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DecisionSupport 5Discussion and ApplicabilityThe review and case studies provide a number ofpractical lessons on the application of PortfolioAnalysis to adaptation. They provide usefulinformation on the types of adaptation problemtypes where the technique might be appropriate,as well as data needs, resource requirementsand good practice examples.Clearly PA is a key tool for helping to identify andanalyse alternative portfolios of adaptationoptions. It has a clear application in cases whereadaptation actions are likely to becomplementary in reducing climate risks. Thetechnique is not relevant when one optionaddresses the full range of uncertainty in climateimpacts.Portfolio Analysis has a high resonance with theconcepts of iterative risk management, andaddresses uncertainty by encouragingdiversification (a key part of risk management)with the use of portfolio mixes. It can be used foreconomic analysis, but can also work with nonmonetary(physical) metrics and therefore can beapplied in non-market sectors, such as forecosystem based adaptation (as in the forestcase study in the box).However, the approach requires benefits to beexpressed in quantitative terms, either aseconomic values or physical benefits, thus it ismore applicable in cases where data availabilityis reasonable.Furthermore, the application of the techniquerequires probabilities, which makes it moreapplicable to cases where climate information isgood, and some information on climateuncertainty exists.and it is therefore good practice to take theseinto account within the PA analysis.ReferencesAerts, J. C. J. H., Botzen, W., van der Veen, A.,Krywkow, J. & Werners, S. (2008) Dealing withuncertainty in flood management throughdiversification. Ecology and Society, 13, 41.Crowe K. A. and Parker, W. H. (2008) Usingportfolio theory to guide reforestation andrestoration under climate change scenarios.Climatic Change 89: pp.355-370.Hunt, A. (2009) Economic Aspects of ClimateChange Impacts and Adaptation in the UK. PhDThesis. University of Bath.IPCC, 2012: Managing the Risks of ExtremeEvents and Disasters to Advance ClimateChange Adaptation. A Special Report of theIntergovernmental Panel on Climate Change[Field, C.B., et al (eds.)]. Cambridge UniversityPress, Cambridge, UK, and New York, NY, USA,582 pp.Markowitz, H. M. (1952) Portfolio selection.Journal of Finance 7: pp.77-91.Further Readingand Reference SourcesMEDIATION Policy Briefing Note 1: MethodOverview.The formal application is data and resourceintensive, requiring a high degree of expertknowledge, which is also a factor in consideringapplicability.Finally, in considering the application of portfolioanalysis to adaptation, a number of goodpractice lessons are highlighted. As identified inthe second case study on flood risks, there canbe issues of inter-dependence between options,6