In brief
- With urban areas expected to account for 70% of the world’s population and 80% of global GDP by 2050,1 towns and cities will need to remain resilient to the impacts of climate change, from both a social and economic standpoint.
- To adapt to increased climate risk, investment spending on urban infrastructure, real estate and transport needs to increase significantly, and the particular climate exposures and vulnerabilities of cities need to be better understood to ensure investments are targeted more effectively.
- Private sector investors have a compelling opportunity to reap the benefits of moving early in a space that offers a range of emerging solutions and the potential for long-term, often inflation-linked returns.
- Asset managers with expertise in understanding the adaptive opportunities within urban infrastructure can provide access to attractive potential returns, while helping clients to manage climate risks within their portfolios.
The scale and visibility of climate change impacts have accelerated across the world in recent years, leaving few regions untouched. In our previous publication on climate adaptation, we discussed the particular vulnerability of cities and their physical infrastructure to the effects of global warming, due to climate risks such as flooding, storms and extreme heat. Now, we dive deeper into the increasingly severe climate change-related risks facing cities worldwide, focusing on the transport systems, real estate and other critical infrastructure that allow cities and urban societies to function.
There are many reasons why investors can benefit when it comes to adaptation investment in cities – including increasingly supportive policy and regulation, the high benefit-cost ratio of adaptation measures, and the growing opportunity set in this space. The question is how private investors can benefit from these opportunities and, for those investors with specific sustainability goals, direct their capital towards solutions to this pressing global challenge.