Mobilising private capital for climate resilience

Are we entering the age of investing in climate resilience? The answer is increasingly yes – though not by default. What is still missing is the market plumbing that allows private capital to move more efficiently: better translation of data into decisions, more meaningful disclosure, stronger asset- and system-level design standards, and instruments such as resilience bonds, write Swenja Surminski, Keith Guthrie and Vanessa Hodge.

Physical climate hazards such as heatwaves, floods, droughts and wildfires are growing in frequency, severity and financial footprint, making resilience commercially relevant across regions, sectors and asset classes. But investors are operating in a period of genuine volatility: shifting geopolitics and fractured supply chains only add to a growing sense that the assumptions underpinning long-term portfolios no longer hold.

A known risk – with uncertain tails

In that context, climate change is, in one important sense, one of the better-known quantities we have: much of the change that will occur in the next few decades is already locked into the physical system. We know, with reasonable confidence, how much warming is already unavoidable, how heat, flooding and drought will intensify, where and with what level of severity. That predictability is precisely what makes the economic case for climate resilience calculable.

But that confidence has limits. We still know comparatively little about tipping points – the thresholds beyond which physical systems shift abruptly rather than gradually, whether that is an ice sheet, ocean current or regional ecosystem entering a different state. Some tipping points may represent tail risks: low-probability but high-consequence events that do not show up cleanly in models built on historical relationships. Others may be more plausible than conventional risk assessments assume. For investors, this means acting on well-evidenced, near-term physical risk while simultaneously building protection against potentially systemic shifts that current models are least equipped to price.

The conversation has shifted from definition to mechanics

As recently as a few years ago, raising the subject of investment in climate resilience with an institutional investor elicited three predictable types of response: what is climate resilience – a seawall, a heat-proofed building, an early warning system, a sovereign disaster insurance scheme or all of the above? What does it look like across different asset classes, given that there is no template? How much capital are we talking about – and who is expected to pay?

Those were reasonable questions in a market with no data, no pricing convention and no track record. They are still worth asking now. But the question being heard today is a different one: how do we get private capital into climate resilience, at scale, on terms that make sense to a fiduciary? That shift signals that the evidence base has expanded considerably, and that the gap is no longer analytical intent but market infrastructure.

The numbers behind the case

Part of what has changed is the strength of the evidence. A recent report published by the Grantham Research Institute, The macroeconomic case for investing in climate adaptation, shows that adaptation investments can yield substantial returns at the macroeconomic level, often resulting in a ‘triple dividend’: preventing losses, stimulating economic activity and providing social and environmental co-benefits. Covering a wide range of adaptation actions, the report finds a median benefit–cost ratio of around 4:1, with the benefits typically exceeding costs within about three years for the average project.

At the national level in the UK, the Climate Change Committee (CCC) estimates that, without additional action, climate impacts could cost between 1% and 5% of GDP annually by 2050. The same CCC report estimates that, under a scenario of 2ºC of warming, approximately £11 billion per year will be required through to 2050 to address heat, water stress and flooding, with around 72% of heat adaptation costs expected to fall to the private sector. Establishing clarity over what is privately investable, what falls to governments and where blended approaches add most value is, therefore, central to any credible policy or investment framework.

What investors say they need

Four things are required to convert investor intent into actual portfolio decisions.

• Data and decision-useful information. The biggest challenges are not data availability or volume but translation and interoperability. Physical climate risk remains systematically underpriced because asset-level data is incomplete, vendor outputs diverge and models lack the spatial granularity investment decisions require – even if physical risk disclosure and increasingly granular property-level data enrichment are beginning to change this.

• A willingness to act before the data is perfect. Stewardship conversations about heat, water stress and supply-chain exposure do not need to wait for a complete dataset; engagement can run ahead of the analytics.

• Smart design of adaptation solutions. This is required at both the physical-asset and the systems level. Adaptation is not a single intervention. Rather, it spans hard engineering of infrastructure and other physical assets, operational changes and nature-based solutions (see Surminski, 2026). For investors, this distinction matters: adaptation measures have different cost profiles, payback periods and degrees of transferability across a portfolio. The value of adaptation is often easy to miss when it is designed around a single asset. For instance, a logistics hub hardened against flooding will still fail if the road network around it is inundated. System-level thinking is what unlocks a different order of return through shared infrastructure and pooled risk reduction.

• Innovative structures. Resilience projects typically generate no direct cash flow of their own, which is part of what makes resilience a hard sell to some investment committees – and this is where the most significant product innovation over the next few years is likely to occur. Resilience bonds are a compelling example, as they provide returns against demonstrated resilience performance, giving private capital a monitorable proxy for a benefit that has historically been almost entirely invisible – the flood that did not damage a factory; the heatwave that did not cause grid failure. A related model is sustainability-linked insurance, in which an asset manager’s investment in physical climate resilience, and their willingness to share the underlying data, helps secure more attractive insurance terms. This aligns stakeholders’ incentives across the board and gives the market a precedent that prices resilience rather than postcode exposure. Neither of these instruments is yet mainstream, but they offer a template for innovative structures that could be scaled up.

Where does influence come from in the investment chain?

Acting on climate resilience requires clarity not just about what to do, but about who in the investment chain has the leverage to do it – and through which channel. The conflation of these factors is one reason why progress has been slower than the evidence warrants.

We can think of the investment chain as three concentric circles: asset owners appoint investment managers who allocate capital to and steward investees – the companies, infrastructure assets and funds in which capital is held. Each layer has two primary levers: capital allocation, and stewardship through engagement, voting and escalation.

The use of these levers can affect resilience outcomes through three channels. The first is encouraging investees to manage physical climate risk well – ensuring boards and executive teams have credible plans for addressing physical asset risk, operational disruption and supply chain exposure. The second is allocating capital directly to resilience projects such as early warning systems, adaptation infrastructure, nature-based solutions and resilience-linked financing instruments. The third is engaging at the systems level with regulators, policymakers and civil society to shape the broader environment on which all private investment ultimately depends.

A few distinctions matter in practice. Investment managers typically operate within mandates set by asset owners; their ability to allocate funds towards resilience solutions usually requires an explicit instruction. As asset owners can set that mandate, they are the primary decision-makers in designating adaptation as a strategic objective.

Stewardship, by contrast, is available to all layers of the investment chain and does not need to wait for perfect data. Nonetheless, it is important to note that almost all progress on physical risk analysis has been made on real assets. It is much harder to model and make progress on listed equity and credit because a company’s resilience runs through its supply chains and water dependencies, as well as the heat exposure of its workforce. Closing that gap is a defining near-term challenge.

For the investees themselves, the relevant questions run deeper than portfolio-level risk scores. A well-governed investee will be actively managing physical asset risks and operational resilience, engaging with the communities and regulators on whom its social licence depends, and reducing its reliance on the critical infrastructure and ecosystem services that are most exposed to climate disruption.

Understanding this chain of influence is not just conceptually useful: for any investor trying to translate a resilience commitment into action, it is the practical foundation. Frameworks such as the Mercer Investor Transition Pathway offer a structured route for doing exactly that: treating resilience not as a bolt-on, but integrated into action alongside climate mitigation and work to support nature, a circular economy and a fair low-carbon, nature-positive transition.

Insurability as a systemic portfolio risk

Insurability is the other side of the equation. In our view, insurers withdrawing from markets is not primarily a failure of the financial sector; rather, it reflects a failure to address and manage the underlying risks, as explained in our Insurability in a Changing Climate briefing.  When a location or asset class becomes uninsurable, this is a clear signal that planning policy and infrastructure investment have fallen behind the risk. Insurability is therefore a systemic portfolio risk that accumulates quietly until it surfaces as a valuation shock. Investors in real estate, infrastructure and private markets are already encountering this issue; it will not remain confined to those asset classes.

The response must start with pricing resilience at the individual asset level: rewarding buildings, sites and infrastructure that have demonstrably reduced their risk rather than treating exposure as a uniform feature of a location or sector. Appropriate insurance coverage levels matter, as well as an adequate risk management strategy. Businesses systematically underinsure – particularly for business interruption, which is frequently the larger financial loss driver of extreme weather events but often remains uncovered entirely. It is increasingly common to understand resilience as a way to protect insurability and create longer-term value: a growing number of investors are treating it as an active investment criterion rather than a defensive afterthought.

Putting people at the heart of climate resilience efforts

Climate resilience must work for the people who live and work in the places where portfolios are exposed to risk. Physical climate risk does not land evenly: it is concentrated in the regions and communities with the least capacity to absorb it, and rising inequality is one of the more destabilising systemic risks that investors face. Therefore, support for the workers, households and communities most exposed to both climate risk and the cost of adaptation should be embedded in investors’ approaches to stewardship and in engagement with policymakers, not treated as an optional adjunct to the financial case. Climate resilience cannot be delivered at scale without listening to and integrating affected communities.

Swenja Surminski is a Professor in Practice at the Grantham Research Institute and Managing Director, Climate and Sustainability, Marsh

Keith Guthrie is Global Sustainable Investment Lead and Partner, Marsh People and Investment

Vanessa Hodge is UK Sustainability Integration Lead and Partner, Marsh People and Investment

The views in this commentary are those of the authors and do not necessarily represent those of the Grantham Research Institute or Marsh.