Getting serious about climate adaptation

In an exceptional (and exceptionally well-illustrated) article, journalists at the Washington Post wrote in December about accelerating rises in sea-levels along the US’s south-eastern seaboard. 

The impact is particularly pronounced at Fort Pulaski, Georgia.  Here average sea levels are now nearly 18 inches higher than they were in the 1940s. Nearly two-thirds of that change has come since 1980.

Figure 1: Sea-level relative to the mean at Fort Pulaski, Georgia (1940-2023)¹

While the problem is particularly acute at Fort Pulaski, NASA projections show that in the coming decades many cities along the whole eastern seaboard will experience up to 100 more days of high-tide flooding each year².

Hollywood becomes Bollywood

The scale and reach of the changes driven by climate change are profound and global. In a ‘visual essay’ another group of journalists has shown how specific cities will feel in the years ahead³. Hollywood in Los Angeles currently has a temperate climate characterized by dry and hot summers. They report, however, that in less than fifty years, Hollywood will feel more like Bollywood with an arid climate that is more akin to New Delhi’s. Closer to home, London will remain temperate but will feel more like Washington DC and Atlanta than it does today.

Climate’s impact on economics

In some respects, some of these impacts might seem quite positive. As I sit here with temperatures of -1°C outside, temperatures that are on average 2-3 degrees warmer sound quite appealing. The problem is that the effects of climate change are diverse: warmer temperatures also bring more and more intense precipitation and stronger winds among other things.  And in cities that are already hot, another 2-3 degrees of warming can move daily activity from uncomfortable to life-threatening.

These impacts are now clearly affecting economics. In Florida, home and flood insurance has become dramatically more expensive, in part due to the risk of more frequent or more intense storms, as a result of climate change. California’s insurance market was already much diminished before the Palisades, Hurst and Eaton fires broke out in early January 2025⁴. The impact of the fires is expected to lead to even less insurance coverage, and without insurance coverage, banks won’t issue mortgages. Globally, losses of US$320bn due to catastrophes including extreme weather in 2024 were 30% higher than the previous year⁵.

In India, the Asian Development Bank warned in October last year that climate change could hit the country’s GDP by as much as 25% within the next 50 years. A third of India’s GDP is linked to nature-related sectors. Increased frequencies of drought events are already negatively impacting agricultural output. Companies are also citing heat stress as a cause of reduced earnings⁶.

In Europe, the European Central Bank recently estimated that the heatwave of 2022 caused crop yields to decline in that year, causing food inflation of around +0.6 to +0.7 percentage points7. This impact lasted well into 2023. As the Financial Times has speculated, it is not unlikely that ‘a material proportion of the debate at monetary policy committees will be taken up with discussion of how the economic forecasting model is going to interact with expectations of the next flood or wildfire season’⁸.

Adaptation in a changed climate

It should not come as a surprise therefore that many companies, communities and even countries are already adapting to the climate change that is now with us and to that which is inevitably yet to come. By some estimates India is already spending more than 5% of its GDP on climate adaptation⁹. 

We are seeing evidence of this increased spending in our portfolio as well. We introduced a Climate Adaptation thematic as a part of our investment strategy early in 2024. Holdings include the Dutch environmental engineering business Arcadis as well as Advanced Drainage Systems, a US-based manufacturer of storm water drainage systems.  In recent earnings calls both companies have pointed to demand for their products and services increasing as clients look at adapt to increases in extreme weather¹⁰.

Other companies held in the strategy are also seeing growing demand for products and services that help make communities more resilient in the face of a changed climate. This includes demand for efficient cooling systems from Trane Technologies, water treatment and management equipment from Xylem and even fire-fighting equipment from MSA Safety. Most of MSA’s fire-fighting equipment is used in fighting fires in buildings. The company does also supply kit for fighting fires in rural areas – including to fire fighters working to extinguish the Palisades and Eaton fires.

We’ve written before about the increased prevalence of extreme weather that has now become a feature of our lives. But bear in mind that the changes we are currently seeing are associated with global average temperature rises of less than 1.5°C.  We can anticipate that the frequency, duration and intensity of these events will be dramatically worse from temperature rises of 2°C or more.