Some people were optimistic, some were measured in their pessimism, and some were simply glad that climate adaptation and finance now come up in the same sentence. I share that last feeling most of all. For most of my career, climate adaptation was the thing you raised after the climate mitigation conversation, if there was time left, and if it was even allowed to be discussed to begin with.
But I also came away with a nagging sense that expectations for adaptation finance are running ahead of what is being built, and of what we can measure.
It is not just about knowledge, it is about operationalizing it.
The Adaptation Exchange, to which my organization is a member and I sit on its Strategic Council, states: “The gap is no longer knowledge – it is execution.” I agree. I have been hearing calls for cross-sector, multi-jurisdiction coordination for years… decades even. We are not short on frameworks.
What I kept running into comes down to money. Resilience is an unpriced asset. It is infrastructure that economic activity sits on top of, like roads, power, and water, and yet almost nobody carries it on a balance sheet.
It isn’t that the returns are unknown. There are dozens and dozens of these ratios developed in the literature. But these returns accrue to society, spread across lives saved, homes protected, and businesses kept running. Very little of it is articulated in terms of the ledger of whoever we are asking to write the check.
At a roundtable on financing early action with several governments and multi-lateral institutions, the question on the table was one our field has mostly skipped: does acting before a disaster save a government’s treasury money, and not just its society? That is a much harder one than the ratios we usually quote, but highly relevant if that government owes you money.
For those on the ground, waiting on the math to be more elegant is not an option. Officials from a South American delegation described a recovery financed through a patchwork of
loans and grants. There was money to buy people out of the floodplain, but there was no money to restore that land with nature-based solutions, which means it may simply be repopulated. The buyout was funded. The asset was not. And without it, resilience is elusive.
And businesses are feeling the pain as well. At a Wall Street event, I heard the framing of climate resilience expanding from financial risk to operational risk, showing up in insurability and operating costs. Companies are already paying for a lack of resilience before we have figured out how to pay for building resilience at scale.
Private capital is needed, but shareholder value will always have limits
More private capital in this space is a good thing. And more discussions of climate resilience among private capital is good too. But it is inherently limited.
In discussions about making nature investable, I heard reflections on prior efforts to build new financial approaches that would get the math to work for investors. Some ideas had potential, while others were hinged on too many external variables and downstream factors to likely become investable without guarantees.
To be clear, that is not a failure of the people in the room. It is a limit of the business models. Reconciling shareholder value with public good is an important, but limited enterprise. So where shareholder value can’t carry it, regulation and taxes will have to. That is how we pay for every other kind of infrastructure an economy needs to function.
I don’t say that lightly. A California mayor at another event was blunt that new revenue is a hard sell with voters, and that no new money is coming from Washington. But that is a reason for leadership and creativity in how we underwrite broader climate resilience.
We need courage above certainty
The hardest part is that we don’t yet know the true return on many of these investments, and research alone won’t get us much further. More analytics can squeeze more insight out of the data we have, but it can’t create the data we don’t have. We know resilience works. What we don’t know is how well, and we won’t know until someone deploys the instruments and gives us something to study.
This is less of a leap than it sounds. My colleagues at Columbia have spent decades building index insurance for farmers that pays out on a measurement instead of a claim, in some cases priced on seasonal forecasts. And in a UN event focused on Southeast Asia, we saw how one of the most hazard-exposed regions on earth built a regional risk pool and early action systems.
At an engineering event, it was also highlighted that big infrastructure has always looked like this. Mega projects are a mess in implementation and almost don’t happen. A generation later, nobody can imagine life without them.
Passing the torch to Düsseldorf
The Adaptation Exchange describes its goal as “a functioning adaptation economy in which resilience is widely understood, valued and acted on.” In a warming world with more disasters, resilience has to become a condition of capital, not merely a virtue of it. And that is not only about new revenue or avoided losses. It is about whether we build economies positioned to thrive, or economies destined to succumb to the hubris of thinking we can avoid what comes next.
As we convene at the Handelsblatt Corporate Climate Adaptation conference in Düsseldorf in just a few weeks, we must stop waiting for a perfect business case and start building one. The corporates, insurers, and lenders in the room are among the partners who can demonstrate the courageous leadership this moment needs. We know that resilience saves and resilience pays. Let’s show others just how much.