Globally, companies are taking more responsibility for climate change mitigation. They pledge to reduce carbon emissions and water use across their operations and supply chain to slow global warming and better protect the environment. These efforts are essential, but they do not address the consequences of the damage already done. For example, carbon offsets have not significantly impacted the atmosphere. According to some reports, global carbon sequestration efforts only remove 1% annually of global emissions.
Climate adaptation, which helps people, animals, plants, and the environment to survive in an era of increasing climate volatility, should be a top priority. These types of projects receive only 7% of the climate-related investment, according to the Climate Policy Initiative’s 2021 report. This is despite them being responsible for many needs, including flood and wildfire prevention, resilient agriculture, clean water supply, infrastructure modification, and population resettlement. These initiatives deserve much more significant business investment because they offer near-term opportunities for lower capital expenditures and faster paybacks. According to the Bloomberg report, Bank of America analysts believe climate adaptation could be worth $2 trillion annually in the next five years.
Climate adaptation is fundamentally about adapting organizational and institution practices, infrastructures, and technologies to climate risks. This includes places like floods and rising sea levels. We support solutions that are cost-effective, effective, and immediate in impact. These include early warning systems of extreme weather events, coastal barriers and water desalination, wastewater treatment, vertical farming, hydroponic agriculture, improved cooling and insulation, and 3D printed and modular housing.
SwissRe, an insurance conglomerate, warns that a global temperature increase of 3.2degC in 2050 will wipe out 18% of global GDP. Nevertheless, OECD studies show widespread climate adaptation can positively affect growth, particularly in G-20 countries.
A more robust global economy will result when governments, capital market investors, and commercial lenders work together towards climate resilience and mitigation. Many are taking steps to complete this. The Coalition for Climate Resilient Investment, a group of over 120 companies and stakeholders with more than $20 trillion in assets, has launched pilot projects to strengthen infrastructure to withstand climate impacts. Notable positive developments are also being made in other areas. We’ll look at water, agriculture, construction, and real estate projects.
Water and Agriculture
Water scarcity is a severe short-term and long-term problem that no mitigation efforts can address. Water is the essential input to human life and global agriculture. It is therefore vital for our health, sustenance, and productivity. Yet, many highly populated areas are already suffering from water shortages.
Rainwater harvesting and efficient irrigation are two cost-effective water-related adaptation measures. Cloud seeding is a great way to increase rainfall and plant drought-resistant seeds. Conserving water for agriculture can be a complementary effort. Arup, a London-based engineering company that reports almost $2 billion annually in revenue, has led the charge in flood control projects to increase natural water retention in Poland. It also implemented flood relief schemes in England. Kingspan, an Irish construction firm whose low-energy insulation system is featured at the Bloomberg headquarters in London and Singapore’s Changi Airport, now has a growing percentage of its portfolio that includes rainwater harvesting projects. Sydney commissioned Kingspan to audit all 48 city rainwater management systems. Sydney has been suffering from droughts that have left its dams at record low levels.
Also, there are signs of progress being made in developing countries. Netafim, an Israeli company with a $1 billion annual revenue, has installed irrigation systems in more than 100 villages in India. It uses soil and plant data to determine the appropriate water dose. This allows for optimal yield and lower fertilizer and water consumption. Olam, a global agri-business coffee, rice, cotton, and cocoa beans producer in 60 countries, has committed to reducing wastewater in its 30% upstream farms and plantations in areas with high water stress.
Water conservation has many economic benefits. They save money on water storage, purchase, maintenance, and storage. This is a win-win situation for both villages and corporations. These adaptation efforts, especially in India, where only 10% have been implemented to save water, deserve significant investment and scaling.
Another important and expanding business opportunity is clean water generation. Many existing desalination systems use large amounts of energy and are oil- or gas-powered. Elemental Watermakers’ solar-powered reverse osmosis system, which uses gravity to collect and pressurize seawater, is portable enough to be used in residential and industrial settings. One customer in Aruba saw a 67% reduction in water costs and a 180-ton decrease in carbon emissions. Terraformation is another company that operates what may be the largest solar-powered, full-scale water desalination plant in Hawaii. It is located on a 45-acre site of reforestation. Similar ventures are still woefully underfunded, despite their potential to regenerate ecosystems and boost local economies. The most promising innovation is nuclear-powered desalination. This technology would have huge applications around the world.
A reliable and efficient water supply will also help to support environmentally-friendly agriculture like hydro- and aquaponic production. China’s Sananbio operates large indoor farms in Beijing, producing approximately six tons of leafy vegetables per day using just 5,000 square meters of space. The plants can absorb 60% of the water, and 40% is recycled. This food production is an excellent option for many water-stressed countries, including small and strategically vulnerable ones like Israel, the United Arab Emirates, and Singapore.
Construction and Real Estate
The built environment is a significant factor in climate change and must be essential in adaptation. Real estate assets, valued at $200 trillion globally, are highly vulnerable to natural disasters or resource shortages due to their fixed location. Many opportunities are available at the intersections of technology and geography. Developers and localities from all over the world, including the Netherlands, Denmark, Maldives, and Singapore, are building or planning floating cities that can rise with tides to desalinate, recycle, and re-use water for hydroponic farming.
Astro Teller, Director of the Google X Lab, suggests that “movable cities” might be needed to adapt to climate changes. ICON and other companies are making 3D-printed homes as a first step. The Vulcan construction system, which can produce homes and structures of up to 3,000 sq. ft, meets the International Building Code (IBC). They are expected to last longer than the standard Concrete Masonry Units (CMU) and be more resistant to extreme weather. The first of their kind in America, they are being sold by the company, which is currently valued at approximately $2 billion. Lennar, a leading U.S. home builder, will construct a community of 3D-printed homes in Austin. ICON also builds entire villages in Mexico and El Salvador.
Book also produces flat-pack homes designed and built in collaboration with Skanska. These homes can be purchased at Ikea. Because of the low climate impact of Scandinavian wood, the houses are made primarily of timber sustainably sourced from Scandinavia. Around 14,000 homes have been built in Sweden, Finland, and Norway. This generated $250 million in revenue for the adapt-focused manufacturer.
UN-Habitat estimates that at least three billion people will need better housing by the end of this decade. This means that 96,000 new homes must be built every day between now and then. We will eventually need to move specific populations to areas less affected by climate change. This is inevitable due to rising flood and fire insurance premiums and chronic droughts or heatwaves.
Climate Alpha’s research shows that climate-resilient regions will yield more than 70% higher real estate portfolio returns by 2030. Property developers, asset managers, and insurers should pay attention to profit from climate-induced migrations. This can be done with new technologies. Alquist, a U.S.-based company, can now print a three-bedroom house in less than 24 hours instead of the four weeks it takes Habitat for Humanity to build one.
We believe adaptation is a better business option than mitigation in addressing climate change. Charles Darwin taught us that adaptability is the key to survival and success. Even small investments can significantly impact preparing for the unpredictable future.