New Report:  Financing Natural Infrastructure for Coastal Flood Damage Reduction

June 13, 2017

A report prepared for Lloyd's of London by the Center for the Blue Economy, in collaboration with The Nature Conservancy and UC Santa Cruz, examines options for financing natural infrastructure (wetlands, mangroves, natural dunes, etc.) that help protect against flooding and storm surge.   The results? Investment to conserve natural habitats makes economic sense for investors and insurers.    Natural barriers are less expensive than seawalls, the study finds, and with natural infrastructure taken into account, insurers could reduce the amount of claims they pay out and lower premiums.   "If you are in a more resilient city, compared to a less resilient one, then those risk levels should be taken into account in pricing," said Trevor Maynard, head of innovation at Lloyd's, as reported by Reuters1.  

The need to find funding to reduce flood risks in coastal areas is pressing.   Insurers have paid out more than $200 billion in claims for damages due to coastal floods in the past 10 years, the report says.  Forecasters at NOAA’s Climate Prediction Center say the Atlantic could see another above-normal hurricane season this year2.  Dr. Charles Colgan, Center for the Blue Economy Director of Research and lead author of the study, noted that:  "more people live and work in coastal areas, increasing the absolute magnitude of properties and values at risk. The coastal regions where population is growing are highly dynamic in ways that increase flooding risks. Sea levels have been rising for more than a century and the pace of sea level rise is increasing. Moreover, in many coastal areas the shoreline is eroding at a pace exacerbated by human intervention. The combination of rising sea levels and eroding shores are creating unprecedented risks."

There is hope, however, as money is out there for natural infrastructure investment.  Some of the main takeaways from the report:

There is a large and growing pool of funding for natural infrastructure, but securing funding will require significant actions by industry, government, scientists, and communities.

There is no "one size fits all."  Financing, whether public/private or a combination of both will be determined by specific local conditions.

The largest opportunities for funding are in the redirection of post-disaster recovery funds to pre-disaster investments in risk reduction.  

The report focuses particular attention on a number of financial innovations which can greatly increase the money available.    “Innovations such as green bonds, catastrophe bonds, and evolving policies in flood insurance have created a solid base for a future set of funding sources that will meet the needs for coastal adaptation to a much greater extent than today’s array can," according to the study.



1: Reuters Story:  Mangroves, coral reefs could cut flood insurance premiums: Lloyd's

2:  NOAA Climate Prediction Center Story

Photo Credit: NOAA

Learn More:  Climate Change Adaptation Initiatives from the Center for the Blue Economy

The San Diego Regional Climate Collaborative Economic Vulnerability Study

“Economic Impacts of Climate Adaptation Strategies for Southern Monterey Bay”

“Measurements of Risk and Uncertainty”

"Climate Adaptation:  A planning guide for New England states, an example for all states"

The Journal of Ocean and Coastal Economics:  Volume 3, Issue 2—The Economics of Coastal Climate Change Adaptation

Coastal Marketplace: Innovative Research for Market-Based Coastal Development

New Economics of Coastal Climate Change Adaptation Forum