Building financial resilience to climate impacts: a framework for governments to manage the risks of losses and damages

This report addresses the public financial management challenges that these climate-related risks present to governments in terms of fiscal risks. It examines the role of different public schemes, including budget reallocations, risk retention (e.g. reserve funds), risk financing (e.g. official finance, public debt issuance) and risk transfer mechanisms (e.g. insurance, catastrophe bonds) in managing fiscal risks, with due recognition to potential differences in fiscal resources and repayment capacities and other key factors that may influence financial strategies for climate risk, such as data availability, technical expertise, and the structure of fiscal arrangements across levels of governments.

Key recommendations and actions for the financial management of losses and damages from climate change presented in this report include:

1. Identify, assess and report on climate-related risks and their financial implications for government
2. Mitigate financial losses from climate-related risks and their implications for governments
3. Prepare integrated multipronged government financial strategies
4. Promote integrated strategies to strengthen financial resilience at the country or regional level
5. Mobilise development co-operation to strengthen global financial resilience