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It’s time to invest in climate resilience

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By Jeppe Tranekær Nielsen

· 8 min read

A hopeful reboot to climate tech: The bet on a new wave of climate mitigation technologies

In recent years, a range of funds with a strict focus on GHG emissions avoidance popped up as part of the second wave of Climate Tech (following the first wave of Clean Tech in the late 00s, widely covered elsewhere). The VC world awakened on the back of valuable learnings from Wave 1 as well as early funding success stories of second-wave companies like Climeworks, Solugen, and Northvolt. Ideas with “gigaton decarbonization potential” excited investors and start-ups alike.

In this wave, the investment scope expanded from renewable energy to a wider variety of solutions to lead the world towards a “Net-Zero economy,” e.g., electrification of transport, mobility platforms, batteries, decarbonized manufacturing, lab-grown meat, recycling technologies, etc.

These efforts were—and still are—a much-needed capital alignment with the opinions of climate scientists, who have been tirelessly and urgently trying to make the world look up (no pun intended) and mitigate climate change by cutting emissions.

Let’s face reality: The climate has already changed

However, the climate urgency raises questions about whether investors, decision-makers, and society are considering the full extent of solutions to environmental changes:

Scientists are alarmed because the climate has already changed and is changing at an accelerating pace.

It is not just a matter of a warmer planet on average. Rather, the urgency especially arises from the increased amount and severity of the underlying extremes that make up the average. From an economic perspective, these extremes translate into risks for companies and governments; Floods, heat waves, droughts, and the increasing weather volatility lead to substantial asset losses, disruptions to global supply chains, disruption of natural growing cycles of our food, insurability issues, etc.

From a mere social perspective, the development also marks a significant shift in priorities for communities around the world. While vulnerable developing countries long have been advocating for adaptation finance in response to the intensifying and changing environment, the changes are now impacting almost any community across the globe. As such…

… we’re moving down Maslow’s hierarchy of needs to safeguard our physiological needs and secure a safe, secure environment for ourselves:

With this reality in mind…

… we must now adapt to a more volatile climate and build resilience into our systems.

The power of perspective: Widening the lens from emissions to systems

To some readers, acknowledging the full extent of climate change and shifting towards climate resilience may seem like a resignation to hopelessness (frankly, it would serve as a welcome reality check if people, if only just for a moment, resigned and acknowledged that we already have reached a degree of warming that will lead to abrupt, unmanageable tipping points). However …

… building climate resilience represents a powerful and hopeful shift in perspective for companies, investors, and society.

Before discussing the opportunity for resilience, let’s briefly consider the implications of society’s focus on mitigation and decarbonization. While these efforts are undoubtedly needed, betting on decarbonization as the only strategy to combat climate change is arguably not just for the hopeful but rather the ignorant. Put in other words, it borders on greenwashing when companies and states solely rely on the debatable moral imperative that consumers are willing to go green, or when they invest blindly in Direct Air Capture. From an environmental perspective, we must complement decarbonization with efforts. Alex Laplaza eloquently explains why decarbonization is no longer enough:

“Even if global emissions zeroed out tomorrow, the warming baked in by centuries of past emissions could still bring many climate systems dangerously close to cascading tipping points and feedback loops.” Alex Laplaza, Lowercarbon Capital

On top of the warming risks arising from the fossil-fueled configuration of the economy, a sole focus on decarbonization also has implied risks related to how we approach the configuration of society in the future. From a planetary perspective, decarbonization and the associated Net-Zero targets have reduced the highly complex planetary challenges to a degree that has become almost unproductive. Decision makers and businesses seemingly resort to a singular yard stick for understanding and managing the environment: CO2 emissions.

Arguably, this singular yardstick has served as a much-needed foundation for markets fueled by pledges and long-term decarbonization regulations. As such, building markets and managing impact by a unified metric may provide direction and some (perceived) clarity for everyone. Yet, companies, state leaders and investors are now backpedaling from their ambitions, limiting actual action and increasing uncertainty for innovators. On top of this, scientists have repeatedly emphasized how the systems of the Earth are undergoing environmental changes across an interplay of processes. A singular, narrow focus does not do these systemic dynamics justice.

Enter the complementary perspective of Climate Resilience. For investors and decision-makers who thrive on the grand vision of changing the world, adaptation and resilience represents a much more interesting playing field: this is where you combine real impact with systematic overhauls for creating a better world. Building a resilient society means backing solutions that inherently acknowledge that the world is changing, instead of only building highly unique mitigation solutions (some of which, frankly, are only poised to reach their full impact potential in an ideal world where renewable energy is abundant, the climate is stable, and the capital continuously flows to the start-ups). Adopting a climate resilience perspective allows us to shift the perspective towards a holistic approach to “solving” climate change:

A shift to a resilience perspective is not just about expanding our toolkit of solutions but about redefining how we configure the economy and society.

Increasing our capacity: climate resilience is the greatest opportunity we have

Adopting a climate resilience perspective is about seizing an opportunity. It entails creating proactive strategies to enhance the capacity of our systems to survive and thrive under new climatic conditions. From a climatic and societal perspective, a focus on resilience shifts the approach of managing climate change effects from reactive and incremental adaptation strategies to forward-looking and holistic measures. A good example is how resilience thinking increases society’s capacity to cope with flood risks:

Flood adaptation strategies that are informed by resilience thinking encompass a range of actions for reducing risks (such as analysing hazard probability, exposure and vulnerability) before flood events as well as enhancing preparation, response and recovery capacities for when a flood occurs through e.g. water management systems, urban planning, and nature-based buffers such as wetlands and mangroves. In contrast, had it not been informed by resilience thinking, the strategy could have been building a flood barrier which ultimately could lead to a false sense of security and a decrease in other adaptive measures, leading to less resilience overall.

Adapted from The Grantham Research Institute on Climate Change and the Environment, London School of Economics

Importantly, due to the inherent system thinking in climate resilience, resilience also embeds nature and people as central elements to its solutions. Applying such systemic and integrative perspective therefore also has the potential to have mitigation effects to climate and society, e.g. when applying nature-based solutions that function as carbon sinks and buffers to flooding at once or when reducing physical risks to homes and assets.

From a market perspective, resilience also poses an economic imperative. As noted previously, climate risks are already material: physical risks are increasing and directly impact companies’ balance sheet and supply chains. Proactively building resilience and adaptive capacity into our systems, supply chains, cities etc. helps in avoiding unnecessary costs and disruptions. This will inevitably align incentives to integrate resilience into business and investments decisions, and ultimately pave the way for a more stable and prosperous economic environment.

It’s time to invest in climate resilience

Investing from a perspective of climate resilience is crucial. It hands society the opportunity to transform systems and build the capacity to withstand and prosper in alignment with nature, in spite of the disruptive forces that a changed climate presents to us. In a resilient society, businesses can produce and deliver services and products with no disruptions, cities are located and managed in liveable and safe environments, systems respond adequately and timely to disasters, and decision-makers make decisions in accordance with nature.

While some of the solutions needed to create such a society may not be suitable for venture financing (e.g., due to the common goods problem or the infrastructural nature of some projects), there is a wide range of arising venture capital opportunities. Look Up Ventures is exploring the opportunities and challenges of some of the most exciting investment areas within resilience, touching on e.g. resilient agriculture and resilient supply chains, and sees opportunities evolving around climate risk modeling, parametric insurance, land banking, water management, and cooling.

This article is also published on Look Up Ventures. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.

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About the author

Jeppe Tranekær Nielsen is a Principal at Look Up Ventures. He invests in deep tech start-ups that improve planetary health and climate resilience.

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