ or ‘impact first’ – make the asset rather complex and difficult to value. This has led to the development of a separate wealth management division in private banks, often known as sustainable investing, responsible investing, or social finance divisions. While the majority of impact investment supply-side participants – HNWIs, corporate investors, asset managers, wealth managers and private banks – are based in developed countries such as the UK and the US, the majority of demand-side participants are based in emerging countries such as South Africa, Nigeria, Kenya, China, Brazil and India. This structure generates gaps in the wealth management market, requiring further research. This report aims to provide an in-depth analysis of key market insights and the future outlook of impact investment over the forecast period.

This report covers areas like attitudes of wealth managers and private banks to targeting impact investors, a global market snapshot of impact investments, strategies for targeting impact investments and key market regulations as well as high-profile HNWI and UHNWI impact investors. The research helps understand significance of impact investments in the wealth management sector, and recognize how this asset class can have potential benefits to private banks. Be informed about latest market trends on impact investment products and services offerings in the six regions studied, and draw competitor analysis, Be aware of attitudes of wealth managers and private banks towards the future outlook of impact investments and Make informed decisions about impact investment growth and build better business strategies to target impact investors with the help of this report. Comprehensive table of contents and more on Insight Report: Impact Investments 2015 – Global Opportunities here.

Impact Investing Cleared for Take-off
Natural CatastropheRisk Management

Impact Investing Cleared for Take-off

 Two major hurdles to the broader adoption of impact investing are being cleared by structural changes in the capital markets and new guidance issued by the Department of Labor that makes it easier for retirement plans to offer environmental, social and governance (ESG) solutions to investors planning for retirement.

In a new whitepaper, “Impact Investing: The Performance Realities,” Merrill Lynch analyzes these structural changes and the growing body of evidence showing that investors can do well financially by investing in organizations that are doing what’s right for the environment and society. The paper tracks key developments in the impact investing arena, pointing to rapid growth and innovation that are due largely to growing client demand over the past decade, as well as the improving quantity and quality of ESG data.

A recent Merrill Lynch client survey of 1,500 U.S. investors found that awareness and education about impact investing are also among the keys to its continuing growth.

“More of our clients want their portfolios to reflect their beliefs on issues such as social mobility, climate change, women’s rights and other key issues,” said Anna Snider, author of the paper and head of Global Equity and Impact Investing Due Diligence, Merrill Lynch Wealth Management. “Many investors have held back because of a commonly held belief that investing for a better world requires a trade-off in performance. We believe that a combination of more reliable data, enhanced portfolio construction techniques and innovation in structures and investment approaches will start to turn that outdated assumption on its head.”

“Impact Investing: The Performance Realities” assesses the real state of impact
In developing the whitepaper, Merrill Lynch analyzed proprietary, academic and industry data to gain insight into the impact investing landscape. Key findings include:
• Many impact investments can be used in a market-based portfolio without a significant increase in risk, and can serve to lower overall portfolio volatility and aid in the risk adjusted profile of portfolios.
• The risks of many impact investments are not necessarily greater than their traditional counterparts, but they often are different – and understanding those risks is critical for investment decision-making.
• Most impact-oriented, diversified public equity and fixed income strategies can provide market-like returns – and some more-targeted public and private strategies may even outperform.
• Merrill Lynch found wide recognition that companies lacking good governance, which fail to consider environmental risks or disregard community impacts, are ignoring risks to their bottom line.
• New public-private financing structures are gaining interest from not-for-profit organizations, policy makers and government issuers, and there’s been a marked increase in social impact partnerships, green bonds and direct capital investments in thematic ventures such as health and energy.
• Institutional investors, who were among the first to incorporate impact investing criteria into their mandates, still account for the largest share of assets. Recent substantial growth in indexes, network services and other collaborative or aggregative sources of social responsibility data are now making it possible for all investors to use ESG data, along with traditional financial analysis, to make informed decisions about investing in sustainable companies.

Supporting client survey points to need for education and awareness
Merrill Lynch’s client survey of 1,500 U.S. investors found that awareness and education about impact investing are also among the keys to its continuing growth. The survey found:
• Younger investors – millennials under the age of 35 – are leading the way in the demand for impact investing investments. More than any other age group, they are interested in investing in companies that share similar values and are more likely to believe they can achieve competitive returns (59%).
• Millennials also place greater importance on the issues they consider important than on financial returns (47%).
• Nearly one-half (48%) of the 1,500 investors surveyed would be more likely to incorporate impact investing strategies into their portfolios if assured it didn’t mean sacrificing returns.
• Three in five (62%) investors aren’t yet convinced that impact investing investments can deliver competitive returns.
• Approximately half of investors would be spurred to add ESG investments to their portfolio if they better understood them.
• Fewer than 25% of investors are aware of the impact investment options available to them.

Global Wealth and Investment Management and impact investing
Bank of America’s wealth and investment businesses launched their impact investing platform in August 2013 with a range of investment offerings across asset classes and themes, extensive insight and thought leadership, and a major commitment from Bank of America totaling more than $70bn in lending, financing and other investments, as well as $100mn in grants, over a 10-year period.

As of September 2015, Bank of America’s investment businesses had more than $9.7bn in assets with a clearly defined impact investing approach. Of these assets, approximately $8.1bn are assets under management and $1.6bn are advised assets. These businesses include Merrill Lynch Wealth Management, U.S. Trust, Merrill Edge and the institutional investment business.

While there are many impact strategies that have long track records, as the investment approach is expanding, there are many strategies that may have limited performance history. Data availability and standardized frameworks are still evolving for the private and public impact investments industry and will be subject to multiple improvements in coming years. As such, reporting around the particular impacts of impact investing strategies are subject to the manager’s definition of those results, and investors should be aware of these issues prior to investment. Finally, as impact investing approaches are being more widely integrated into investment processes, it is important for investors to acknowledge that certain portfolio managers and other investors offering solutions in this space are still in their developmental stage, and investors need to be aware of these risks. 

Continued Expansion of the Calvert Responsible Index Series
Natural CatastropheRisk Management

Continued Expansion of the Calvert Responsible Index Series

Calvert Investments, Inc., a global leader in responsible investing, announced today the introduction of two new indexes in the Calvert Responsible Index Series: the Calvert Developed Markets Ex-U.S. Responsible Index (CALDMI) and the Calvert U.S. Mid Cap Core Responsible Index (CALMID).

“Calvert is committed to meeting the evolving needs of our clients with both active and indexed responsible investing products,” said John Streur, CEO, Calvert Investments. “Calvert has 30 years of leadership in helping responsible investors define and assess the environmental, social and governance impacts of the corporations they own. Combine this with our shareholder engagement and we can help investors drive real positive change in the world.”

The indexes are driven by the Calvert Research System, a proprietary research platform that synthesizes multiple sources of non-financial data, including environmental, social, and governance (ESG) data. Calvert analysts identify and weight the ESG factors that are most material within each of 156 sub-industries, then rate and rank every company to build the list of index constituents. The firm continues to build upon its global responsible investment research expertise with the newest additions to its responsible index series and related low-cost index funds that will track them and institutional separate account products.

Investment Managers: Fill Your Stockings with Big Data and Real-Time Analytics
Natural CatastropheRisk Management

Investment Managers: Fill Your Stockings with Big Data and Real-Time Analytics

KPMG has today warned that investment managers must invest in big data and real-time analytics, or risk being caught short in 2015, as the firm predicts an increasingly volatile geopolitical landscape.

Tom Brown, global head of investment management at KPMG, said, “While geopolitical risk will always be in the fabric of investment management, it is the ability to manage and quickly respond to these developments that defines success.

“However as recent geopolitical developments such as the falling oil price and volatility in the Rouble suggest, risks are increasing in unprecedented variety, volume and velocity. Investment managers without the ability to analyse as well as make decisions in real-time, risk falling behind and therefore, impacting fund performance.”

KPMG’s economics practice has released five economic themes that investment managers should take note of next year:

●Volatile exchange rates
●Continued low crude oil prices
●Local conflicts from Isis and Ukraine, to the Eurozone
●Business innovation – potential emergence of breakthrough technologies
●Cheap money inflating asset bubbles

Yael Selfin, head of macroeconomics at KPMG, said, “The latest Fed announcement points at US interest rates rising in the second quarter of next year, which could trigger significant market volatility early in 2015, as investors hastily readjust their global holdings.”

Tom Brown adds, “January’s fund performance figures will reveal the industry’s winners and losers in terms those that have been able to respond to the spate geopolitical risks over the past quarter.

“Undoubtedly those who have been caught short will be reflecting on the quality of their data, modelling and ability to respond quickly. However it is equally important for those who have performed well not to be complacent. They must look at whether their existing data, systems and processes are able to cope with the increasing volatility.

“Successful investment managers will be those who invest in advanced big data and real-time analytics. This will not only help them make informed real-time decisions, but can also help with predictive analysis to maximise fund performance. Those who fail or are slow to embrace this technology risk being caught short and will potentially suffer poor fund performance.”

Arabian Earthquake Catastrophe Model Launched
Natural CatastropheRisk Management

Arabian Earthquake Catastrophe Model Launched

Impact Forecasting, Aon Benfield’s catastrophe model development team, launched a catastrophe model to estimate the financial impact of earthquakes in the Arabian Peninsula. Aon Benfield is the global reinsurance intermediary and capital advisor of Aon plc(NYSE:AON).

The demand for catastrophe modelling in the countries of Gulf Cooperation Council (GCC) is increasing as a result of the region’s rapid economic growth. The new probabilistic earthquake model for the Arabian Peninsula addresses this market demand and can be used by insurers and reinsurers to gain a more accurate view of the seismic hazard for risk pricing and reinsurance purchasing.

The model covers Saudi Arabia, Yemen, Oman, the UAE, Qatar, Bahrain and Kuwait. Key features include:

  • up-to-date understanding of the seismic risk in the region with the model incorporating state-of-the art research on the
  • regional seismic risk published in leading academic forums
  • 500,000+ stochastic events capturing the full range of potentially damaging events
  • understanding of the insured building stock of the region, drilling down to 24 different structural types, three building age and height categories, and detailed residential, commercial and industrial occupancies
  • ability to model buildings, contents and business interruption
  • incorporation of model uncertainty with regards to hazard, location and vulnerability in order to quantify the intrinsic variability behind the model.

Cristina Arango, seismologist and catastrophe model developer at Impact Forecasting, commented: “Our Arabian Peninsula model is built upon the latest scientific data gathered during recent earthquakes as well as research on regional seismic hazard. The model allows insurers and reinsurers to understand how their portfolio will stand up in events of varying severity, as they look to expand their business in the region. Earthquake is considered to be the number one peril in the region, however, countries such as Saudi Arabia have also experienced flood so this peril is also being investigated by the Impact Forecasting team.”

Ahmed Rajab, CEO of Aon Benfield in the Middle East, added: “The new model for the Arabian Peninsula will help insurers and reinsurers to quantify their exposure, making sure that they are adequately protected against this risk and preserving the capital that they have been entrusted with by their shareholders. Crucially, the new insight into the hazard will develop knowledge, open new opportunities and allow better designed insurance products for households, commercial and industrial buyers as well as for governments and reinsurer buyers. This is a clear statement of Aon’s contribution and long-term commitment to the region.”

Global Tensions “Heighten Cyber Security Risks”
Natural CatastropheRisk Management

Global Tensions “Heighten Cyber Security Risks”

“Businesses are so focused on cyber attacks by organised crime that it is easy for them to ignore the possibility of being targeted by groups wanting to make a political point, possibly even with backing from a hostile government,” says Malcolm Marshall, UK and global lead in KPMG’s cyber security practice.

“Over the past five years the international business community has seen a number of incidents where websites have been hacked so that political messages can be uploaded where they will receive widespread exposure – the Syrian Electronic Army is just one example, amongst many. Hacktivists are certainly more active during periods of international tension, but it’s the next step that businesses should be wary of.

“Cyber attacks are becoming part of international conflict and it seems that probing cyber attacks are likely to be the first phase in the hostile phase of future conflicts. The well-worn phrase about who has their ‘finger on the button’ has taken on a new meaning and this is something that banks, financial institutions and global businesses need to consider. After all, the ability to disrupt electronic trade, divert funds, or overload IT systems so that transactions cannot be completed, can have an effect that goes far beyond the geographies where disputes are raging.

“It doesn’t mean organisations should panic and ‘bunker down’. What it does mean is that, just as scenarios are planned to help deal with major physical security breaches, organisations need to put plans in place that recognise we now operate in a world without cyber borders. If they can successfully build these defences and take proactive steps to protect themselves, they will reduce the chances of inadvertently becoming embroiled in a wider dispute.”

Natural CatastropheRisk Management

Which are the Riskiest Countries for Business?

The 2014 FM Global Resilience Index finds Norway, Switzerland and Canada top the list of nations most resilient to supply chain disruption, one of the leading causes of business volatility. The first-of-its-kind Index, commissioned by FM Global, one of the world’s largest commercial property insurers, is an online, data-driven tool and repository ranking the business resilience of 130 countries. More than a year in development, the Index is designed to help executives better assess and manage supply chain risk. The Index finds Kyrgyzstan, Venezuela and the Dominican Republic as nations least resilient to supply chain disruption.

“Natural disasters, political unrest and a lack of global uniformity in safety codes and standards all can have an impact on business continuity, competitiveness and reputation,” said Jonathan Hall, executive vice president, FM Global. “As supply chains become more global, complex and interdependent, it is essential for decision makers to have concrete facts and intelligence about where their facilities and their suppliers’ facilities are located. The Resilience Index is a dynamic resource to better understand unknown risk in order to strategically prioritize supply chain risk management and investment efforts.”

Key findings for 2014 include:

• The United States and China are each divided into three separate regions because the geographic spread of these countries produces significantly disparate exposures to natural hazards. All three regions of the US rank in the top 25 and China’s regions rank 61, 66 and 75. China’s weakest grouping, which includes Shanghai, ranks particularly low as a result of poor risk quality due to acute natural hazards.

• The biggest riser since 2013 is Bosnia and Herzegovina, climbing 19 places due to improvements in the country’s political risk and in the quality of local suppliers.

• Bangladesh is one of the top fallers due to declining quality of both natural hazard risk management and fire risk management.

FM Global commissioned analytics and advisory firm Oxford Metrica to develop the rankings with the aim of bolstering intelligent dialogue around building resilience and avoiding supply chain disruption.

The data comes from a combination of independent third-party sources and FM Global’s RiskMark benchmarking algorithm, which measures the risk quality of more than 100,000 insured commercial properties worldwide. The inaugural index allows for browsing of countries’ rankings and scores from 2011 to 2014, to reflect both improvements and declines in individual countries’ relative rankings.

“We live in a volatile world and whether that’s because of what nature wrought or the human element, every nation is prone to some form of risk,” said Margareta Wahlstrom, United Nations Special Representative of the Secretary-General (SRSG) for Disaster Risk Reduction. “The question is why are some countries, whether developing nations or economic power houses, more resistant to supply chain disruption or better able to bounce back? It’s a puzzle that world leaders are perpetually trying to solve and there’s endless value inherent in a tool like the FM Global Resilience Index to help answer that.”

Christie Administration Wants Claim Extension for Businesses
Natural CatastropheRisk Management

Christie Administration Wants Claim Extension for Businesses

The Christie Administration has urged the Federal Emergency Management Agency (FEMA) to grant New Jersey residents and businesses who suffered property damage or destruction in Superstorm Sandy an additional six-month extension to file a complete flood insurance claim, or proof of loss, in connection with the storm. The Administration is asking that the filing deadline be extended from April 28, 2014 to October 28, 2014.

“Superstorm Sandy was the worst natural disaster to strike New Jersey in a generation, and the process of rebuilding has been expensive and complicated. Homeowners and business owners simply need more time to file their final flood insurance claims,” said Governor Christie. “Many property owners have begun to rebuild only to find there was more damage than they originally thought.”

A proof of loss is a form used by the policyholder to support the amount they are claiming under the policy, which must then be signed, sworn and submitted to the insurance company with proper supporting documentation. An extension of the filing deadline would give homeowners and business owners additional time to evaluate newly discovered damages and costs, obtain proper documentation, and submit detailed information in a supplemental proof of loss.

FEMA has twice extended the deadline for New Jersey residents to file a proof of loss. In November 2012, FEMA extended the 60-day timeframe for filing Superstorm Sandy-related proof of loss documents to October 29, 2013, one year from the date Superstorm Sandy struck New Jersey. In October 2013, the deadline was extended another six months to April 28, 2014. If FEMA grants the State’s request to extend the deadline a third time, New Jersey residents and business owners would have until October 28, 2014 to submit a proof of loss.

Governor Christie’s letter also reiterated a previous request for FEMA to clarify the interplay between the extended proof of loss deadline and the one-year statute of limitations for filing litigation relating to flood insurance claims. Under current FEMA policy, consumers have a one-year time limit to file litigation resulting from unresolved claims. The Administration sent a letter to FEMA in December 2013 asking that the agency to interpret the one-year time period as beginning after the denial or partial disallowance of a claim following the submission of proof of loss documents. The clarification requested by the Christie Administration would mean that the one-year window for residents to file Sandy related lawsuits over flood insurance claims would not begin until after a claim was denied following the submission of the
proof of loss.

World Bank Helps Solomon Islands with Disaster Resilience
Natural CatastropheRisk Management

World Bank Helps Solomon Islands with Disaster Resilience

The agreements will officially launch two new projects for Solomon Islands, one to improve electricity supply and reliability in Honiara, and the second to help protect communities against growing risks from climate change and natural disasters.

“This launch will kickstart two very important projects for our country – projects that will help improve electricity supply, a priority for the Government and people of Solomon Islands, and that will enable communities to be better prepared for climate change and natural hazards,” said Rick Houenipwela, Minister of Finance and Treasury for Solomon Islands.

“I am pleased to be launching these projects on behalf of the World Bank as it continues to expand its support for Solomon Islands, by way of projects that support national priorities, such as reducing risks from climate change and natural disasters, and improving power supply for households and businesses,” said Franz Drees-Gross, World Bank Country Director for the Pacific Islands.

The Community Resilience to Climate Change and Disaster Risk in Solomon Islands Project (CRISP) will invest US$9.1m in climate and disaster risk information and early warning systems, which can save lives in the event of a tsunami or other natural hazard, as well as community projects in climate change adaptation and disaster risk reduction, such as climate proofed buildings, in up to four provinces.

The agreement was also signed for US$13m in new financing for the Sustainable Energy Project (SISEP), which is working to improve the reliability and efficiency of electricity supply for the 65,000 residents of Honiara.

“Efficient, affordable and reliable electricity access is essential for every aspect of development from running hospitals to doing business, while the Climate and Disaster Resilience Project is vitally important in a country where communities face very real, very present threats from natural disasters and climate change, especially in the remote Outer Islands,” said Drees-Gross.

The SISEP project began in 2008 and has supported the financial turn-around of the Solomon Islands Electricity Authority (SIEA), and improvements in power reliability in Honiara. During the course of SISEP, the annual total length of time that a customer is without power in Honiara has fallen by more than 80 percent, from 864 hours in 2007 to 124 hours in 2012.

This new funding will build on SISEP’s achievements and enable investments to further strengthen power systems, in particular through improvements to the grid in Honiara.

SISEP is being funded through US$13m in grants and low-interest credits from the International Development Association (IDA). CRISP is funded through a US$7.3m grant from the Global Environment Facility for Least Developing Countries, with a further US$1.8m from the Global Facility for Disaster Risk Reduction and Recovery Grant through the European Union Asian, Caribbean and Pacific Natural Disaster Risk Reduction Program.