Why I'm Betting My Career on Climate Adaptation

Climate is an existential threat that has to be addressed 

Other existential threats all have a chance of not happening: Skynet or an AI superintelligence destroying the world; disease; nuclear war; or an Armageddon-style asteroid hitting the Earth. These may all happen, but there are more immediate interventions to avert these disasters. 

But climate change is happening now

So, when I think about personally addressing this climate crisis, I think of a framework for the likely success in solving the problem and the impact those solutions will have. 

The math is clear: focus on the scenario with the combination of high probability of success and the great potential impact.

Adaptation is a pragmatic way to make an impact when everything is on fire

What is climate adaptation? Unlike mitigation (reducing emissions), adaptation means building the tools, technologies, and services that help society thrive in a warmer world. This is about maintaining and improving quality of life despite climate impacts. This is what we are good at and done for generations.

The need for new services is measured in the trillions of dollars and, as yet, venture capital and private equity are not investing enough in solutions. 

According to Tailwind, one of the few investors to really take a deep dive into adaptation investing, over 1800 startups with adaptation and resilience technologies raised $32 billion between 2019 and 2023, that’s not even 21% of the total climate tech investments over the period. And 71% of those investments only focused on software and data vs. physical risk reduction. 

Those numbers are just focused on addressing the direct risks from climate change. And I think there’s an even larger opportunity to offer pathways for thriving in a warmer world, not just surviving it. 

Large fund managers like GIC and Temasek and investors like Third Sphere are doing great work to establish the foundations for what an adaptation thesis can look like, but many of their solutions don’t focus enough on the consumer in the equation and don’t go far enough in their scoping of what an adaptation thesis should include. 

Analysts at Boston Consulting Group (BCG) and Temasek estimate that up to $1.3 trillion could be spent by 2030 to support our lives on a hotter planet. Meanwhile, in the GIC study I’d mentioned earlier (conducted with help from @Bain), that number reaches $9 trillion in investable opportunities by 2050. These numbers… are not small. What’s more, they serve to make society more liveable and promise to save lives, livelihoods, and the simple luxuries that a hotter world threatens to take away from all of us. 

Why consumers?

Rightly or wrongly, consumers power 60% of the world’s economy (as EY notes). That means for economic growth to continue and for us to continue evolving, shaping and creating the world we want in the face of extreme weather externalities caused by climate change, the consumer needs to be at the center of the equation. 

Consumers are at the heart of everything that happens - representing 60% of the economy directly, and directly shaping policy through voting

As creaking systems begin to break down under stress, investors can expect spending on resiliency and adaptation to be added to the list as well. Most people are self-interested because their survival depends on it. Instead of asking them to change, we need to build businesses that meet their needs where they are. That allows their self-interest to lead to good outcomes for society.

Look at the projections from Bain and GIC’s market map of goods and services that will see revenue growth rates of 5% or more in the new adaptation economy. What do you see? 

Backup power systems, water conservation, fire-resistant building components, indoor cooling, reflective cooling materials and components, flood-resistant construction materials, and wind-resistant building components. And these are just a few of the new physical goods needed to ensure successful adaptation. 

To enable humanity to thrive under baseline warming scenarios will require thinking beyond bare necessities to make healthcare (including mental healthcare) more accessible and resilient, improving community engagement and boosting sociallization to develop support networks, and investing in entertainments that allow us to enjoy the world we live in – whatever the temperature may be outside. 

Consumer demand will reshape markets and we need to start building those businesses now. 

The profit motive creates the right incentives and is the best chance we have for impact at scale

Like climate mitigation, adaptation investing encompasses so much of the economy that the universe of investable new businesses becomes astronomically large. Luckily, we can start focusing our efforts on the companies that are creating shared value for the world as climate change happens.  These companies create returns and impact.

Luckily, organizations like Valuing Impact Impact and the International Foundation For Valuing Impacts (IFVI) are creating economic frameworks to quantify contributions to human development. Just last month Simon Vionnet and his team published a study offering one prescription for impact valuations that I not only find incredibly fascinating, but intend to adopt as a guidepost for assessing dealflow. There’s a lot that still needs to be worked out in here, but their visualization of the framework is a great place to start. 

Realism is the way forward

This isn’t about pessimism or optimism… it’s about realism. 

I’m certainly not saying we should abandon climate mitigation investing.  In fact, I think it should still be where we put the majority of our effort.  But the world is warming, and it’s likely to get warmer still. We need to start getting ready in case we don’t succeed at solving climate change.

I think we’re all in agreement that the human experiment with geoengineering by burning dinosaur bones and pressurized plant matter has led to a level of comfort that’s enviable for an entirely too small portion of the world’s population. 

To ensure that more of society can enjoy that comfort – even as the results of our fossil fuel use put pressure on the economic systems we created – will mean enabling low-cost adaptation solutions to flourish and new innovations to drive wealth creation in a warming world. 

Capitalism can respond to this moment. The impacts of climate change are measurable and (somewhat) predictable, and so too is the demand that these environmental changes precipitate. 

Developing solutions to serve humankind in its moment of need will be a massive invisible hand that can raise populations by harnessing the new technologies we’ve developed instead of pressing them down under its thumb. 

I'm betting my career that Adapt [us] will be a vital part of the equation. If you're interested in exploring this thesis further, I'd welcome the conversation.