The News
As negotiators at COP30 struggle to make progress on a long-delayed global agreement on climate adaptation, some observers in Belém warn the talks overlook what could be the most important solution for improving countries’ resilience: Drawing in more private sector investment.
One of Brazil’s top priorities for this COP is to hammer down a “global goal on adaptation,” which would identify universal metrics for countries to track, and articulate shared principles for how to reach them. That goal was called for in the Paris Agreement, but has remained elusive in part because adaptation — a category that can include everything from seawalls to wildfire detection software — is so broad and so geographically variable. As successive COPs have failed to reach agreement on a political framework for the problem, a growing number of private investors — including startups, major corporations, and financial firms — are identifying promising ways to turn a profit from adaptation. Experts widely agree that, as wealthy countries pull back on foreign aid of all kinds, the private sector is an indispensable source of adaptation capital.
But private adaptation finance is held back by a number of technical, financial and policy bottlenecks. And the arcane debates around national goal-setting that preoccupy COP negotiators do little to address them, Meredith Ryder-Rude, a senior Environmental Defense Fund official — and until April a longtime adaptation negotiator for the US State Department — told Semafor.
“The global goal on adaptation is well-intentioned, but it’s become a proxy to rehash every grievance on climate finance we’ve had over the last two decades,” she said. “I’m not sure we’ll get the outcome on adaptation at this COP that will really send the right signals” to close the investment gap.
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Tim’s view
COP adaptation debates have a strong undercurrent of social justice: Rich countries should bear most of the financial burden for adaptation investments in poorer ones, the argument goes, because they are most responsible for the climate crisis. That may be fair. But a much quicker solution would be for global climate negotiators to focus on finding ways to encourage more companies and financial institutions to step in.
While global investment in the clean energy transition has risen rapidly, passing $2 trillion for the first time last year, funding for adaptation has remained stagnant at levels far below what experts believe is necessary. By some estimates, the need for global adaptation investment could reach as high as $1.3 trillion annually by 2030, but currently sits at less than $100 billion. And of that, only about 8% is private, rather than government, investment.
A main reason for the private finance gap is that many companies and Wall Street firms used to view adaptation spending purely as a cost, with no profit potential. That’s starting to change, said Jean-Charles van den Branden, head of global sustainability at the consulting firm Bain & Co.
Companies whose own operations are exposed to climate risk — anyone who deals with agricultural commodities, for example, or uses a lot of water, or has facilities near a coast — are scrambling to cover their bases, he said. As for Wall Street, “they love shovels for the gold rush.” He pointed to a recent investment by the private equity firm Lightsmith Group in a startup that provides AI-based software for electric utilities to better manage their assets during disasters, or an investment by Munich Re in technology to speed up insurance payouts after floods.
Still, “the reality for most companies is that unless there’s an imminent threat to your operations, it’s easier to just defer the investment,” said Andrew Wilson, deputy secretary general of the International Chamber of Commerce, a business advocacy group.
Wilson was at COP to advocate for the global goal on adaptation to include a clear statement that governments should do more to facilitate private investment in adaptation, especially in emerging markets. Other helpful steps the international community could take, he said, include calling on governments to improve access to climate risk data so companies can make more informed decisions about their exposure, setting up an established practice for calculating the return on investment of corporate adaptation investments so that such projects can be more easily financed, and creating more venues for businesses to collaborate with municipal or regional governments to plan adaptation investments that could have broader public benefits. But at the moment, those steps are largely absent from the conversation.
“Our biggest concern right now,” Wilson said, “is that we end up with a decision at this COP that just recognizes how things are, without moving them forward.”
The View From Wall Street
When the private equity firm TPG first started investing in climate a decade ago, adaptation investments with a strong business case were rare, Maryanne Hancock, partner at TPG and CEO of Y Analytics, TPG’s internal impact assessment unit, told Semafor. Now they surface much more often: The firm’s latest investment, announced Monday, was in the US grid engineering firm Pike, which helps utilities harden their infrastructure against extreme weather events. Unlike TPG’s energy transition investments, which are often in relatively new companies or technologies, adaptation deals are more often with longstanding companies finding growing demand for adaptation-related products and services, Hancock said.
“When you have an existing company with a proven customer base that makes the investing case really interesting,” she said. “The private sector can’t solve the whole problem. But if it can solve the parts of the challenge that do have an investment thesis, that frees up governments and philanthropy to focus on everything else.”
Room for Disagreement
There are downsides to relying on the private sector to close the adaptation finance gap, said Lisa Sachs, director of Columbia University’s Center on Sustainable Investment. Some things, like seawalls, will never be a good fit, because they don’t generate revenue. More broadly, “you don’t want the private sector to try to squeeze profits from systems that are meant to have public benefits. That’s how you get the US health care system or private prisons,” she said. “And the larger and more diffuse the pool of beneficiaries, the less suitable private capital is.”
A better intervention, she said — which is also often left out of the debate at COP — is for development banks to offer cheaper loans to developing countries.