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Finance for resilience: climate adaptation as a productive asset
Until recently, climate investing largely centred on the transition to a lower-carbon economy. London Climate Action Week 2026 featured a strong focus on a complementary challenge: how businesses, economies and investors adapt to the physical impacts of a changing climate and build resilience against them.
The cost of physical climate risks
The scale of these risks is becoming increasingly visible. Insured catastrophe losses have now exceeded US$100 billion annually for six consecutive years (approximately £79 billion), driven by weather and climate-related events accounting for up to 95% of insured losses[1],[2]. Total economic losses are significantly higher once uninsured losses are included, exceeding US$200 billion annually (£158 billion) globally[3].
Businesses are already recognising these risks in their own planning. According to the Allianz Risk Barometer 2026, business interruption ranks as the third largest business risk globally, driven in part by increasingly frequent weather events disrupting operations and supply chains. Natural catastrophes rank fifth and climate change sixth.
These risks increasingly translate into tangible economic impacts. During recent periods of extreme heat, Germany estimated productivity losses of approximately €430 million per day (£370 million) as working conditions deteriorated and economic activity slowed[4].
From mitigation to adaptation
This brings greater attention to climate adaptation. While mitigation focuses on reducing future warming through measures such as renewable energy, electrification and energy efficiency, adaptation focuses on reducing the economic consequences of climate impacts that are already occurring or increasingly likely to occur. Examples include flood protection, water infrastructure, electricity grid resilience, cooling systems, resilient agriculture and more robust supply chains.
Historically, these investments have often been viewed as costs of doing business. Increasingly, they resemble investments in productive capacity and economic resilience.
Resilience as a productive asset
Data from CDP illustrates this dynamic. Companies reporting through CDP identified median environmental opportunities worth US$33.1 million (£26.1 million) per company, compared with an estimated US$4.6 million (£3.6 million) cost to capture those opportunities. This suggests that, for some companies, the reported value of environmental opportunities may materially exceed the estimated cost of pursuing them, although these figures are company-reported estimates and outcomes will vary[5].
The same relationship exists on the risk side. Companies reported median environmental risks worth US$39.4 million (£31.1 million), while the estimated cost of mitigating those risks averaged US$3.1 million (£2.4 million). Put differently, the potential financial damage identified by companies was approximately 13 times larger than the cost of reducing it.
At the more extreme end of the distribution, CDP estimates that the potential value associated with addressing physical climate risks may be up to US$21 (£16.60) for every US$1 (£0.79) invested for some businesses. These figures should be viewed as indicative company-reported estimates rather than guaranteed outcomes.
What this means for investors
For investors, this changes how adaptation is viewed. Infrastructure that improves water security, cooling systems that preserve productivity during heatwaves, or investments that improve supply chain resilience may increasingly look less like defensive expenditures and more like productive assets that may help preserve revenues, reduce operational disruption and support long-term asset values.
As physical climate risks become more visible across economies and markets, resilience may increasingly become an important consideration in long-term investment analysis.
However, adaptation-related investment themes are not without risk. The benefits of resilience spending can be difficult to measure, may take time to emerge and may already be reflected in valuations. Companies may also face execution, regulatory and capital-allocation risks. As with any investment theme, climate adaptation should be considered as part of a diversified investment approach and not in isolation.
Our approach
We believe that companies that anticipate and manage these challenges effectively may be better placed to remain competitive and create long-term value.
Physical climate risks increasingly affect supply chains, operations, infrastructure and long-term profitability. As part of their investment process, our investment managers seek to understand how companies identify, manage and adapt to these risks.
- Reuters / Swiss Re Institute, Global insured catastrophe losses set to hit US$107 billion in 2025.
- Allianz Commercial, Allianz Risk Barometer 2026.
- Swiss Re Institute or other source for total global economic natural catastrophe losses.
- Reuters, Germany heat productivity losses, 2 July 2026.
- CDP, Disclosure Dividend 2025.
Important information:This article is for information purposes only and does not constitute personal financial advice or a recommendation to invest, buy or sell any investment. The suitability of any financial planning or investment strategy depends on individual circumstances. Tax treatment depends on individual circumstances and may change in future. The value of investments can fall as well as rise and you may get back less than you invest.
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