Houses washed away by floods, power lines and road surfaces buckling under extreme heat, and drought threatening food supplies and pressuring water resources. These natural disasters are becoming all too common. And they are taking a massive economic toll.
In the last year alone, the world experienced more than 150 extreme weather events, causing an estimated USD320 billion in global economic losses – 40% higher than the decade-long annual average. https://www.munichre.com/en/company/media-relations/media-information-and-corporate-news/media-information/2025/natural-disaster-figures-2024.html
As the impact of climate change and environmental degradation increases, it is clear that investing in adaptation and resilience – concrete steps such as installing stormwater pump stations, retrofitting existing buildings with efficient cooling technologies or adopting early flood and wildfire warning systems – becomes just as important as measures to mitigate global temperature rises.
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USD 320
Billion
in global economic losses caused because of extreme weather events in last year
Source: Munich Re, 2025
Illustration © 2025 Menah Wellen
This was the dominant theme at this year’s The Klosters Forum, where architects, engineers, academics and investors gathered to discuss the challenges businesses and cities face in adapting to severe weather. During the three-day conference, representatives from Pictet Group shared their insights, citing examples of innovative and disruptive technologies on adaptation and resilience (A&R) which present strong investment opportunities.
Mind the gap
Investing in adaptation has long been neglected. The United Nations estimates that adaptation attracts just over USD30 billion a year in investment, less than half of that on mitigation. https://www.un.org/en/climatechange/raising-ambition/climate-financeThis amount falls significantly behind estimated annual financing needs of as much as USD387 billion by the end of this decade.
Encouragingly, according to representatives from Pictet Group, the adaptation finance gap should start to close. This is because adaptation and resilience is no longer a topic for the distant future, but is becoming a necessity already today.
Comparison of adaptation financing needs, modelled costs and international public adaptation finance flows*
* Modelled costs are estimate of adaptation costs based on sectoral models. Adaptation finance needs are based on reporting by developing countries
Source: Adaptation Gap Report 2024, UN environment programme, https://www.unep.org/interactives/adaptation-gap-report/2024/
Photography © 2025 Magnus Arrevad
Tackling “adapter’s dilemma”
In her presentation to the conference, Jennifer Boscardin-Ching, Pictet Asset Management’s senior client portfolio manager, explained how she expects that growing corporate awareness should lead to increased spending on A&R practices.
Gathering reliable data on A&R spending is challenging, especially since reporting and definitions are not yet standardised and at a very early stage. Nevertheless, according to the most recently available data and research, it is evident that governments and consumers have traditionally been the largest spenders on A&R globally, she said, with their combined expenditure dwarfing that of corporates.Tailwind Climate, December 2024. Government estimates include public budget focused on adaptation in theworld’s largest economies and do not include regional or local governments.
In a survey conducted by A&R consultancy Tailwind, only 40% of businesses have specifically reported investing in products and services that reduce the risk of physical damage from extreme weather.
This lack of action is even more puzzling given that more than 90% of companies recognise climate change as a risk.
“We have reached the point where awareness seems to be at highest levels, yet there’s a lag between awareness and trying to do something,” Boscardin-Ching said. “This could be because of a potential dilemma or trade-off – the earlier you are, the more uncertainty there is. Corporates don’t want to overspend on things they don’t know and they tend to wait. But the longer you wait, the greater your exposure becomes to future risks.”
Sample management approaches to climate adaptation
Source: JP Morgan, Building Resilience Through Climate Adaptation, 2025
Photography © 2025 Magnus Arrevad
“But we’re at the inflection point. When you talk about A&R people’s eyes start to light up. I’m positive because awareness about needing to invest in A&R is at the highest level ever.”
Boscardin-Ching suggested that companies and investors are beginning to realise the attractive pay-back potential of A&R investment.
A study by the World Resources Institute found that every USD1 invested in adaptation and resilience generates more than USD10 in benefits over ten years. This translates to potential returns of over USD1.4 trillion, with average annual returns of 27%.https://www.wri.org/news/release-wri-study-finds-climate-adaptation-investments-yield-massive-returns
Crucially, these benefits go beyond financial gains. The report also explained that A&R projects typically yield a “triple dividend”, providing an environmental and social return in addition to a financial one.
The WRI study found that financial and non-financial gains from A&R projects are often equal in magnitude, yet only 8% of investment appraisals translate every benefit, financial and non-financial, into a single dollar figure. This means most evaluations understate a project’s true value.
This suggests that societal rates of return are substantially underestimated in economic assessments of most adaptation investments.
Companies that can tap into the growing demand for climate change adaptation with the right business model and economics have a real chance to offer attractive investment opportunities while also making our cities stronger and more resilient.
Photography © 2025 Magnus Arrevad
Steve Freedman, head of research and sustainability of thematic equities at Pictet AM, added that financing structures such as blended finance – which brings together, public, private and philanthropic capital into a single investment structure – can be effective. “It brings multiple stakeholders to the table. It’s easier to fund A&R projects this way, where no one group is willing to do it on their own.”
Historically, a major obstacle to ramping up A&R investments has been the perception that they are only valuable for preventing “economic losses” from climate-related disasters. These events are notoriously hard to predict and come with significant uncertainty.
However, the WRI study showed over 50% of benefits from adaptation strategies occur even in the absence of climate-related disasters.
Boscardin-Ching explained that companies can also realise A&R benefits even before the climate disaster strikes, as many of the practices have co-benefits with mitigation.
For example, tech companies building and operating data centres in arid regions like Arizona may consider installing efficient cooling technologies, smart water management and recycling systems and large solar panels and adopting sustainable and green building designs.
These measures should not only mitigate drought and heat risks and ensure round-the-clock operations during extreme weather, but also reduce emissions, conserve energy water and ease strain on local grids and water systems, on top of cutting utility bills.
“Is there an investment case? Yes, we can say investing in A&R generates positive return. That’s the most influential argument in talking to clients and investors,” Boscardin-Ching said.
“To the broader investment community, to say ’we’re investing to avoid losses’ is a very unsexy way of describing things. To make this case clearer, you have to reframe the narrative. It’s about future proofing the business and ensuring business continuity.”
Photography © 2025 Magnus Arrevad
Economics of adaptation
For many environmental and adaptation solutions to scale and thrive, the business case needs to work – but that is not always so.
Nicolas Thomas, private equity principal at Pictet Alternative Advisors, told conference delegates that while there are plenty of innovative A&R solutions and technologies in the market, not all will be commercially successful.
“You can sell dreams but unit economics are super important to achieve scale,” Thomas says.
He presented a business model of Energy Exemplar (EE), an economic simulation software provider for the energy market. EE’s software helps integrate renewable energy into the grid and enhance grid resilience through advanced modelling, simulation and planning capabilities. Its precision forecasting can model medium- to long-term future electricity prices – from less than 24 hours to up to 50 years.
Demand for such services is growing, especially in the aftermath of the massive power blackout across Spain and Portugal on April 28, which plunged cities into darkness, cut off Internet and phone lines, stranded thousands on trains and lifts and disrupted businesses for more than 10 hours. The paralysis was blamed on Spanish grid operator Red Eléctrica de España’s failure in calculating the correct mix of energy, which hindered the grid’s ability to cope with a surge in voltage.
EE already has a solid client base of more than 600 across 90 countries, enjoying annual revenue growth of around 30%.
As soon as you get sustainability and unit economics, you’re on the winning side.
Photography © 2025 Magnus Arrevad
Another example of a profitable A&R company showcased by Boscardin-Ching and Thomas is Xylem, a US-based water component and technology provider. Part of Xylem’s offerings enhance water security and resilience by offering floodwater and stormwater management, early warning systems, and water pollution prevention.
Xylem demonstrates how investment opportunities in the A&R industry span both private and public markets.
Private equity investors can benefit from financing technologies and solutions that have the potential to scale up. Once listed, public investors can capitalise on those that generate attractive cash flow and earnings growth.
“Companies that can tap into the growing demand for climate change adaptation with the right business model and economics have a real chance to offer attractive investment opportunities while also making our cities stronger and more resilient,” Freedman said.
