Supporting adaptation is critical in the fight against climate change
Overcoming the challenges of climate change presents unique opportunities for innovators to find powerful market-based solutions which are bound to yield positive economic returns through their use. Climate change adaptation, ultimately, will become necessary despite our best efforts to thwart the worst effects of rapid climate change.
Consider the goals of the Paris Agreement, the landmark accord that sets humanities collective ambition toward reducing our greenhouse gas emissions. The goal of the Paris Agreement, stated in simple terms, is to prevent the next 0.5°C — 1°C of warming. According to the IPCC, limiting warming to 1.5°C above pre-industrial levels is still theoretically possible, but doing so would require unprecedented economic changes. Even with the most optimistic international climate policies, we expect to overshoot this target by more than 30%. While the turbulent events of 2020 will lead to a dramatic fall in emissions, they may only serve to postpone the inevitable rise in emissions as economic activity picks up once more. It seems increasingly likely that we will see +1.5°C in the next decade, and +2°C soon after.
Before abandoning all efforts to hopelessness and despair, consider: the need for new innovation, more investment, and stronger policy only increases as temperature rises and tipping points approach. Indeed, the UK’s 2021 Budget on 3rd April 2021 puts innovation and investment (from civil society, the private sector and the public sector) enabled by policy, as the cornerstone of its so-called “Green Recovery”.
So, what will the +2°C world itself look like? Adaptation and resilience will become the new priority. We can expect dramatic reorganization of our urban fabric, coastlines, and food and agriculture systems, and we can expect broad changes to our global development priorities, international trade, and geopolitics.
Impact investors today are focused on decarbonization. It’s time to extend this focus to the key services, technologies, and innovations that drive resilience and adaptation. In addition, organizations should do a full assessment of their own exposure: Which geographic regions will be hit the hardest? Which industries will be disrupted?
Likewise, we must reconsider: what does decarbonization look like in a +2C world? As an example, the role of Direct Air Capture and Carbon Capture Usage and Storage technologies, which were previously considered too expensive or nascent, become much more viable. So do ambitious and large-scale geoengineering projects, like seeding beaches with olivine stone or stratospheric aerosol injection. These opportunities have the potential to be scalable, high-impact, and high-demand.
Innovation Responds to the Challenges of Adaptation
Adaptation is crucial and presents a massive investment opportunity for companies that will be responding to the changing world. As the impacts of climate change manifest in more frequent and severe social and economic consequences, existing adaptation solutions will have to be financed and deployed at scale. To date, much climate finance is financed via international aid. However, as the aforementioned impacts move closer to home, the demand on our public budgets to pay for domestic adaptation activities will also increase.
This process has already begun. New York City has committed $615 million to the 5.3-mile Staten Island seawall in response to their vulnerability to sea level rise. Other large-scale adaptation efforts are underway in the US including Gulf Coast restoration activities, with $20 billion mobilized for projects ranging from marshland revegetation to artificial island and breakwater construction. This is in addition to, for example, Louisiana’s Coastal Master Plan, which has a budget of $50 billion over the next 50 years for coastal restoration efforts.
Importantly, companies that leverage technologies to rapidly implement and scale such adaptation and restoration projects stand to benefit from the massive pools of public capital allocated for them.
It won’t just be the private sector responding to calls by public institutions to find solutions to climate risk. Private industry is already awakened to systemic risks which will affect their business operations. In response to questionnaires delivered by the Carbon Disclosure Project, the water, accommodation and food service, and manufacturing sectors all reported some of the highest severity impacts from a changing climate. One can already imagine the requirements for private companies to ensure they maintain stable water supplies for industrial processes. Adapting to future challenges will require innovations and in some cases completely new markets to be born.
Seizing these opportunities has thus far seen the most traction for companies working to support agriculture (e.g. agricultural fertilizers and pesticides), health care, and industry (e.g. technology for specialised industrial processes). Biotechnology firms developing more drought tolerant crops, for example, are one prime example of those working to build resilience in our global food system.
Infrastructure itself must also be made ready for changes in the climate: the built environment will need to adapt accordingly with the expected physical changes from climate change. Roads and railways in Africa and the Middle East may need to be redesigned or upgraded within the next 20 years to withstand higher temperatures. Buildings around the world may have to be redesigned to withstand more extreme weather events over the next 10 years. Extrapolating from the aforementioned two regions to the global stage, with the variety of infrastructure crossing over the Earth, and one can see the massive undertaking required across e.g. materials science and construction in order to upgrade our built environment to one able to withstand the myriad challenges we’re already and soon to face.
Climate change may be the ultimate test for the perennial proverb “necessity is the mother of invention.” The changes required in order to move society toward a sustainable future in greater balance with Earth’s natural systems could indeed shake the foundations of our socio-economic system. Continuing to improve the quality of life for all people in parallel to the above will certainly require vast technological undertakings. Those who bring us into the future through their efforts will thus not only be rewarded by the continuation of human progress, but so too by the economic incentives bestowed upon those who find solutions to our most dire challenges and needs.
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References:
IPCC, 2018. Summary for Policymakers of IPCC Special Report on Global Warming of 1.5°C
Climate Action Tracker, 2020
https://climateactiontracker.org/global/temperatures/
Business Opportunities to Climate Change, 2017
Smith and Wagner. 2018. Stratospheric aerosol injection tactics and costs in the first 15 years of deployment
https://iopscience.iop.org/article/10.1088/1748-9326/aae98d
Project Vesta. 2020. Project Vesta research papers
