Unlocking Climate Resilience

T he Nepali economy is closely connected with nature. The country’s key sectors such as agriculture, hydropower and tourism not only drive its GDP but also make the country vulnerable to climate risks. According to the Nepal Rastra Bank (NRB), Nepal could experience a GDP contraction of up to 2.2% annually by 2050 without climate change mitigation over the next decades. Agriculture alone contributes about 25% to the national GDP, and when tourism is included, the two sectors account for nearly one-third of the economy. However, the increasing variability in climate—manifested through floods, droughts, erratic monsoons, and glacial lake outburst flood (GLOFs)—has begun disrupting livelihoods, infrastructure and local economies.

Information becomes a game changer in this context. Satellite imagery, weather data and mobile usage patterns can then be transformed into actionable insights that strengthen early warning systems and support better decision-making. That being the case, a sub-national adaptive plan on the adaptation and reduction of disasters introduced by the federal government recognizes the critical role of accessible climate data in disaster risk reduction.

According to the World Bank, access to open climate data can encourage innovation in vulnerable economies. For instance, the Department of Hydrology and Meteorology now provides real-time river forecasts that help banks and insurers design adaptive financial products. A move toward a data-driven economy could help in planning, build investor confidence and boost long-term resilience.

Banking and Climate Risk

The effects of climate change have begun to affect operations of banks. The Environmental & Social Risk Management (ESRM) Guideline of NRB now requires banks to integrate environmental and climate risks into loan processing and evaluation Some banks, such as NMB Bank and Nepal Investment Mega Bank, are already conducting stress tests of their loan portfolios using historical climate data. As a case in point, NMB Bank, which is known for its pioneering practices in sustainable financing, has aligned its risk evaluation frameworks with ESRM requirements.

According to ILO’s Labor Mobility and Regional Climate Adaptation report, one bank even anticipated the impact of heavy monsoon rains on small business borrowers and adjusted its financial reserves in advance. New lending products are also emerging to support solar irrigation, energy efficient buildings and soil restoration projects. Several banks are now using data dashboards that map climate exposure by industry and region.

Banks are adopting frameworks like the Task Force on Climate-related Financial Disclosures (TCFD) to align with global standards. This not only enhances transparency but also places the sector in readiness to cope with future regulatory requirements.

Insurance Goes Data-Driven

While banks are adjusting, the insurance industry is fast becoming one of the foundations of climate resilience in Nepal. The Nepal Insurance Authority (NIA) is drafting new guidelines to help insurers be in a better position to manage and even evaluate risks related to climate.

Insurers are turning to data-driven products such as parametric and index-based insurance. Compared to conventional policies which have the condition of verifying loss, these innovative products are actuated by defined climatic factors like excess or deficit rain falls. For example, Himalayan Everest Insurance, together with Nepal Economic Forum and Rockefeller Foundation, has introduced a weather index-based micro insurance program targeting vulnerable communities. These policies are based on real-time weather conditions and mobile applications to deliver prompt, equitable payments that many times are accomplished within hours.

Research by the United Nations Development Program (UNDP) shows that such products can expand financial access for underserved communities, particularly women and smallholder farmers. By pooling risk and relying on quantifiable climate triggers, index-based insurance lowers costs and increases coverage.

Tourism and Real-Time Resilience

Tourism, which contributes approximately 6.7% to the GDP, is becoming increasingly vulnerable to climate-related challenges. Landslides, avalanches and erratic weather patterns are affecting both infrastructure and tourist movement. Warmer temperatures, delayed monsoons and unpredictable rainfall are particularly affecting popular destinations like Pokhara, reducing the periods when these areas are comfortable and appealing for visitors.

Data, however, is providing solutions. The Nepal Tourism Board (NTB) is now providing real-time information on trail conditions, while hotels are integrating booking platforms with weather forecasts to suggest travel plans and even relocate stays when necessary.

These efforts demonstrate how digital tools can help even small tourism operators enhance safety and deliver better customer experiences. Analysts have urged closer collaboration between the government, businesses and researchers to expand these practices across the country.

Smart Agriculture

Agriculture, which employs more than 60% of the total population and contributes 24% to GDP, is among the sectors most affected by climate variability. Erratic rainfall, pest infestations and extended dry seasons are making traditional farming increasingly risky.

Digital tools, however, are emerging as crucial solutions for farmers. In some regions, SMS alerts in local languages provide weather predictions to guide planting and harvesting. Others are experimenting with solar-powered irrigation systems and soil moisture sensors that respond to live climate data. Farmers’ cooperatives are using dashboards to monitor crop trends, weather and market prices, enabling more strategic decision-making.

In research, machine learning models are being used to predict yields and pest outbreaks. Index-based crop insurance, triggered by temperature and rainfall thresholds, is reducing delays in payments and limiting payout obligations. Meanwhile, the Department of Hydrology and Meteorology is expanding the number of weather stations, while donor-supported training is helping local teams interpret climate data. Communities are also crowd-sourcing weather information via mobile apps, making climate responses more transparent and timely.

Data as a Tool for Structural Resilience

Nepal is showing greater commitment to using data as a foundation for resilience in different sectors. Banks are embedding climate risks into lending criteria, insurers are adopting parametric models, tourism operators are using real-time information to safeguard visitors and farmers are shifting to tech-enabled decision-making.

These changes are supported by government policies promoting open data, international collaboration and rising digital awareness. There, however, are challenges that need to be resolved, particularly in digital literacy, equitable access to information and infrastructure. Nepal must prioritize investment in high-tech solutions and locally adapted innovations to fully harness the potential of climate resilience.

From Response to Readiness

Nepal is moving from reacting to climate events toward predicting and preparing for them. Whether it is climate-intelligent banking, data-driven insurance, tech-enabled agriculture or digital tools in tourism, multiple sectors are becoming more resilient. Government initiatives to share open data and foster international cooperation are accelerating this transformation. With the right support systems, climate data can empower stakeholders at every level — from bankers and insurers to farmers and tour operators. Nepal now has the opportunity to turn risk into readiness and vulnerability into resilience.

This opinion article was originally published in November 2025 issue of New Business Age magazine.