Adaptation and Resilience:an Urgent Need
Protecting communities and organisations from climate extremes
Climate change is accelerating…
The last three years have been the hottest on record, exceeding the 1.5°C limit set by the 2015 Paris Agreement to limit the worst and irreversible damage caused by climate change.
Source: Copernicus Climate Change Service
… and the economic losses caused by extreme weather events are unprecedented
In the EU, economic losses from floods, storms, heatwaves, wildfires and droughts have exceeded €200 billion over the last four years.
Source: European Environment Agency
Companies and financial institutions risk being unprepared: too few companies are insured against natural disasters...
The European Insurance and Occupational Pensions Authority (EIOPA) has highlighted a widespread insurance protection gap for natural disasters in Europe
Flood insurance protection gap in EU member States
...and financial institutions urgently need to integrate physical climate risk assessment into their processes.
“Financial institutions should assess … physical risk drivers, taking into account at least the following:
i. the geographical areas in which key assets of counterparties (e.g. production sites) and, in particular for real estate exposures, physical collateral is located;
ii. the vulnerability level to environmental hazards (e.g. temperature-related, windrelated, water-related, solid mass-related hazards) associated with different climate scenarios and transition pathways or, for … non-large institutions, associated with at least one adverse scenario.”
Source: European Banking Authority Guidelines, 01/2025
The need for investment in adaptation and resilience is enormous.
€35–500 billion per year
Estimated adaptation investment needs in the EU
Source: European Investment Bank
$615 billion per year
Estimated adaptation investment needs in developing countries, including public finance ($365B) and private finance ($250B).
Source: UN Environment Programme
Demand for adaptation and resilience technologies is increasing and represents an opportunity for private markets.
Demand for climate resilience technologies, such as resilient buildings and agriculture, could create a $1 trillion opportunity for private capital by 2030.
Projected investment opportunities for selected technologies and services by 2030, $ billion
Resilient buildings
Energy-efficient HVAC¹, heat pumps, heat-resistant and insulation materials, building hardening, back-up power
Grid hardening
Energy storage, grid reliability services, grid equipment and hardware manufacture, smart grid technology, EPC² companies
Resilient agriculture
Farm management software, biologicals, controlled environment agriculture, advanced irrigation, precision agriculture hardware, aquaculture
Logistics and supply chains
Cold-chain logistics, supply chain software, refrigerated warehouse construction, active containers
Water infrastructure
Industrial and municipal wastewater treatment, smart water meters, desalination, rainwater harvesting
Healthcare and livelihoods
Medical consumer products, health surveillance and warning tech, remote healthcare services and solutions
Disaster prediction, prevention, and recovery
Postdisaster recovery, emergency management platform, climate resilience engineering consultancies, weather forecasting software
Wildfire and vegetation management
Antiwildfire chemicals and materials, vegetation management, wildfire suppression, postfire restoration, wildfire analytics
Financial-risk transfer
Parametric insurance, data analytics providers, insurance support services
Flood management
Stormwater and flood software, emergency flood services, flood engineering consultancies
1Heating, ventilation, and air-conditioning.
2Engineering, procurement, and construction.
Source:
McKinsey
Investments in adaptation are not only indispensable, but also yield high returns.
An analysis by the World Resources Institute of 320 adaptation investments in agriculture, water, infrastructure, and health across 12 countries between 2014 and 2024, totalling $133 billion, concluded that these investments generated benefits of $1.4 trillion, meaning that every dollar invested in adaptation generates benefits of $10.50 over ten years (average return on investment of 27%).
These benefits come from avoided losses (first dividend), induced economic benefits (second dividend) and social and environmental benefits (third dividend).