21 September 2021

Adapting to climate change: investing in the resiliency imperative

Climate change is accelerating, and society is underprepared for the rising human, environmental, and economic toll. Investing in climate adaptation can help address the problem.

Partnered content

For professional investors only.

Key points:

  • Climate change is accelerating, and society is underprepared for the rising human, environmental, and economic toll.
  • We believe demand for climate adaptation solutions will increase significantly.
  • By investing in climate adaptation, investors can help address the climate challenge, gain exposure to a growing and inefficient market segment, and hedge portfolio exposure to climate risk.

Combating climate change is fast becoming an economic necessity. Swiss Re estimates global GDP could shrink 18% by 2050 if global temperatures are allowed to rise by 3°C. To date, most efforts have focused on mitigating climate change through regulation or carbon pricing, while spending on innovations to help society adapt to physical climate threats has lagged. Our work with Woodwell Climate Research Center gives us conviction that physical climate risks will rise significantly over the next 10 to 30 years, driving demand and expanding markets for adaptation solutions. This thesis is corroborated by the United Nations Intergovernmental Panel on Climate Change's (UN IPCC's) recent report, which calls for an increase in adaptation investment across public and private sectors to build resilience to climate extremes and climate variability.

Here, we share why we believe market growth for climate adaptation has been slow and how a growing need for climate resiliency will accelerate investment. We also share how we translate insights we have gained from Woodwell's climate research into our investment process. Finally, we discuss why we believe investors need to think differently about climate adaptation, adopting longer time horizons and accepting uneven growth in a segment we believe can outpace broader markets over time.

 

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For professional investors only. This material and its contents are current at the time of writing and may not be reproduced or distributed in whole or in part, for any purpose, without the express written consent of Wellington Management. This material is not intended to constitute investment advice or an offer to sell, or the solicitation of an offer to purchase, shares or other securities.

Investing involves risk and an investment may lose value. Investors should always obtain and read an up-to-date investment services description or prospectus before deciding whether to appoint an investment manager or to invest in a fund. Any views expressed are those of the author(s), are based on available information and are subject to change without notice. Individual portfolio management teams may hold different views and may make different investment decisions for different clients.

This material is provided by Wellington Management International Limited (WMIL), a firm authorised and regulated by the Financial Conduct Authority (FCA) in the UK. In Europe (ex. UK and Switzerland), this material is issued by Wellington Management Europe GmbH (WME GmbH), which is authorised and regulated by the German Federal Financial Supervisory Authority Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin). Shares of the Fund may not be distributed or marketed in any way to German retail or semi-professional investors if the Fund is not admitted for distribution to these investor categories by BaFin.

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Contact

Bob Sharma
Head of EMEA Insurance
bssharma@wellington.com

 

James Bradbury
Relationship Manager
jbradbury@wellington.com

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