Resilience, Inc.
For years, climate investing was mostly about cutting carbon such as funding wind farms, solar panels and electric cars. But as extreme weather wreaks havoc, a new theme is coming to the fore… helping society adapt to climate change. Building resilience to floods, heatwaves and droughts was once left to governments and charities; now it is attracting interest from profit-seeking investors.
Resilience solutions span many sectors. For example:
Early-warning systems for floods and wildfires.
Cooling innovation such as efficient air conditioning and reflective materials to cope with heatwaves.
Climate-smart agriculture with drought-tolerant seeds and water-efficient irrigation.
Storm-proof infrastructure like flood defences and weather-resilient buildings.
Disaster insurance and financial tools to cushion economic losses from extreme events.
All these are becoming growth industries as the planet warms. One analysis identified over 800 publicly listed companies – about 11% of global stocks – selling products or services that help societies withstand climate impacts. These firms span fields from construction to data analytics. Roughly a quarter of them are based in emerging markets, proving the Global South is also generating resilience innovations.
Investors are starting to treat climate resilience as an opportunity, not just a cost. Adaptation and resilience “is emerging as a theme for growth-minded investors,” notes one analyst. The logic is simple, climate upheaval is now inevitable, so demand for resilience will surge. Even with emissions cuts, some damaging warming is locked in which means trillions will be spent on shoring up cities, supply chains and societies. One estimate finds that if global temperature rises about 3°C above preindustrial levels, the adaptation costs for listed companies would reach roughly $4 trillion. Put plainly, there is a massive market for climate-defence goods and services.
‘Adaptation and resilience “is emerging as a theme for growth-minded investors”’
The finance industry is slowly building tools to channel capital into this area. Investor groups are working on taxonomies and metrics for adaptation investments. A nascent market for resilience bonds – bonds earmarked for adaptation projects – is taking shape. In 2019 the European Bank for Reconstruction and Development issued a $700 million resilience bond to fund climate-proof infrastructure, attracting institutional investors. Specialized equity funds are likewise emerging to back companies poised to profit from rising resilience spending.
Admittedly, turning resilience into a true asset class is not straightforward. Unlike a solar farm that sells electricity, a seawall or mangrove restoration doesn’t generate easy revenue, so purely private investors can be wary. Many resilience projects still rely on public or philanthropic support. And measuring the benefit of disasters avoided – the flood that didn’t inundate a city – is tricky. Yet innovators are finding ways to capture value. Insurance firms, for instance, have a financial incentive to invest in risk-reduction measures that lower their future payouts. Some public-private partnerships now reward investors based on resilience outcomes like fewer flood damages, rather than fixed cashflows.
Still, the broader trend is unmistakable, climate adaptation is becoming investable. Bolstering resilience may soon stand alongside renewable energy as a pillar of the green economy. For communities on the front lines of climate change, an influx of private capital for adaptation could fund life-saving defences. And for investors, the message is increasingly clear; helping the world weather the storm can be good business.
