NRI Papers
No. 191 November 1, 2013
  Strategy to Develop Frontier Markets with Emphasis on Adaptation to Climate Change  
Junji KOIKE, Tokutaro HIRAMOTO and Takanori IZUMI

Climate change not only affects the global environment, as seen in the changes in ecosystems and poor harvests that are caused by temperature rise, changes in rainfall patterns that lead to unseasonable droughts and heavy rains, and spread of salt damage caused by rises in the sea level, but it also has a major impact on society and the economy. Any response to these challenges will require the increased use of not only public, but also private funds.

For private-sector enterprises in developed countries, business opportunities presented by adaptive measures in response to climate change are found extensively in various sectors. For business operated in emerging and developing countries, an approach that takes in not only consumer markets but also local governments and local companies is essential to expanding the scale of business and stabilizing earnings. From this point of view, it is possible to say that adaptive measures in response to climate change will come to form a major market in the future.

Efforts to deal with adaptation business have also begun in Japan under the umbrella of the "2012 Study on Sustainable Contribution by the Japanese Private Sector to Developing Countries' Adaptation Needs," which is the feasibility study (FS) project undertaken by Japan's Ministry of Economy, Trade and Industry. Specific examples include a desert greening system, climate adaptive agriculture in salt-polluted areas and landslide prevention/mitigation business.

An approach adopted for developing frontier markets with an emphasis on climate change should consist of six steps, namely, 1 survey of trends in frontier markets by assuming solutions of social issues, 2 analysis of a company's strengths and weaknesses after breaking down business models and product specifications into elements, 3 rebuilding business models based on solutions, 4 alliances with diverse partners, 5 rapid establishment of a PDCA (plan - do - check - act) cycle and success models and 6 proactively publicizing results and effects.

Contents
I Effects of Accelerating Climate Change and Frontier Markets for Private-Sector Enterprises in Developed Countries
II Wave of Adaptation Business Spreads among Enterprises in Europe, the U.S. and Emerging Countries
III Beginning of Adaptation Business by Japanese Companies
IV Steps to Develop Frontier Markets with Attention Placed on Climate Change

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