Adaptation Investments Research Articles

Country-level dynamic capabilities and inward FDI: a framework on future policy adaptations applied to post-Brexit UK

The purpose of this paper is to establish a policy framework for those responsible for maximising the opportunities of inward foreign direct investment (FDI). Our proposed framework intellectualises the need for dynamic capabilities at the country level (national and local) to sense and seize new opportunities from inward FDI, use this knowledge to mobilise resources and, over time, make changes to reconfigure the UK’s location-specific advantages in a post-Brexit marketplace. Using the backdrop of the UK’s decision to exit the European Union in May 2016 (Brexit) alongside other global challenges (the COVID-19-induced supply chain crisis, political unrest, wars, new trade deals), we explore the changing nature of FDI entering the UK. We explain why an adaptive investment promotion strategy means greater and more widespread benefits of inward FDI for the economy. Then, we propose a policy-oriented dynamic framework for how the benefits of FDI can be maximised during political upheaval. In our analysis and discussion, we highlight how changes in foreign firms’ FDI motives can alter the UK’s value proposition, and over time, the nature of a country’s specific advantages.

A data-driven framework for enhancing coastal flood resilience in resource-crunched developing nations

A comprehensive Flood Resilient Scenario Model ‘FReSMo’ employs a data-driven, evidence-based approach for assessing climate-induced flood risk and validating the efficacy of mangroves (as context-specific adaptation measure) in reducing residential building damage. Based on an improvised Source-Pathway-Receptor-Consequence-Evidence concept, FReSMo employs a three-step analysis. First, hazard mapping estimates coastal flood extents for various return period under different Shared Socioeconomic Pathways. Second, the model maps the exposure of residential buildings to these flood extents by projecting built-up area for 2050 using the FUTURES model, based on physiographic, socio-demographic, and economic parameters. Finally, a data-driven probabilistic damage model is applied to estimate the built-up area damage for a 100-year coastal flood event (SSP-2.6). The pre-and post-adaptation damage estimate demonstrates the efficacity of NBS (mangroves) in reducing coastal flood risk. A 100 m mangrove patch on the Sagar coastline reduced the building damage cost by 70% for a 48-hr and 75% for a 24-hr flood. Considering a plantation cost for 6.2 km2, the total benefit, despite persistent losses, was a 222% return on investment. FReSMo transcends conventional risk assessment frameworks by offering a comprehensive approach for evaluating the cost-effectiveness of adaptation investments in developing countries, making it an invaluable tool in the face of climate change.

FinTech and economic readiness: Institutional navigation amid climate risks

The current climate change is declared as a global boiling point by the UN; businesses are facing increasing costs in maintaining their supply chains and production standards and are being urged to adapt and innovate for environmental transition. With the Industrial Revolution 4.0, FinTech has helped develop households’ and firms’ resilience against climate change. This study explores how businesses use FinTech to increase economic readiness to attract adaptation investments. This study hypothesizes that, at initial levels of businesses, FinTech adoptions are typically targeted to improve profitability while, as businesses mature, their FinTech adoption shows a transition towards sustainability. Following this, the role of institutions in regulating an ecosystem is to promote sustainable financial innovations. This study employs a 114-country panel data analysis to investigate these dynamics empirically. The estimation using Panel Quantile Regression showed that institutional quality can moderate the U-shaped FinTech adoption and business readiness relationship to expedite the transition under Sustainable Development Goal 9. This research sheds light on the impact of institutional quality on improving businesses’ ability to attract adaptation investments via promoting sustainable innovation. Outcomes offer valuable insights for policymakers, firms, and investors seeking to foster a more resilient economy.

From Debt to Sustainability: Advancing Wastewater Projects in Developing Countries through Innovative Financing Mechanisms—The Role of Debt-for-Climate Swaps

Developing countries, including Small Island Developing States (SIDSs) and Least Developed Countries (LDCs), are exceptionally vulnerable to climate change due to their distinct geographical and environmental characteristics. Escalating sea levels and heightened salinity levels imperil freshwater reserves, while warmer ocean temperatures and acidification disrupt water demand, tourism, health services, and fisheries. Concurrently, these countries bear the brunt of water shortages, flooding, and declining water quality. However, significant barriers such as limited financing capacities to fund water security initiatives, exacerbated by a growing debt crisis marked by escalating interest rates and inflation, hinder developmental progress and investments in climate adaptation and mitigation endeavors. Consequently, there arises a critical necessity to harness innovative financial mechanisms to transform these debts into opportunities that support effective climate action. This paper explores the potential of debt-for-climate swaps as a catalyst for advancing transformative wastewater projects, focusing on their strategic deployment to underpin critical initiatives. Through case studies and empirical evidence, the paper elucidates how debt-for-climate swaps can enhance sustainable wastewater management systems in developing countries and delineates best practices for leveraging these mechanisms and the roles and responsibilities of key stakeholders, including governments, policymakers, the private sector, communities, and climate financial institutions. Combining theoretical insights with tangible examples, this paper furnishes a comprehensive framework for harnessing debt-for-climate swaps to enhance water security and resilience in developing countries. It offers actionable strategies for policymakers, practitioners, and stakeholders to navigate the complex terrain of climate change and engender sustainable development.

Why do rural youth migrate? Evidence from Colombia and Guatemala.

Migration, from rural to urban settings is a common phenomenon in Latin America, due to social, economic, political, and other factors. Young people in search of economic and educational opportunities, financial, and social stability, have been migrating to larger urban centers, thus crafting important shifts in rural labor, generational transfer, and domestic economies. Through a systematic literature review of scientific literature, and documents from public institutions and international organizations, published between 2012 and 2022, this article addresses rural-urban migration of youth in Colombia and Guatemala's cattle sector, particularly identifying (i) driving factors, (ii) their impacts on cattle farming, and (iii) public policies implemented to counteract prejudicial effects. Results show that unemployment, lack of educational opportunities, and insecurity are the main reasons for youth migration to cities or abroad, with Mexico, the United States, and Spain being the most common destinations. Additionally, impacts on the cattle sector include shortage of labor and a perfectible generational transfer, hindering the modernization of the industry and investments in climate change adaptation and mitigation strategies. Despite various implemented public policies, the results are partial, and the issue of accelerated youth migration remains relevant. Consequently, without more effective measures adopted by national governments, the cattle sector will lag behind its regional and international competitors, deterring the achievement of the Sustainable Development Goals. As the main contribution of the study, the analysis of migration is highlighted based on its effects on a specific economic sector and not focused on its causes, as evidenced in a wide range of literature.

Limits to asset manager adaptation

AbstractIn Our Lives in Their Portfolios, Brett Christophers provides an account of the rise of ‘asset manager society’ – a world in which the infrastructures of public life are converted from public to private ownership. Here I use Christophers’ analysis to comment on growing calls for asset manager investment in climate adaptation. The asset manager business model requires ever-escalating returns, a poor fit with the now unavoidable losses that climate change promises to bring.

Subnational Investments in Mitigation and Adaptation to Climate Change: Some Financing and Governance Issues

Meeting climate change goals requires steadfast action at all levels of government in terms of both mitigation (measures to reduce greenhouse gas emissions) and adaptation (measures to reduce the impacts of climate change on economies and societies). Against this background, this paper discusses the role of subnational investment, including funding and financing options, as well as governance arrangements. It fills a gap in scholarly work on the principles guiding subnational investment in climate change mitigation and adaptation, identifies areas for future work, and underscores the need for cross-country comparable information on policy instruments and outcomes at the subnational levels of administration that could be used in more systematic hypothesis testing in this area. JEL classification codes: H11, H70, Q54.

Pedagogical Strategies for the Development of Critical and Reflective Thinking in Students

This article discusses the importance of developing critical and reflective thinking in students in the context of 21st-century education. The research, of a bibliographic and qualitative nature, is based on learning theories, such as constructivism and meaningful learning, and educational theories, such as differentiated pedagogy and self-directed learning. It points to the need to break away from the traditional teaching model and presents pedagogical strategies to promote critical and reflective thinking, such as Problem-Based and Project-Based Learning (PBL), structured debates and discussions, critical analysis of texts, and Socratic questioning. The study highlights the potential of these strategies for developing essential skills for the 21st century, such as autonomy, problem-solving, decision-making, and creativity. Furthermore, it discusses the challenges and opportunities of implementing these strategies on a large scale, emphasizing the need for investments in teacher training and adaptation of school infrastructure.

From few large to many small investments: lessons for adaptive irrigation development in an uncertain world

Conventional approaches to irrigation development involve large lumpsum investments in big infrastructure that cannot adapt to changing climate and socio-economic conditions. There is an urgent need for alternative ways of investing in smallholder irrigation in Sub-Saharan Africa (SSA) that are adaptive and avoid capital lock-in. Adaptive Investment Pathways (AdIP), inspired by the Dynamic Adaptive Policy Pathways (DAPP) concept, proposes stepwise investments to support smallholder irrigation development. AdIP builds resilience to future shocks through dynamic and flexible investment plans instead of investing in single static solutions. To develop an empirical grounding for operationalizing AdIP, we draw lessons from three case studies representing different stages of irrigation development along shallow sand river aquifers in Kenya and Zimbabwe. We retrospectively analyse the nature of investments at farm and landscape scales, and the type of risks and opportunities that farmers respond to. We find that in face of risks, farmers diversify their livelihoods, make small investments incrementally especially in response to opportunities and risks created by external triggers, and pause or reorient activity when they reach saturation points, i.e., biophysical or socio-political limits to their development objective, here irrigation development. Governments and external agencies can support smallholder irrigation development in SSA through targeted landscape scale investments that address saturation points faced by smallholders. This requires a robust participatory monitoring framework to identify and respond to saturation points, and a re-thinking of financing mechanisms which do not measure progress against a fixed schedule of investments, but instead measure continuous progress towards the development objective.

Maize migration mitigates the negative impact of climate change on China’s maize yield

Crop migration as an adaptation to modulate climate change’s impact on crop yields presents both benefits and risks. We explored how maize migration in China modulates yield responses to climate change and quantified the potential economic benefits of maize migration as an adaptation strategy. We employed a panel data model to identify and measure the factors driving the relocation of maize area, linear regression to quantify the effects of maize migration on climate exposure and irrigated area, and an econometric model to estimate the effects of maize migration on yield. The results show that rise in temperature has a significant negative effect on maize area and that precipitation has a significant positive effect. The migration of maize area is driven by socio-economic factors including agricultural gross domestic product, power of farming machines, and fertilizer input. Moreover, expanded irrigation reduces the adverse effects of high temperatures on maize yield, thereby influencing adaptive crop migrations. The beneficial effects of maize migration are primarily achieved by reducing the adverse effects of extreme heat and strengthening the positive effects of irrigation. However, the extent of this adaptation is jointly affected by agricultural policies, irrigation infrastructure, and economic factors. Current market-oriented agricultural policies may be effective in guiding spatial shifts in maize distribution to align with climate-driven changes, potentially decreasing the vulnerability of China’s maize yield to the impact of climate change. China’s food security policies need to consider climate-driven spatial shifts in crop cultivation and enhance food subsidy policies to highlight the benefits of investment in climate change adaptation, such as adjusting cropping acreage and irrigation to farmers in North China.

Role of the built environment stakeholders in climate change adaptation

PurposeThere is an urgent need to translate climate change awareness into tangible climate adaptation strategies. The built environment is identified as one of the kick-off points in making climate change adaptation as the built environment shares a dual-way relationship. While the built environment largely contributes to the climate change-triggering factors, it also becomes highly vulnerable in the face of climate change impacts. Tied up with the interconnectedness of the built environment processes and associated systems, the involvement of numerous stakeholders from different spectrums creates the need for a holistic and multi-stakeholder approach in developing climate response strategies for the built environment. Accordingly, this study aims to identify the roles and responsibilities of the different built environment stakeholders in climate change adaptation.Design/methodology/approachThe study consisted of a scoping review at the initial stage, contextualising studies based on secondary data, and semi-structured expert interviews in five different countries: the UK, Sweden, Malta, Spain and Sri Lanka. The paper summarises the findings of the individual country-level desk studies and 65 built environment stakeholder interviews representing national and local governments, communities, academia and research organisations, civil organisations, professional bodies and the private sector. The findings were validated through focus group discussions in two stakeholder seminars.FindingsThe findings summarised a set of key roles and sub-roles for each stakeholder category, considering the current status and needs. The national governments need to set a long-term vision, enabling multi-sector interventions while promoting investment and innovation in climate change adaptation. The local governments overlook local adaptation plans, while the community is responsible for decarbonising operations and practising adaptation at the local level. Civil organisations and professional bodies are the voice of the community, linking policy and practice. Academia and research are responsible for nurturing skills and new knowledge, and the private sector must contribute by adopting climate resilience into their business portfolio and corporate social responsibility.Research limitations/implicationsThis research is part of an Europe-Union-funded research project, Built Environment leArning for Climate Adaptation (BEACON), which aims to develop skills and competencies of the built environment professionals so that they will be adequately equipped to handle the adaptation process of the built environment needs to adapt in facing the climate change impacts.Originality/valueThe paper provides an in-depth analysis of the roles and responsibilities pertaining to each category of the different stakeholders in effectively adapting the built environment to withstand the climate change consequences. Demarcation of each stakeholder’s roles and responsibilities separately facilitates collaboration and coordination between the different parties and provides a more holistic approach to climate change adaptation in the built environment.

Life After COVID-19: Artificial Intelligence in Hotels; In-depth Literature Review

Purpose: This study aims to systematically review the impact of artificial intelligence (AI) on the hotel industry post-COVID-19, focusing on articles published between 2019 and 2024. Grounded in the Technology Acceptance Model (TAM), the research examines the relevance and application of AI within the industry, particularly in response to the challenges posed by the pandemic. Study design/methodology/approach: The study adopts an interpretive paradigm and employs thematic analysis to synthesise findings from various academic journals. Keywords such as ‘hotels,’ ‘tourism industry,’ ‘COVID-19,’ and ‘artificial intelligence’ are used to identify relevant literature. The methodology involves a detailed literature review and analysis to explore how AI technologies enhance operational efficiencies, service quality, and cost reductions in the hotel industry. Findings: The findings reveal that AI has become critical in adapting hotel operations to new market realities post-COVID-19. AI technologies offer innovative solutions that align with changing consumer expectations and industry standards, contributing to improved customer experiences and operational efficiency. Integrating AI into hotel management and customer service platforms is essential for the recovery and future growth of the hospitality sector. Originality/value: This study contributes to the existing literature by providing insights into the impact of AI on the hotel industry post-COVID-19. It highlights the importance of AI technologies in improving hotel customer experiences, operational efficiency, and profitability. The application of the TAM framework underscores the significance of perceived usefulness and ease of use in driving the acceptance and sustained use of AI in the hotel industry. The study recommends ongoing investment in AI technologies and adaptation to technological advancements to meet evolving customer needs and industry demands.

Climate change adaptation projects of transport facilities: is a demonstrator necessary?

AbstractTransport facilities are increasingly threatened by the climate-change related natural disasters in recent years. In order to incentivize the transport facility operators to engage in climate change adaptation, governments may provide subsidies to the adaptation investment. Due to the substantial uncertainties in the outcomes of the adaptation projects, the government can set up an “experiment” project, which can be used as a demonstrator. In this paper, we develop real-option game models to investigate the transport facility operators’ adaptation investment under static stochastic demand and time-varying stochastic demand. Meanwhile, the government’s optimal decisions on whether to set up a demonstrator and the related subsidy policies are also examined. We find that under static stochastic demand, the government prefers to set up a demonstrator if the marginal benefit of the adaptation capacity is larger than its marginal cost, or the demonstration effect is high enough. Under time-varying stochastic demand, the government prefers to set up a demonstrator when the demand volatility is low. Moreover, increasing demand volatility requires less (or more) subsidy, when the demonstrator is (or is not) set up. Increasing demand volatility leads to postponement of the adaptation timing and more adaptation investment, irrespective of whether there is a demonstrator.

Optimal dynamic climate adaptation pathways: a case study of New York City

AbstractAssessing climate risk and its potential impacts on our cities and economies is of fundamental importance. Extreme weather events, such as hurricanes, floods, and storm surges can lead to catastrophic damages. We propose a flexible approach based on real options analysis and extreme value theory, which enables the selection of optimal adaptation pathways for a portfolio of climate adaptation projects. We model the severity of extreme sea level events using the block maxima approach from extreme value theory, and then develop a real options framework, factoring in climate change, sea level rise uncertainty, and the growth in asset exposure. We then apply the proposed framework to a real-world problem, considering sea level data as well as different adaptation investment options for New York City. Our research can assist governments and policy makers in taking informed decisions about optimal adaptation pathways and more specifically about reducing flood and storm surge risk in a dynamic settings.

US macroeconomic determinants of Bitcoin

This study aims to determine the impact of macroeconomic variables on bitcoin prices in the United States. Bitcoin is one of the cryptocurrencies that has the highest price and the most users in the United States in recent years. This study uses monthly data on inflation, interest rates, USD/EUR rates, gold prices, and bitcoin prices. To achieve the objectives of this study, Dynamic Conditional Correlation (DCC) and Multivariate Generalized Autoregressive Conditional Heteroscedasticity (MGARCH) were used. The results showed that there is a negative and significant relationship between the variables of inflation, interest rates, and USD/EUR rates affecting the price of Bitcoin in that period. Conversely, there is a positive and significant relationship between the price of gold and the price of Bitcoin in the United States during that period. An in-depth understanding of how macroeconomic factors such as inflation, interest rates and the USD/EUR rates affect Bitcoin price is key to making smart investment decisions in an increasingly complex crypto market. The findings of this analysis confirm that the significant relationship between macroeconomic variables and Bitcoin price provides deeper insights for investors to anticipate market movements and design adaptive investment strategies.

Climate adaptation investments: Short-term shocks and long-term effects of temperature variation on air conditioning adoption

Air conditioning (AC) has gradually become the main way for households to adapt to climate change. Using a climate econometric model with two-way fixed effects, we systematically examine the short-term shocks and long-term effects of temperature variation on AC ownership in urban and rural households in the Yangtze River Delta region of China. When considering short-term shocks of temperature variation, our results indicate that cooling demand is the main driver of growth in AC ownership while heating demand and intra-seasonal temperature variance are not. In terms of the long-term effect, we find mean summer temperature has a positive lagged effect, with the cumulative effect being larger for rural households. The analysis of heterogeneity shows that while the greater elasticity of air conditioning ownership to temperature variation for rural residents indicates a faster diffusion of air conditioning during 2001–2020, the larger income elasticity (greater than 1) suggests that air conditioning is still a luxury item for them. Our findings not only provide empirical evidence for studying the pattern of climate adaptation investments in response to temperature variation, but also offer policy guidelines for households to better adapt to climate change.

Seaport adaptation and capacity investments under inter-port competition and climate-change uncertainty

Climate-related disasters are causing increasing damage to seaports, necessitating investment in climate-change adaptation to enhance resilience. In addition, seaports must invest in capacity to meet the growing maritime demand. Given that the two types of investments are interdependent, we develop a game-theoretic model to determine the strategic investments a seaport should make in adaptation and capacity, considering inter-port competition. We consider three cases: profit-maximizing seaports, welfare-maximizing seaports, and first-best outcome. We show that a seaport facing higher climate risk invests less in capacity but do not necessarily invests more in adaptation. In addition, a seaport invests more in capacity and adaptation when its competitor faces a growing climate risk. Interestingly, given a high climate risk, inter-port competition leads to underinvestment in both capacity and adaptation. Lastly, our case study reveals that the most detrimental scenario for a port arises when its competitor adapts to changing climate while it does not.

A Protocol for the Review of Examples of Transformational Change in the Energy and Public Health Sectors to Inform Climate Mitigation and Adaptation Interventions

AbstractThis article describes the approach for an evidence review that combines two different evidence gap maps into one learning exercise on transformational change. The review assesses the evidence in two sectors where there has been demonstrable progress in terms of scale, depth and permanence of change: in energy and in behavioural change in public health. The review uses causal evidence to assess how lessons about transformational change in these two sectors may inform climate change mitigation and adaptation investments in low- and middle-income countries. The evidence gap maps will inform the scope of systematic reviews and meta-analyses.

A longitudinal investigation of risk perceptions and adaptation behavior in the US Gulf Coast.

Climate change is occurring more rapidly than expected, requiring that people quickly and continually adapt to reduce human suffering. The reality is that climate change-related threats are unpredictable; thus, adaptive behavior must be continually performed even when threat saliency decreases (e.g. time has passed since climate-hazard exposure). Climate change-related threats are also intensifying; thus, new or more adaptive behaviors must be performed over time. Given the need to sustain climate change-related adaptation even when threat saliency decreases, it becomes essential to better understand how the relationship between risk perceptions and adaptation co-evolve over time. In this study, we present results from a probability-based representative sample of 2,774 Texas and Florida residents prospectively surveyed 5 times (2017-2022) in the presence and absence of exposure to tropical cyclones, a climate change-related threat. Distinct trajectories of personal risk perceptions emerged, with higher and more variable risk perceptions among the less educated and those living in Florida. Importantly, as tropical cyclone adaptation behaviors increased, personal risk perceptions decreased over time, particularly in the absence of storms, while future tropical cyclone risk perceptions remained constant. In sum, adapting occurs in response to current risk but may inhibit future action despite increasing future tropical cyclone risks. Our results suggest that programs and policies encouraging proactive adaptation investment may be warranted.

Theoretical Foundation for Pricing Climate-Related Loss and Damage in Infrastructure Financing

This paper presents a novel theoretical framework for incorporating climate risks and adaptation investments into infrastructure debt pricing. Utilizing the Capital Asset Pricing Model (CAPM), the framework extends the conventional modeling of infrastructure project revenues and costs to include climate risk considerations. It proposes three climate-informed revenue and cost formulations: adjustmentment of mean and standard deviation, incorporation of extreme climate events via Pareto and Poisson distributions, and a climate-informed cost model that includes adaptation investment. The paper demonstrates the application of this model in pricing a loan for a Light Rail Transit project in Costa Rica, introducing the concepts of “flood risk premium” and “adaptation curves”. This study not only offers a novel lens through which to view infrastructure investment under climate uncertainty but also sets the stage for transformative policy and practice in financial risk assessment, encouraging a shift towards more sustainable and resilient infrastructure development.