Climate Adaptation and Resilience are Underinvested: Mapping the Current Market and Where We Go from Here

A version of this article was first published in ImpactAlpha .

By Josef (Joey) Barrick

Climate adaptation and resilience are greatly underinvested, accounting for just 5% of climate finance. We are now seeing private adaptation and resilience investments pick up, however, thanks to a drumbeat of data and research from the Global Adaptation and Resilience Investment working group, the White House, Tailwind Climate and others making the case.?

At SJF Ventures, which has been investing in carbon emissions reductions for more than two decades, we are shifting to support more innovations in climate adaptation and resilience. In this article, we’ve mapped the current landscape of companies working in climate adaptation and resilience. On September 26th from 8:30 a.m. to 11:00 a.m., during New York Climate Week, SJF will host a panel discussion at Dentons in Midtown on the 24th floor. The panel discussion, “Made to Last: Adapting to a Changing Climate,” will feature several industry experts, including Amy Barnes , head of sustainability and climate change strategy at 达信 , Jay Koh , co-founder and managing director of The Lightsmith Group , and Matt Stein , co-founder and CEO of Salient Predictions.

Adaptation and resilience technologies

We developed this market map to support our work and other investors in the space. Many companies touch on multiple areas, but we’ve identified three major themes – hazard analytics and response, resource preservation, and owned-asset protection – and several prominent sub-categories such as climate risk analytics, climate insurance, fire tech, and water resource management.

Climate risk analytics?

The initial wave of climate adaptation and resilience investing was driven by a growing need for business decision-makers to assess the future effects of climate change in strategic planning processes and compliance reporting. Weather intelligence investments followed, improving actionability for discrete weather events and long-term planning.?

Notable companies: Jupiter Intelligence, Four Twenty Seven (acquired by Moody’s), Climate X, First Street, XDI, Salient Predictions, Tomorrow.io, EHAB

Insurance tech?

As areas become increasingly difficult to insure profitably, innovative solutions in insurance, reinsurance, and other adjacent efforts are urgently needed to address the growing insurance gap and protect vulnerable communities.?

Notable companies: FloodFlash, Understory, Demex, Kettle

Fire tech?

With investments rising after the 2020 California wildfires, fire tech largely focuses on responding to wildfire events or reducing their likelihood. We’re also seeing startups take a long-term view of wildfire risk in the broader context of forest and land management.?

Notable companies: Burnbot, Pano, Rain, AirSeed, Dendra Systems, Mast Reforestation, Terraformation, Earth Force, Kodama, Treeswift

Water resource management?

Much of what’s happening in the market overlaps with the insurance tech trend, flood risks are the undisputed headliner here, but platforms addressing water treatment, risk, quality alongside adaptation use-cases in utilities, industry, and agriculture are also getting attention.?

Noteworthy companies: Fathom, First Street, Floodbase, Hohonu, ZwitterCo, Aquaoso, Waterplan, bNovate, Klir, SewerAI

Climate risk planning?

As the climate adaptation and resilience tech field matures, more value will be placed on informing businesses and consumers about flood, fire and other extreme weather risks to homes, properties and other assets.?

Notable companies: Rhizome,? First Street, Unwritten, ClimateView

Infrastructure and asset management

Real-time monitoring is a key theme across asset classes, including the electricity grid, energy, transportation, pipelines, water, and more. We’re hoping to see more solutions that can provide actionable intelligence from monitoring.

Notable companies: AiDash, Ayyeka, DroneDeploy, Gridware, Hubble Network, LiveEO?

Proactive engagement

Many large property and asset owners and operators like JLL, CBRE and Cushman & Wakefield have started quantifying the flood, fire, heat, wind and seismic risks across portfolios for clients, regulators and shareholders. They may begin to quantify latent financial risks associated with those properties, both in terms of property value at risk and the (often more pronounced) business interruption risk.?

The logical next question is: what can be done proactively to reduce risks, costs and damages??

Global engineering firms like Arup, WSP, AECOM and others are developing specialist adaptation and resilience teams to help property owners consider both physical and operational interventions for resilience and mitigation or relocations of critical business units. Arup recently published “A universal taxonomy for natural hazard and climate risk and resilience assessments.”?

Similarly, global insurance firms like Marsh and Aon often consult on managing risks and providing coverage. Global reinsurance firms are beginning to offer software externally for assessing climate risk, such as the Location Risk Intelligence offering from Munich Re.?

Some climate risk analytics companies cited are now offering recommendations for adaptation and resilience strategies for large asset portfolios. These adaptation and resilience intelligence software and technologies are also needed for the public sector to assure that schools, hospitals and communities take cost-effective steps to manage future climate disruptions.

Where we’re headed?

We need a measuring stick for climate adaptation and resilience.?

In climate mitigation, the focus on reducing or removing greenhouse gas emissions has made impact crystal clear. All goals around carbon mitigation can be summed up in one term: net-zero.?

In contrast, metrics and KPIs for adaptation and resilience are often less clear, making it challenging to evaluate technologies and their associated impacts. One potential solution is to measure total “value at risk” from climate events, allowing companies to measure returns on investment in terms of their ability to reduce value at risk.?

So what’s next? As climate risk data becomes more widely available, every household in the US can identify their residence’s key climate risks. We hope to see more innovation that seeks to actively mitigate risk.?

We also need to see more solutions for vulnerable and underserved communities. Most of today’s solutions for adaptation and resilience are accessible only to those that can afford them, leaving others to suffer through floods, fire, wind and heat.?

At SJF, we are looking for companies that serve the broader population in part by enabling more effective government services and infrastructure improvements.?

We also hope to see innovators pursue opportunities to integrate adaptation and resilience measures into more comprehensive solutions, given the many ongoing efforts to achieve net zero. For example, if a building is being retrofitted with heat pumps or new windows or insulation, it makes sense to also anticipate flood, heat, wind and fire risks to “future proof” the building.?

For large scale infrastructure like solar power plants, we similarly need to anticipate and protect against hail events. And for public infrastructure, new FEMA rules require assessing future flood and climate impacts with new or rebuilt facilities.?

There is work to be done on adaptation and resilience, and everyone in the market — entrepreneurs, investors, and academics alike — would benefit from being more connected. We invite everyone interested in making the next 100 years on Earth a little more hospitable to join us for our panel discussion on September 26th during New York Climate Week. You can sign up using the Eventbrite link here.