Investing in climate adaptation

Please note: This article is designed to be thought leadership content, to offer big picture views and analysis of interesting issues and trends that matter to our clients and the world in which we live. It is not designed to be taken as expert advice, investment advice or a recommendation, and any reference to specific companies is therefore not an opinion as to their present or future value or broader ESG credentials. Reliance upon any of the information in this article is at the sole discretion of the reader. Some of the views and issues discussed in this article may derive from third-party research or data which is relied upon by Barclays Private Bank and may not have been validated. Such research and data are made available as additional information for the reader where appropriate.

Key points

• The impact of climate change on societies and companies is far worse, and happening more quickly, than anticipated.
• With the critical average 1.5°C warming threshold now likely breached, adapting to the impact of a hotter world on economies and business is a must. 
• The market for early-stage adaptation solutions and technologies could hit $49.2 billion by 2030. 
• As such, the most pertinent question for investors is how best to position their portfolios for the climate-adaptation opportunities as they occur.

“Climate change is showing its claws" is insurer Munich Re's stark assessment, as, in 2024 alone, natural disasters caused $320 billion in losses worldwide — with less than half insured¹. The ramifications of the effects of global warming are increasingly evident on society, and on investors’ portfolios.

As 2025 begins, the prognosis gets worse. This year saw the hottest January on record, according to Copernicus Climate Change Service². Indeed, it has now been confirmed that the critical average 1.5°C warming threshold has been crossed³. 

Irrespective of political or corporate actions, the reality is that our climate is changing, and faster than anticipated. Investors should recognise the risks. But also, the investment opportunity. 

The more severe the impact of climate change, the greater the demand for solutions to mitigate, cope, absorb and recover from its effects. This article looks at how to invest in climate adaptation and resilience, and provides practical strategies to identify relevant portfolio opportunities. 

Adaptation is an inevitable opportunity 

Climate change effects are arriving sooner and often more severely than expected, as we explained in Why investors should heed this summer’s climate warnings. While efforts to address climate change continue, our societies and economies must adapt to function and prosper in a hotter world. 

This creates substantial investment opportunities for climate adaptation and resilience solutions. These complement, but are distinct from, mitigation investments which seek to reduce the underlying greenhouse gas emissions that drive climate change. 

Adaptation and resilience are similar terms, but not exact substitutes. Together, their aim is “to manage and minimise risk, reduce vulnerability and enhance the capacity of systems to deal with the impacts of natural hazards and climate change”⁴. Individually, they can be defined as⁵: 

“Adaptation is the process of adjusting practices, systems and structures to moderate potential damage and cope with the consequences of natural and climate-related hazards.” 

“Resilience is the ability of a system, community or society exposed to hazards to resist, absorb, accommodate, adapt to, transform and recover from the effects of a hazard in a timely and efficient manner.”

The need for companies and societies to prepare for climate change is now “unavoidable”⁶. The associated investment required is huge. Developing countries alone might need an estimated $215-387 billion annually until 2030 for adaptation measures (see table, by sector). Current financial flows cover less than 10% of this requirement⁷.  

Climate-adaptation funding  

The estimated annual climate-adaptation finance needs, by sector, for developing countries during the 2020s   

The market for new adaptation and resilience solutions and technologies, estimated at $20.8 billion in 2024, is projected to reach $49.2 billion by 2032⁸. This gap, between urgent and growing need and available solutions, presents a clear opportunity for investors.

Seven starting themes for investors

Adaptation and resilience investments target solutions that help businesses and communities cope with actual climate impacts. For example, coastal infrastructure and industries need provision for extreme weather. Healthcare and labour workforces should prepare for more climate-related health challenges. 

This differs from mitigating physical and transition risks, which can protect or enhance portfolio value, as explained respectively in Making portfolios more weather resistant and Is your portfolio at risk from the low-carbon transition?

The table below summarises seven key themes, identified by the United Nations, along with potential examples⁹: 

Source: United Nations Office for Disaster Risk Reduction, Barclays Private Bank, February 2025 

The seven themes represent distinct market entry points across asset classes, such as equities and bonds, whether found in public or private markets. Astute investors will seek to identify where growing climate pressures create urgent needs that align with scalable business models and clear revenue streams.

How to identify attractive opportunities 

Investors can begin to locate opportunities through four practical strategies:

1. Target climate-exposed sectors: Identify sectors and regions facing immediate and/or increasing climate pressures. Next might be the companies developing critical technology and service solutions. For example, heavier downpours are putting strain on sewer and waste-water systems, creating opportunities for new technologies and robotics to assess and maintain critical infrastructure.
2. Apply a thematic lens: Focus on, and across, the seven adaptation and resilience themes to capture interconnected opportunities across sectors and regions. For example, on rivers and coasts, communities are at increased risk of more frequent and severe flooding. This creates opportunities for data and AI solutions to provide earlier, and more accurate, forecasting.
3. De-risk other family assets: Existing business or real estate owners can examine adaptation and resilience solutions for their own assets. For example, a family with agricultural interests, in an increasingly arid climate, may look to invest in technology companies improving precision use of water through sensors and data analysis.
4. Follow public funding: Track government adaptation initiatives, which can often provide early signs of investment opportunities. For example, the UK’s £15 million adaptation research programme signals growth across its key areas of food security, urban spaces, nature-based solutions, climate risk assessments and vulnerable populations¹⁰.

Now is the time to adapt your portfolio

With the impacts of global warming occurring sooner than anticipated, the investment case for finding climate-adaptation and resilience solutions is more compelling, and urgent. 

Moreover, if climate mitigation efforts slow, or stall, these solutions would become even more critical. Ultimately, the question isn’t about whether there is a need for adaptation and mitigation measures, but how to best position your portfolio for their inevitable need.