Photography © 2025 Magnus Arrevad
Madrid’s iconic Plaza Mayor is a magnet for tourists. Built in the 16th century, this bustling square at the heart of Spain’s capital city features Baroque buildings whose ground-level archways support balconies. Sunny terraces, lively shops, street musicians and performers enhance its vibrant atmosphere.
But from May to August, visitors may think twice before venturing to this popular destination.
In summer, the stone-paved open space, much of it lacking tree and vegetation cover, can become oven hot. During vicious heatwaves in recent years, ground temperatures reached as high as 63.5°C.https://es.greenpeace.org/es/sala-de-prensa/comunicados/greenpeace-uses-thermal-imaging-cameras-to-expose-the-extreme-heat-in-the-city-of-madrid-and-calls-for-urgent-measures-to-adapt-to-extreme-temperatures/
“We used to say Madrid has nine months of winter and three months of hell. Now we’re having this hell in May, when universities are running exams and kids are in school,” says Juan Azcárate Luxán, deputy director general of energy and climate change at the Madrid City Council.
But this urban heat island effect is not unique to Madrid. Extreme temperatures are now affecting cities around the world, killing nearly half a million people each year, burdening health services, disrupting water, power and transportation systems and causing devastating wildfires.https://www.who.int/health-topics/heatwaves#tab=tab_1
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3x expected increase in number of cities exposed to heat above 35°C by 2050
Source: Arup Urban Heat Snapshot, May 2024
The impacts of the heat island effect are not equal. Climate policy sometimes can enlarge a climate inequality gap, but we should not create more inequality. We have to move from incremental efforts to more transformative policies.
Azcárate Luxán was speaking at this year’s The Klosters Forum (TKF) which took place in late June – when much of southern Europe was suffering from back-to-back heatwaves.
Economic damage is hard to overstate –according to an analysis by German insurer Allianz, one day of extreme heat, defined as above 32°C, is equivalent to half a day of strikes, resulting in GDP losses of more than half a percentage point by 2030.https://www.allianz.com/content/dam/onemarketing/azcom/Allianz_com/economic-research/publications/specials/en/2025/july/20250701_Heatwaves_EconImplications.pdf
The stakes are high. Encouragingly, city authorities are beginning to take action. Investment is growing in infrastructure and technology that can help urban centres adapt to extreme weather.
TKF delegates were presented with several real-life example of successful climate adaptation initiatives.
The Spanish capital, they were told, has invested in several projects that aim to mitigate the effects of extreme heat, including replacing hard surfaces with green space and introducing water-permeable surfaces to combat excessive heat and build flood resilience.https://www.madrid.es/UnidadesDescentralizadas/Sostenibilidad/EspeInf/EnergiayCC/06Divulgaci%C3%B3n/6cDocumentacion/6cNHRNeutral/Ficheros/RoadmapENG2022.pdfIt also intends to plant more trees, build shaded sidewalks and make greater use of reflective building materials.
Yet devising an adaptation plan is no easy task. Cities involve a wide range of stakeholders, including residents, neighborhoods, businesses and government agencies, each with different priorities and risk perceptions. From transportation, energy and water supply and waste management to communication networks and public services, urban infrastructure is like several value chains bundled in one. A failure in one system can cause cascading effects on others.
This is especially true for Madrid, which is the second largest city in Europe with a metropolitan-area population of around 7 million. Earlier this year, what initially started as a voltage surge caused grid failures, which triggered a chain reaction throughout the system that disrupted traffic lights, lifts, and trains as well as mobile and Internet connection.
"Mapping a corporate value chain is relatively straight forward. For a city, it’s more complicated, as every sector has a different definition of risk,” Amar Rahman, Global Head of Climate and Sustainability Solutions at Zurich Resilient Solutions, told the forum. Zurich Resilient Solutions, the risk consultancy unit of Zurich Insurance, has worked with Madrid on the climate risk assessment.
Photography © 2025 Magnus Arrevad
Illustration © 2025 Menah Wellen
Cooling schools
Madrid started by mapping, identifying and quantifying its exposure to extreme heat.
One of the vulnerable hotspots identified by the exercise is schools. Children bear the disproportionate brunt of heatwaves as they sweat less and spend more time outdoors than adults; classrooms heat up like a sauna with poor ventilation and unshaded asphalt playgrounds trap thermal energy and burn skin.
Madrid has turned to nature-based solutions (NbS) – a less tech-heavy method of harnessing ecosystems — to help schools and kids adapt. Specifically, it planted trees, created gardens and installed pergolas and canopies, all of which provide cooling, water retention and flood prevention.
NbS are typically more cost effective than traditional industrial methods and yield additional benefits, such as reducing emissions and pollution and improving social well-being and enhancing urban resilience.
“The impacts of the heat island effect are not equal. Climate policy sometimes can enlarge a climate inequality gap, but we should not create more inequality. We have to move from incremental efforts to more transformative policies,” Azcárate Luxán says.
“We have schools running as carbon neutral areas. If you give nature a degree of freedom, the results are incredible and transformative.”
Quick wins
Adaptation benefits can come relatively quickly. This is in contrast to mitigation efforts of reducing emissions and transitioning to renewables – which can take decades or more to bear fruit.
Take Madrid’s NbS. Measures like green walls or roofs can start providing benefits like temperature regulation and better air quality in a matter of weeks or months of installation.https://www.sciencedirect.com/science/article/pii/S2772411525000096
A study on urban heat by UK developer Arup has found that the hottest areas in cities had vegetation cover of less than 6%. By contrast, cooler surroundings have vegetation cover of 70%.
This is relevant for the Spanish capital. The study has also found that downtown Madrid is 8°C hotter than surrounding rural areas, the most significant temperature difference among six major cities around the world.Cairo,London, Los Angeles, Madrid, Mumbai and New York. https://www.arup.com/news/madrid-suffers-most-extreme-urban-heat-island-hot-spot--new-international-survey-shows/
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30% increase in tree cover in European cities could have prevented over 2,500 excess deaths
Source: Arup Urban Heat Snapshot, May 2024
Water – too much, too little
Other initiatives zeroed in on water, a major stress point in a city which suffers from both drought and floods.
Under its 2050 roadmap, Madrid plans to address chronic water management issues by investing in measures aimed at reducing water supply loss, increasing rainwater retention and infiltration, maintaining supply and sanitation networks, while it also intends to recycle wastewater.
Madrid’s initiatives offer a template for other major cities in the world, which – along with businesses – are likely to invest more in adaptation and resilience technologies and solutions.
Other cities, from New York, London and Tokyo, are also investing in waterfront resilience and flood management, turning to innovative technologies, which include stormwater pump stations and flooding relief, flood alert and stormwater monitoring as well as sewage handling and pollution control.
NbS also feature extensively, notably the Sponge City Programme in Wuhan which uses parkland, vegetation and permeable pavements to reduce flood risks and improve water quality.
Photography © 2025 Magnus Arrevad
Long-term opportunity in climate adaptation and resilience
By Jillian Regnier, sustainability lead at Pictet Wealth Management
Sustainable investing sits at a critical juncture and potential watershed moment. The political ESG (environmental, social, governance) backlash has driven many large US asset managers to retreat from their sustainability commitments, while the asset owners they serve - from pension funds to family offices and foundations - remain committed to future proofing their long-term investments. This includes not only managing climate and nature-related risks but also financing the sustainable transition that is already underway, contributing to portfolio resilience. While on the surface we may have seen recent outflows, global responsible investing indices actually outperformed not only in the first four months of 2025, but also over the long term from 2019 to 2024*. Long-term investors seeking diversification against an uncertain macroeconomic backdrop can look to a variety of sustainable investment opportunities with established track records across risk-return profiles, from microfinance to blended finance in both emerging and developed markets. These can offer long-term, impact investments, which empower our clients to preserve and grow their wealth for future generations, ensuring a legacy of both financial security and environmental stewardship.
*Source: Morningstar: Global Sustainable Funds Outperform Year to Date, April 2025 & Bloomberg: ESG Funds Beat S&P 500 for Longest Stretch Since Late 2022, June 2025
