Revenue generated by climate adaptation could hit US$4 trillion ($5.18 trillion) by 2050 and deliver investment opportunities in sectors from firefighting technology to flood insurance, according to a report co-authored by Singapore's sovereign wealth fund.
Analysts at GIC Pte, which manages an estimated US$880 billion, and Bain & Co. identified key industries exposed to the adaptation theme, as some sustainability-focused investors begin to look beyond efforts to reduce greenhouse gas emissions and examine work to protect assets against the impacts of extreme weather.
Companies offering adaptation solutions are "emerging as a complementary and increasingly investable part of the broader climate response," GIC and Bain said in the report released on Friday. Sales among a group of specific technologies will rise from an estimated US$1 trillion today, while the combined debt and equity value of those providing adaptation solutions could grow from about US$2 trillion to US$9 trillion by mid-century.
With the world currently on track for warming of roughly double the critical threshold of 1.5C, climate adaptation "will need to scale across all levels of society, from governments and businesses to communities and households," the analysts wrote. Backup power systems, wind-resistant building materials, indoor cooling and weather intelligence are all among sectors likely to deliver revenue growth as a result.
The adaptation theme is being flagged as likely to deliver stronger returns than mitigation strategies - which currently attract the vast majority of climate finance, and with potentially less exposure to political tensions associated with emissions cutting.
Adaptation finance is currently on track to meet just a sixth of the expected need by 2030, JPMorgan Chase & Co. said in a report released this week.
