Navigating transformation and durability: A lucrative venture in a shifting landscape
In a world where climate-related extreme weather events are becoming increasingly common – from blizzards in the United States to cyclones in the Bay of Bengal, and rising sea levels in Singapore – the need to protect communities and assets from the impacts of climate change has never been more urgent. A new report by Boston Consulting Group (BCG) and Temasek, titled "The Private Equity Opportunity in Climate Adaptation and Resilience," highlights this field as an opportunity for private equity investment.
The report identifies three promising areas for investment: climate-resilient infrastructure development, protective and mitigation solutions for communities and assets, and scalable, high-demand climate adaptation technologies and services.
- Climate-resilient infrastructure development involves designing and investing in infrastructure that anticipates and mitigates climate-related risks. This could include upgraded drainage systems, reinforced foundations for solar projects, and flood-resistant power and water systems.
- Protective and mitigation solutions for communities and assets aim to help protect physical assets and communities from climate impacts such as rising sea levels, intense storms, and droughts. These solutions ensure functionality and reduce socio-economic losses.
- Scalable, high-demand climate adaptation technologies and services offer innovative solutions that address specific climate vulnerabilities and risks. As global spending on adaptation and resilience is expected to exceed US$1 trillion by 2030, these areas present a compelling opportunity for private equity investment.
The Climate Adaptation and Resilience Investment Opportunity Map, a three-layered framework introduced by BCG, breaks down the sector into seven impact themes, such as water, infrastructure, and agriculture. The themes are further divided into over 50 subsectors, ranging from seawater desalination to wildfire management.
The Opportunity Map showcases hundreds of practical solutions, spanning from modular flood barriers to smart meters. Examples of these solutions include the Large-Scale Long Island reclamation project for coastal protection, prompted by rising sea levels in Singapore.
Despite the growing opportunity, private equity investments in adaptation and resilience make up less than 10% of total climate-related investments. Mr. Daniel Oehling, managing director and partner at BCG, emphasizes that while some governments and companies are showing signs of scaling back on climate goals, the field remains a compelling opportunity for private equity investment.
Mr. Oehling also notes that the Opportunity Map is the first tool of its kind built from a private equity perspective. It uses a scoring model that combines current and forward-looking indicators of private and public sector demand, as well as investor activity, to identify subsectors with strong near-term potential.
As the world continues to grapple with the challenges posed by climate change, the private sector has an increasingly important role to play in investing in solutions that protect assets and livelihoods while driving future-ready portfolios.
[1] The Private Equity Opportunity in Climate Adaptation and Resilience - Boston Consulting Group (BCG) and Temasek [2] Climate Adaptation and Resilience Investment Opportunity Map - Boston Consulting Group (BCG) [3] Global temperatures rise to 1.55°C above pre-industrial levels, making 2024 the hottest year on record - World Meteorological Organization [4] Global spending on climate adaptation and resilience set to exceed US$1 trillion by 2030 - United Nations Development Programme
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