Climate Adaptation Development Programme (CADP)
Swiss Re launched its Climate Adaptation Development Programme (CADP) at the Clinton Global Initiative 2007 meeting. The programme is designed to develop a financial risk transfer market for the effects of adverse weather in emerging countries. In a first phase, it will aim at providing financial protection against drought conditions for up to 400 000 people in Africa.
Background
Climate change is happening now. Due to the inert nature of the global climate system, some negative impacts of global warming will become unavoidable, even if the world completely stops emitting greenhouse gases. For this reason, adaptation measures must be taken without delay.
The poorest nations will suffer most, as they often lack the required infrastructure and institutional framework to cope with the effects of the changing climate. At the same time, weather-related disasters disproportionately affect the agricultural sector in the least developed countries, where many farmers operate on a subsistence level. Most farmers have only limited access to financial means (eg micro-credit and -insurance) to adapt to the effects of global warming.
Financial risk transfer instruments can play an important role in this context. They can be applied
- on a stand-alone basis, as financing instruments that provide effective and timely risk coverage, or
- as embedded elements of micro-credit products, greatly facilitating access to financing for individual farmers.
Climate Adaptation Development Programme
In a first phase, Swiss Re is partnering with Millennium Promise – a non-profit organisation which aims to lift rural African villages out of the poverty trap – and the International Research Institute for Climate and Society, which has pioneered climate modelling and climate risk management approaches, and is part of The Earth Institute at Columbia University. The goal of this partnership is to develop and implement climate risk indices for 12 clusters of Millennium Villages in Africa (Ethiopia, Ghana, Kenya, Malawi, Mali, Nigeria, Rwanda, Senegal, Tanzania and Uganda), which are home to 400 000 people.
Based on these climate risk indices, Swiss Re will design financial risk transfer instruments and bring them to the commercial market. Additionally, Swiss Re will financially support related research and risk assessment, and will engage in complementary corporate citizenship initiatives.
Swiss Re has pioneered weather risk transfer instruments in low-income markets, starting in India in 2004. A total of 280 000 policies have since been sold to smallholder farmers. Earlier this month, Swiss Re announced that it had provided financial protection in the case of extreme drought to three village clusters in Kenya, Mali and Ethiopia.
The Climate Adaptation Development Programme is open for partnerships. Additional contributions to research, training or funding of risk transfer from public and private institutions are invited.
