The climate crisis is no longer theoretical. Increasingly certain and worsening impacts of climate change are resulting in hundreds of billions of dollars in economic losses annually, and affecting lives, livelihoods, and economies around the world. Global leaders and businesses are beginning to recognize the urgent need to invest in climate adaptation and resilience alongside mitigation—particularly in the regions most vulnerable to climate impacts. However, there remain immense needs for adaptation and resilience finance, with the private sector currently only contributing a small fraction.
A new study published by Boston Consulting Group (BCG) in collaboration with the Global Resilience Partnership (GRP) and United States Agency for International Development (USAID) lays out the investment thesis for the private sector to finance this space. The report, titled From Risk to Reward: The Business Imperative to Finance Climate Adaptation & Resilience, will be launched today at COP28 in Dubai, alongside an announcement by United States Special Presidential Envoy for Climate, John Kerry, and USAID Administrator, Samantha Power, that BCG is responding to the PREPARE Call to Action—a growing coalition of major private sector players committed to advancing adaptation and resilience in developing countries.
This study is the first of its kind to detail the range of opportunities and financial benefits for the private sector to fund adaptation and resilience in both emerging markets and developing economies (EMDEs) and advanced economies.
“The business case for adaptation and resilience has been elusive and entry points have been unclear,” said Rich Lesser, BCG’s Global Chair. “This report demystifies the imperatives and opportunities. It shows how companies and financiers can invest in ways that benefit their bottom line and contribute to the wellbeing of people and the planet. Unless private enterprises take these actions, they will face significant disruptions, impacting continuity, productivity, and growth. Resilient businesses contribute to a resilient world.”
Businesses at the Vanguard of Minimizing Climate Risk Will Be at an Advantage
Companies that are already implementing resilience-building measures such as water collection and storage are realizing benefit-to-cost ratios ranging from 2:1 to 15:1 and sometimes as high as 53:1, with interventions in EMDEs demonstrating some of the highest benefit to cost ratios. By changing traditional definitions of return on investment from cashflow generation to protecting value that is at risk from climate impacts, the report finds that companies can ensure business continuity, and long-term benefits for themselves and for local communities, economies, and ecosystems in a warming world.
Investors Can Capitalize on a Diverse Pipeline of Adaptation and Resilience Solutions
The rising number of governments and companies taking action to build resilience is driving demand for adaptation products and creating opportunities for investors. The report reveals a robust pipeline of deals that direct finance toward adaptation and resilience solution providers who earned valuation multiples of nine times their revenue across food, health, water, energy, and other sectors—with some companies generating valuations as high as 77 times revenue.
Governments Play a Prominent Role in Unlocking and Wielding Private Finance
The public and social sectors play a critical role in directing private funds toward areas of greatest need, particularly in EMDEs. Their engagement provides the catalytic financial instruments, enabling environment and technical assistance needed to de-risk investments and enable private financing for adaptation and resilience.
“There is no time to waste. The levers for building resilience are understood. The solutions underpinning adaptation are ready to scale. The business case is clear,” said Nathanial Matthews, CEO of GRP. “Crucially, this journey demands the active involvement of local communities, especially in the Global South, where a rich pipeline of investments is emerging. Now companies and investors must rise to the challenge—and the opportunity—to collaboratively build an adaptive and resilient world.”
Download a copy of the report here.
