Anne Chataigné
Senior Programme Manager, Adaptation and Resilience
We outline what adaptation and resilience is, why it matters to investors, how it can be considered in investment strategies. It is the topic of a member-only workshop and a plenary session panel for guests, in-person and online, at the IIGCC Summit on Monday 23 June.
Adaptation and Resilience (A&R) is a topic of growing importance for investors considering climate risks and opportunities. There is clear evidence that physical climate hazards affect portfolios and the assets within them, and that investment in solutions can offer opportunities.
Extreme weather, climate and water-related events between 1970 and 2021 caused some USD 4.3 trillion in economic losses, according to the World Meteorological Organization.
Considering the opportunity, revenues from adaptation solutions surpassed USD 1 trillion in 2024 according to the United Nations, up 21% year-on-year. Though it highlights the “enormous gap between needs and flows”.
This urgency is underpinned by the Paris Agreement Global Goal on Adaptation (GGA) to enhance adaptive capacity, strengthen resilience and reduce vulnerability to climate change.
What is adaptation and resilience?
‘Adaptation’ and ‘resilience’ are often used together, and while related, they represent distinct strategies for addressing the physical impacts of climate change.
Adaptation involves taking steps to reduce exposure or vulnerability to climate risks, whether physical, economic or otherwise. It refers to actions that “adjust to actual or expected” climate outcomes and their effects. These steps are complementary to mitigation and a critical component of the long-term, global response to climate change and its associated risks.
Resilience, on the other hand, is the “capacity to prepare for, respond to and recover from the impact of hazardous climatic events while incurring minimal damage”.
In short, adaptation focuses on adjusting to climate risks, while resilience is about withstanding and recovering from them. Together, they offer a comprehensive approach to managing climate risks.
Why this matters?
Physical climate risks once considered extreme are now becoming the new normal. Exacerbated by climate change, more frequent and severe heatwaves, flooding, drought, storms and wildfires have affected economies, countries and communities across the globe.
Many investors are alert to the fact that physical climate risks can disrupt operations, supply- or value-chains, and even indirectly shock broader economic, human, or natural systems. Studies makes clear that the longer adaptation efforts are put off, the more difficult and expensive it is to respond to climate change.
Managing the impact of physical climate risks is therefore becoming an important consideration as part of an investor’s fiduciary duties to protect the assets under their management and the world in which they are valued.
What are the investment challenges?
While A&R as an overarching objective is widely recognised, action and implementation remains context specific. Practices and metrics to integrate climate-related risks and opportunities into processes often vary. This fragmentation, especially among businesses in the same sector, can hamper efforts.
Another key issue is that physical climate risks are not currently priced into investment strategies. This is both a technical conversation – on adjustments to the discount rates to reflect resilience – and a broader challenge and opportunity for an industry-wide conversation on valuation practice.
As a result of mispricing physical climate risks, resilience investment often goes unrewarded. The current investment value chain, including investors, (re)insurers and lenders, does not consistently incentivise or recognise the value of resilience measures as well as it could. As the World Bank has pointed out, there is also a lack of data showing how A&R actions translate into business benefits, especially in the short term.
Yet resilience investment holds significant potential. It can help expand the investable universe by attracting capital for places considered uninsurable or uninvestable.
How can investors adapt?
For investors looking to manage physical climate risks, today and in future, there is a relative lack of resources and guidance compared to climate mitigation. To help, we have worked with our members to create a series of iterative, practical tools which will develop over time.
The Climate Resilience Investment Framework (CRIF), coming 19 June, can support better physical climate risk identification and management at the portfolio level. Helping investors to communicate strategies and actions to relevant stakeholders is one of its core objectives.
Complementary to CRIF, the Physical Climate Risk Appraisal* Methodology (PCRAM) helps investors build a financial case for investing in A&R at the asset level. Its first series of case studies demonstrated that investors who adopted PCRAM have seen improvements in how they integrate physical climate risks into their investment processes. This led to the stronger and more resilient management of assets.
Both tools aim to address A&R-related challenges by providing standardised, investor-focused approaches to consider when assessing and integrating physical climate risks into decision-making.
Clearly, investors cannot and should not be expected to influence change in isolation. Wider stakeholder, market and policy engagement are important levers of influence which can help to stimulate momentum and foster a more enabling policy environment, matching market incentives in the real economy.
Our goal is to help investor strengthen their understanding, bridging the gap between scientific data and financial decision-making.
We hope you can join us at the IIGCC Summit on 23 June 2025, in London or online, where our workshop will discuss this challenge and opportunity in more detail. Keep up to date with all the events to look out for at London Climate Action Week through our event guide.
*Previously 'assessment', updated to better reflect the nature of the tool in June 2025.