Principles of Climate Risk Management for Climate Proofing Projects

The Asian Development Bank (ADB) has been implementing a climate risk management (CRM) approach since 2014. This is a mandatory part of project development. Climate risk screening is applied to all ADB investments, with a more detailed Climate Risk and Adaptation assessment (CRA) undertaken for projects that are assessed to be at medium or high risk. ADB has commissioned a number of reviews of the CRM process and of recent CRAs. These have identified opportunities for improving internal CRM procedures and for enhancing the quality of project CRAs. ADB has also highlighted climate resilience as an operational priority in its Strategy 2030 and announced a cumulative climate financing commitment of $80 billion between 2019 and 2030. This will expand climate investment opportunities, but will also require strengthening of operational processes and project-level guidance. Against this background, this working paper provides guiding principles for applying the CRM processes. This document presents a new set of guiding principles for CRM and CRAs for climate proofing projects in ADB. It focuses on climate risks to development projects, rather than on targeted climate adaptation projects. The aim is to help to improve the overall CRM framework with a fit-for-purpose approach, and to improve the quality and consistency of CRAs. The initial principles were formulated in 2018, then discussed and amended during a workshop in November 2018. These were road-tested and revised using two ADB project CRAs undertaken in early 2019. The principles are presented herewith, sequenced in line with the ADB project cycle and the CRM framework. While these principles are primarily intended at ADB CRM, they also provide useful lessons and insights into climate risk management for ADB’s developing member countries (DMCs).