Opinion: Why impact investors should share the good news about climate adaptation opportunities
Climate adaptation solutions remain under-invested despite the massive opportunities they offer. Impact investors must lead the way by combining both their capital and their influencing power to reframe climate adaptation as the smart thing to do, says Amanda Powell-Smith of Forster Communications.
As the changing climate repeatedly shows that it is a structural force reshaping global markets, we need investment in adaptation to move from being a risk management tick-box exercise to a long-term value proposition that can yield significant returns. It is time to change the narrative – and impact investors can be the leaders.
Despite record-breaking floods in Spain and Texas and wildfires in California, and our increasing understanding about the threat to life, resource scarcity and geopolitical instability that these events pose, climate adaptation investment continues to be sidelined by its complexity, long timelines and a sense of it as a ‘public-good’. According to the European Investment Bank latest investment survey, while 66% of EU businesses acknowledge physical climate threats, only 22% have adaptation strategies in place. Private sector investors remain reluctant to get involved, with many believing that the area is too dependent on government funding.
The exodus of Bank of England staff in climate and nature risk supervision roles reiterates the situation and highlights disillusionment with the lack of climate action in the public sector. This is, in part, a communications failure: risk is acknowledged, but not translated into urgency due to the lack of a narrative highlighting the strategic opportunity that climate adaptation provides.
And it’s a big one. The World Economic Forum and Boston Consulting Group recently showed that the investment opportunity for climate adaptation solutions could increase from $2tn to $9tn by 2050 across both established and emerging technologies. Impact investors are uniquely positioned to help.
Funding for climate adaptation and resilience is among the most impactful development investments available: for every $1 invested, a yield of more than $10 in benefits is expected over a 10-year period
From blended finance solutions that de-risk investments, to impact bonds that are tied to resilience outcomes, to nature-based solutions with co-benefits, impact investors are the ones who can help to shift climate adaptation investment from the margins to mainstream. Uniquely positioned to respond to context-specific situations, they can support small or early-stage solutions over the long term. With a flexible approach, and unafraid of innovation, it is impact investors who can drive an understanding of the investment returns and enable scale.
Success requires more than capital; communications need to reframe climate adaptation as the smart thing to do, highlighting the strategic opportunity and linking solutions to resilience and growth. The World Resources Institute (WRI) published a study earlier this year which showed that funding for climate adaptation and resilience is among the most impactful development investments available, and for every $1 invested, a yield of more than $10 in benefits is expected over a 10-year period. Some sectors such as health are projected to deliver returns of over 78%, driven by the high benefits of protecting lives from climate-related impacts such as heat stress, malaria and dengue fever.
Perception and bias
Despite the case for investment, two cognitive biases underpin inaction. The first of these is status quo bias – a preference for familiar investment models that continue to yield returns, even as the ground shifts beneath them. The second is optimism bias – the belief that severe climate impacts are either distant or manageable. These biases create a dangerous complacency that stifles innovation and delays necessary action.
Status quo bias and optimism bias create a dangerous complacency that stifles innovation and delays necessary action
They are compounded by a resurgence of climate denial movements, and an acceptance among some governments that climate change is real but inevitable. Political polarisation further muddies the waters, with a growing perception gap between politicians and their constituents. The erosion of institutional leadership – exemplified by the US withdrawal from multilateral frameworks – has also left a vacuum in global climate governance. The pressure is on for the rapidly approaching COP30 in Brazil.
To overcome these barriers, communication must be clear, authoritative and evidence-based. Importantly the WRI’s study, which analysed the projects using a triple dividend of resilience (TDR) framework, found that only 8% of investments estimated the full value of these dividends, with actual rates of return substantially underestimated. Addressing this is crucial if attitudes to adaptation investment are to change and the opportunities realised.
Vocal and visible
We need a new language that speaks to opportunity, not just obligation. One that positions climate adaptation as a driver of innovation, competitiveness and growth, and engages not just investors, but policymakers, business leaders and the public. We need to highlight the resilience created by well-designed initiatives and showcase the multiple benefits that it unlocks for individuals, communities, organisations and economies together.
This is about more than data reporting and numbers on a page. To bring the opportunity to life and change opinions requires transparency, storytelling and a commitment to demonstrating impact. Alongside statistics there needs to be human stories, where lived and learnt experiences are combined. Indeed, with so many of the solutions being driven at a local level, community participation in communications needs to become the norm, rather than the exception.
To bring the opportunity to life and change opinions requires transparency, storytelling and a commitment to demonstrating impact
Above all the narrative needs to shift from one of damage control to one of innovation and market growth. Let’s showcase the financial losses that are avoided by investing in resilience. Let’s position adaptation as climate-smart urban development. Let’s spotlight the tech-driven adaptation that will be crucial for early warning systems and predictive modelling. Let’s position adaptation as the next frontier of ESG investing.
The path from risk to resilience is not only necessary, it is inevitable, and impact investors have the tools, the influence and the responsibility to drive this transformation. By combining capital with communication, they can catalyse a new era of investment in sustainable development that benefits people, planet and profit.
Header image: A soil health test being carried out in Kenya under the 'climate-smart soil protection and rehabilitation in Benin, Burkina Faso, Ethiopia, India and Kenya' programme. Credit 2016CIAT/GeorginaSmith
| Ready to invest in independent, solutions-based journalism?
Our paying members get unrestricted access to all our content, while helping to sustain our journalism. Plus, we’re an independently owned social enterprise, so joining our mission means you’re investing in the social economy. |
