Extreme Heat Threat to Corporate Assets, UK Climate Chief's Warning, Adaptation Tech Financing Trends, and More

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Editor’s Note: This is the second-to-last Monday newsletter of the year! There will be a short news digest sent on December 23, then Climate Proof will be on hiatus until January 6.

Premium subscribers can look forward to December’s edition of the Adaptation10 and Q3’s review of S&P500 Climate Physical Risk Signals later this week.

Extreme heat is predicted to inflict annual losses of US$404-448bn on publicly traded companies by 2035, data compiled by the World Economic Forum (WEF) suggests.

In a new report, the Forum counted up the expected yearly dollar impacts on corporations from seven climate hazards: coastal flooding, pluvial (river) flooding, tropical cyclone, drought, water stress, wildfire, and extreme heat.

Altogether, these hazards are projected to cause US$560-610bn in damages per year by 2035 to companies' fixed assets — meaning their plants, factories, stores, and other physical properties. Out of this total, extreme heat could be responsible for up to 72-73% of losses.

“These losses are likely to manifest in the form of business interruption, higher repair and operating costs, and lower employee productivity,” the report reads. Telecommunications and utilities companies are likely to see the greatest drop in income from extreme heat, of more than 20% by 2035. This is because of the sensitivity of the data centers and network infrastructure they depend on.

The WEF crunched the numbers for 5,736 large, listed companies’ fixed assets using climate metrics from the S&P Physical Risk Financial Impact database to arrive at its loss projections.

In light of the findings, WEF is urging company leaders to embed adaptation and resilience throughout their businesses by running audits of their current capabilities and resources, tying climate risk “into every capital maintenance and investment decision”, and supporting scientific analysis of the effects of climate shocks.

Adaptation financing instruments in developing countries are failing because of a lack of clear, investible projects and difficulties measuring outcomes, the Climate Policy Initiative (CPI) says.

In a new report, the nonprofit says many adaptation-focused financial instruments, like equity and debt funds, struggle with insufficient project pipelines — meaning they can’t find enough attractive climate-proofing assets and activities to become viable. The CPI-supported Global Innovation Lab for Climate Finance had supported 17 adaptation-focused financing projects as of end-2023, of which 12 successfully mobilized capital and five did not.

The report offers a number of recommendations on structuring successful financing instruments. Chiefly, instruments should work on building viable project pipelines that are resilient to potential upsets. For example, if a pipeline is reliant on the support of a local government, it may fall apart if that government changes its climate policy or is otherwise disrupted. Projects should also have “robust and predictable cash flows” so that financing instruments are seen as real investment opportunities by private capital providers.

Instrument developers are also encouraged to measure and report on the real-world impact of their investments, as public and philanthropic donors increasingly want quantitative data on how their money is being used. The CPI says focus should be placed on the metrics that matter most to donors, and be based on data that can be realistically captured from the end-users of the financing. 

The other recommendations call on instrument developers to clearly define their adaptation investment theses so that they makes sense to outside investors, to “engage strategically” with an array of capital providers in order to develop structures that speak to both public and private capital allocators, and to “cultivate collaborations” across stakeholder groups.

“Narratives around the risks and lack of bankability of adaptation projects persist, hindering the development of adaptation and resilience as a mainstream investment thesis,” the report reads. “To combat this challenge and scale adaptation finance, work must be done to build a compelling business case for adaptation investments that demonstrates the sector’s ability to generate returns and drive impact.”

The Biden Administration is awarding US$53.4mn to four startup accelerators supporting coastal resiliency and the “blue economy”.

The funds will go toward small businesses and entrepreneurs working to monitor and combat shoreline erosion, tackling coastal flooding, gathering data on marine ecosystems, and bolstering ocean renewable energy and carbon sequestration.

The accelerators awarded the funds were identified by Biden’s Department of Commerce and National Oceanic and Atmospheric Administration (NOAA). They are: StartBlue Ocean Enterprise Accelerator, gener8tor Great Lakes Innovation Accelerator, VentureWell Ocean Enterprise Accelerator, and The Continuum.

The funding has been made available as part of President Biden’s Inflation Reduction Act.

Heat extremes and flooding could crimp the productivity of global fashion production hubs in the Global South. Analysis from Cornell University’s Global Labor Institute finds that by 2030, earnings for key producers like Bangladesh, Cambodia, Pakistan, and Vietnam could drop 22% without adaptation investments, with nearly 1 million lost apparel jobs — a figure that balloons to 68% and 8 million jobs by 2050. The report stresses that heatwaves and intense flooding have worsened since 2005 in key production hubs, posing dire risks for workers, manufacturers, and global supply chains. (Global Labor Institute)

The US Department of Commerce and NOAA announced US$20mn in funding for coastal habitat restoration and climate resilience projects. Of this funding, 15% is earmarked for US federally recognized tribes and Alaska Native corporations and organizations. This is the third and final round of funding for tribal-focused habitat restoration efforts under President Biden’s Bipartisan Infrastructure Law. (NOAA). Also last week, NOAA released US$1.95mn of Inflation Reduction funding to support four tribal-led drought resilience projects in the American West. (NOAA)

Two weeks of hearings at the International Court of Justice (ICJ) on states’ legal obligations to fight climate change wrapped up at The Hague last Friday.

Having heard from more than 100 countries and organizations, judges are now deliberating on an advisory opinion that will set out what governments have to do under international law to protect the climate, and what the legal consequences are for those that fail to do so.

The second week of hearings followed the pattern of the first, with poor countries on the frontlines of climate change arguing that rich nations should take greater responsibility for climate shocks and provide support for adaptation and resilience, and rich nations claiming their obligations do not extend beyond those set out in the 2015 Paris Agreement.

Last Thursday, Laingane Italeli Talia, Attorney-General of the Pacific island of Tuvalu, said “there can be no question” that her country’s “fundamental right to self-determination is being violated” by the climate pollution and resulting impacts caused by industrialized nations. 

“The only way to prevent catastrophic levels of climate change is [for] our states to implement immediate, rapid, and dramatic reductions in GHGs [greenhouse gases],” she added.

Arguing against the imposition of additional obligations, UK representatives said the Paris Agreement and other treaties are the most effective mechanisms for stimulating climate efforts and rejected the idea that the ICJ should set out legal consequences for states deemed to be taking insufficient action. Sébastien Duyck, senior attorney at the Center for International Environmental Law (CIEL), told euronews that “[b]y demanding this, the UK has shredded any semblance of climate leadership.”

“As dozens of States have pleaded, it is vital that the ICJ looks beyond the Paris Agreement and delivers a strong legal opinion anchored in legal norms that advances climate justice and human rights, including by affirming that those most responsible for the climate crisis must remedy and repair the resulting harm,” said Duyck in a separate statement.

The ICJ is expected to produce its advisory opinion some time in 2025.

UN talks on combatting drought, land degradation, and desertification ended without a deal last week, kicking the can down the road to the next meetup in 2026.

The UN Convention to Combat Desertification (UNCCD COP16), held in Riyadh, Saudi Arabia, saw representatives from almost 200 countries gather to discuss ways to bolster drought resilience and slow desertification worldwide. Today, around 40% of the world’s land is degraded, according to UN figures. Moreover, three-quarters of Earth’s landscapes were drier in the period 1990 to 2020 then they were for the previous 30 years, the result of human-induced climate change and deforestation. 

However, the gathered delegates did not finalize a legally binding agreement on a new global drought framework, which could force states to take action on water scarcity — a key climate adaptation issue. This effort will next be taken up at COP17 in Mongolia, two years from now.

Other potentially impactful decisions were adopted, though, addressing land tenure, sand and dust storms, and grasslands and rangelands, among others. 

COP16 also produced a number of new financial commitments. Hosts Saudi Arabia and a group of multilateral lenders pledged US$2.15bn for drought resilience, while the Arab Coordination Group — a coalition of development banks — promised US$10bn by 2030 to combat land degradation, desertification and drought.

The UK is “off track” on climate adaptation, the new chief executive of the country’s Climate Change Committee (CCC) told the BBC in her first televised interview.

“We have to prepare for it [climate change]. We have to prepare our infrastructure for it, we have to prepare the economy for it, we have to prepare our homes for it,” said Emma Pinchbeck. She cited the importance of flood defenses and extreme heat preparedness in cities, and ongoing investment in a climate resilient economy. 

“If we don’t invest in the economy …. there will be risks. We should be acting now to tackle them,” she said.

The UK is currently recovering from Storm Darragh, the fourth major winter storm to hit the British Isles this season. The storm brought 96mph winds, caused power cuts for tens of thousands of people, and triggered widespread flooding.

Friends of the Earth and two plaintiffs are currently trying to revive a lawsuit against the UK government for its “inadequate” climate adaptation plans.

Pinchbeck was appointed head of the CCC on October 9. She previously worked as the CEO of Energy UK, the trade association for the country’s energy industry.

New Jersey advanced a Climate Superfund Act last Thursday that would force fossil fuel companies to pay for climate adaptation and resilience efforts in the state. If passed, the measure could raise up to US$25bn to support projects like home elevation and seawall construction. Similar bills have been passed or proposed in New York, Maryland, and Vermont. (NJ Legislature)

Dame Patsy Reddy has been appointed Chair of New Zealand’s Climate Change Commission, which is responsible for providing the government independent counsel on its work to bring about a climate-resilient and low emissions future. Dame Reddy served as the Governor-General of New Zealand from 2016 to 2021. Her appointment takes effect in February 2025. (New Zealand Government)

The Australian government launched the Torres Strait and Northern Peninsula Area Climate Resilience Grant Program, a six-year, AUD$15.9mn plan to bolster First Nations-led climate action. Of this funding, AUD$10.8mn will finance the hiring of local First Nations climate resilience officers to drive community adaptation efforts, including climate education, cultural preservation, and knowledge sharing. The remainder will be used to support the Torres Strait and Northern Peninsula Area Climate Resilience Centre. (Australian Government)

Funding for climate tech on the whole is on the downswing, but there are some bright spots for adaptation amidst the gloom.

A flurry of year-end reports shows investment flows into clean energy, carbon capture, and other climate mitigating plays slowed again this year. Data analysis by consultancy PwC finds climate tech financing dropped to US$56bn over the four quarters to end-September 2024, down 29% on the period Q4 2022 to Q3 2023. Number crunchers Sightline Climate, meanwhile, found that 18% fewer investment funds made climate deals year-on-year, and that there has been a 9% decline in new climate-focused venture capital (VC) funds over the same period. Market intelligence firm PitchBook has also spotted a drop-off in annual VC investment in climate tech software startups, from US$5.8bn in 2023 to US$4bn calendar year-to-date.

However, PwC claims that over the first nine months of 2024, around 28% of climate tech deals covered adaptation and resilience plays — “a higher proportion than is often reported.” Ten percent were “pure play” adaptation deals and 18% “dual benefit” transactions covering adaptation and mitigation. Still, adaptation deals accounted for just 12% of climate tech investment value. 

The low dollar allocation to adaptation tech reported by PwC aligns with findings by other companies, including Tailwind Climate, which last week released data suggesting that just 3% of total climate tech startup funding went to “pure play” A&R companies from 2019 to 2023 — around US$4.5bn total.

US Navy and Marine Corp bases in Hawaii are to be climate-proofed using tech and research supplied by the state’s university. The University of Hawaii and Department of the Navy have inked a 10-year, US$110mn contract that will support the latter’s resilience against environmental hazards. Among the services the university will provide are flood plain analysis and mitigation, wildfire management and planning, shoreline stabilization, and the implementation of nature-based solutions. (US Navy)

Gross-Wen Technologies (GWT) and the Metropolitan Water Reclamation District of Greater Chicago have secured a new patent for an algae-based tech solution that removes dissolved organic and inorganic matter from wastewater. The innovation, which leverages GWT’s Revolving Algal Biofilm system, is a faster, more efficient way to tackle so-called total dissolved solids while reducing carbon emissions and improving water quality. (Gross-Wen Technologies)

Defining “climatopia”: An evaluation framework to support transformational adaptation in climate-inspired utopic design (One Earth)

Addressing climate risks through fiscal policy in emerging and developing economies: What do we know and what lies ahead? (Energy Research & Social Science)

The case for adaptive inflation targeting (Centre for Economic Transition Expertise)

Fintech applications for boosting climate finance (International Monetary Fund)

Climate change supercharged late typhoon season in the Philippines, highlighting the need for resilience to consecutive events (World Weather Attribution)

Thanks for reading!

Louie Woodall
Editor