SAARI

Strategic Allocation into Adaptation and Resilience Investments

The Premise

Systemic climate risks from emerging markets may depress long term portfolio performance in developed markets by over 50%

Investing in reducing these risks is a core part of macroeconomic prudence

SAARI is an asset owner coalition that pledges 5% of AUM to climate systemic risk reduction within a 5 year time frame in investment grade opportunities

How Would It Work?

Commitment

Investors commit 5% of AUM within 5 years in investment grade assets that reduce systemic climate risk (SAARI coalition)

Research

SAARI secretariat conducts research on which climate impacts most reduce DM portfolio impacts

Assessment

SAARI secretariat assesses which interventions are most effective in mitigating these impacts, best practices for their implementation as well as project design

Design

SAARI facilitate the design of financial products for these interventions, including revenue streams, de-risking and syndication

The Investor Case

Improved DM Portfolio Performance

Investing in strategic climate risk reduction (SCRR) reduces macroeconomic shocks and protects returns across asset classes

Portfolio Diversification

SCRR investments do not correlate with a DM equity or fixed income portfolio, providing diversification benefits

Risk/Return Profile

De-risking through blended finance provides attractive risk/return profiles

Fiduciary Duty

SCRR investments fulfil fiduciary obligations above and beyond purely financial returns

Systemic Climate Risk Affects DM Portfolio Performance

Food Inflation

Agricultural yield volatility leads to higher prices contributing to inflation, central bank tightening and asset performance

Supply chain disruption

Impacts on ports, roads, etc. disrupt supply chains, reduce corporate profitability and margins

Livelihood loss & Migration

Water shortage related conflict and agricultural shocks create migratory pressures contributing to political destabilisation in DMs

What interventions help reduce this risk?

Strategic investments that build resilience and protect long-term value

Food System Resilience

Climate resilient irrigation systems
Cold chain storage
Post harvest loss reduction
Resilient seed systems

Water Security & Basin Stabilisation

Aquifer recharge
Watershed restoration
Urban water system modernisation
Transboundary river governance

Industry & Supply Chain Resilience

Solar/battery systems for industrial zones
Climate proof ports/logistics corridors
Resilient manufacturing clusters
Critical mineral supply stability

Livelihood Protection

Climate smart micro-lending
Climate indexed insurance
Solar pumps, mills and agro processing plants

The Ask and The Coalition

The Ask

$1.5 trillion mobilised through SAARI over a 10 year period would be a sufficient catalyst to improve DM returns by 50-100 bps/year.

The Coalition

This would require a coalition with $30T of AUM across pension funds, life insurers, sovereign wealth funds, endowments and others.

Designing Investment Grade Opportunities

Risk hedging through political, currency and credit risk instruments

Loan syndication and securitisation create tradeable, liquid assets

Monetising adaptation from essential service assets creates stable cash flows

The Roadmap to 1.5

Risk Modelling

Modelling systemic climate impacts on DM portfolios and counterfactuals with a financed SAARI portfolio

Intervention Design

Best practices and considerations for intervention design to ensure adaptation impacts and return profiles

Product Design

De-risking architecture to create investable EM financial products for DM asset owners

Coalition Building

Scaling investor commitments to reach $30T AUM