The adaptation challenge: New technologies help prepare at-risk communities

As the net-zero deadline approaches, funding adaptation technology to ensure a just transition may protect lives—and livelihoods

In recent weeks, we have seen the growing impact of climate change across the United States. In the East, images of orange skies in New York City—shrouded in smoke from wildfires in Canada—dominated the news. In the West, a growing water crisis inspired an agreement among seven states to reduce overall water usage by 13%.1

These developments serve as an important reminder that climate change is a global phenomenon, and its consequences, from near-term natural hazards and extreme weather-related events to long-term temperature shifts, affect everyone across geographies. Climate change is a global challenge.

At the same time, it is not an equal opportunity risk.

Although extreme weather events are becoming commonplace, policymakers and investors are only beginning to quantify the disproportionate impact of these events on vulnerable low income and minority communities. In light of these changes, the need for adaptation technology is real, immediate and growing as climate-driven risks to lives and livelihoods escalate.

How big is the global challenge? By some estimates, the capital required to combat climate change will exceed USD 4 trillion annually.2 While significant progress is being made, many countries and corporations have prioritized “net zero” targets designed to reduce or eliminate greenhouse gas emissions. Those efforts are making a difference, but funding remains focused on solutions for climate mitigation. Meanwhile, funding for climate adaptation, which seeks to tackle climate changes that have progressed too far to be fully prevented, has lagged.

In the years to come, both mitigation and adaptation will require more investment, but the global “adaptation gap” is getting bigger: Current estimates project a shortfall 5x–10x below the demand for adaptation funding, and the gap—especially in developing countries—is growing (Exhibit 1). To close it, countries will require all types of financing: public, philanthropic and private. Currently, private financing largely focuses on delivering infrastructure and technology improvements, as well as nature-based climate solutions, such as forest restoration. Looking ahead, we see a clear market opportunity to invest in technology solutions by targeting venture and growth-stage companies as demand for resilience intensifies—and capital becomes harder and more expensive to source.

Scaling up commercial technologies that are already delivering meaningful results offers investors an attractive route to capitalizing on the need for new, climate risk-focused hardware and software solutions. Effectiveness, affordability and scalability are critical, but so is an awareness of the role these solutions must play in meeting the needs of vulnerable populations. We see this holistic approach as the essence of investing in a “just transition” to a low carbon economy: delivering positive environmental outcomes while enabling inclusive growth for at-risk communities. The reality of such an approach means providing much-needed technology while—at the same time—enhancing social equity.

The stakes could not be higher. Inadequate support for vulnerable communities will likely undercut future economic growth and put lives at risk.3 Reducing air pollution in the U.S. could help avoid hundreds of thousands of premature deaths and USD 150 billion to USD 250 billion of economic damages through 2050.4 According to some estimates, the cost of climate change inaction in the U.S. could run as high as 1%–4% of GDP by 2100.5

The shape of things to come: Anticipating and assessing climate risks

One thing is certain: The future will look nothing like the past. As climate risks emerge, innovators are already applying fast-evolving digital tools—including artificial intelligence (AI)—to help communities measure, manage and adapt to the dangers of a warming planet.

Those dangers impact societies and the natural world in a myriad of ways. With environmental changes, nature and biodiversity loss upend delicate ecosystems. Extreme heat, rising sea levels and changing precipitation patterns can in turn affect communities by worsening air quality, weakening human health and challenging labor productivity. As those stresses accumulate, they are often accompanied by social changes, such as shifts in migration patterns. And rising economic insecurity also creates social inequity, leading to adverse outcomes for vulnerable populations.

Environmental dangers take multiple forms. Some of those risks are near-term, acute hazards (wildfires, hurricanes and floods); others are longer-term chronic risks (desertification, aridity and excess rainfall). Whether acute or chronic, both types of risks present a disproportionate threat to low income and minority populations.6 In the U.S., low income communities are 25% more likely to be located in geographic areas at the highest projected risk from adverse climate changes.7 Minorities across all racial demographics are also more susceptible to the physical and economic effects of climate-driven increases in high temperature days, rising sea levels and high tide flooding.8

Learning how to anticipate and address climate risk before it impacts communities is vitally important. Climate adaptation technologies offer two key capabilities: risk intelligence and response, which are enabling businesses and local governments to get ahead of potential threats. By strengthening these capabilities, the social and economic costs of climate disruption can be kept in check.

Spotlight on U.S. wildfire risk

As climate changes accelerate, the frequency and intensity of near-term, acute risks appear to be rising. In the U.S., studies have shown that climate change has already led to an increase in wildfire season length, wildfire frequency and burned areas (Exhibit 2A).9 Researchers have also shown that minority communities in the U.S. are more susceptible to the hazards of wildfires than are high income communities.10 Nearly half of all Native American communities and more than a quarter of all Hispanic communities may reside in areas with significant risk of wildfires by 2052 (Exhibit 2B).

Poor vegetation management causes most U.S. wildfires.11 The primary goal of successful forest management is to extinguish a fire as soon as it starts, protecting both lives and land. With the continuing evolution of sensor technologies, solutions are now emerging to ensure that precious minutes are not lost trying to pinpoint new fires.

We see opportunities emerging in technology-enabled solutions that unlock data, provide insight and automate responses to ward off fire risk. Some providers, such as Amsterdam-based startup Overstory, apply AI to high resolution satellite imagery to provide forestry data, identify potential hazards and optimize ground-level management. Others, such as California startup Vibrant Planet, are creating cloud-based planning and monitoring tools for agile, adaptive forest oversight.

As forest owners ourselves—thanks to J.P. Morgan Asset Management’s 2021 purchase of Portland, Oregon-based Campbell Global, which manages more than 5 million acres of U.S. timberland—we are eager to identify promising new technologies. Prior to the availability of tech-enabled solutions, inefficiencies strained wildfire response times: On stormy nights, Campbell Global’s forestry teams used to hike up forest ridges to scan the hills for wisps of smoke caused by lightning strikes. Aided by technology, these teams are now more adept at fire detection and were able to detect five fire starts with the help of just one sensor in the summer of 2022.

Taking the long view: Learning how to counter chronic risks

Beyond acute, near-term climate risks, the long-term impacts of desertification and aridity, wetter climates and higher temperatures also pose significant global challenges, especially for low income and minority populations. In the U.S., chronic climate risks could threaten food security, particularly for vulnerable Americans.12 Historically, Black and Hispanic households in the U.S. are more than twice as likely to experience the hardships of food insecurity (Exhibit 3).

Against this backdrop, it is no surprise that agribusiness has considerable market potential for implementing climate adaptation technology. As technology is applied to enhance farming practices and improve food security, we see interesting developments across the entire agribusiness value chain.

The proliferation of innovative agtech solutions has been—and continues to be—dramatic. For growers, technology companies are now providing a wealth of services and programs that can help them assess environmental risk factors and make more sustainable (and economically beneficial) decisions. San Francisco-based company Regrow Ag, for example, leverages satellite imagery to generate field-specific agronomic insights that help growers implement regenerative practices and build resilience.13 Farmers are now able to monitor crop performance, automate decision-making, predict and track the impact of those new practices, and access additional revenue streams through soil carbon measurement, reporting and verification.

Inevitably, machine learning is also playing a bigger role. AI-powered digital agriculture platforms are helping to improve and optimize agronomy, including resource usage and crop yield and protection. Some service providers, such as Brazilian agribusiness software company Solinftec, apply AI at scale, leveraging real-time on-site monitoring of 9 million acres of farmland across 11 countries, including the U.S., to power integrated, end-to-end farm operations management software that schedules and plans spraying, harvesting and farm logistics.

Other innovators are focused on leveraging biotechnology and synthetic biology to develop safer, more sustainable products that enhance crop protection. Durham, North Carolina-based startup Vestaron, for example, is delivering novel, effective chemistries like peptide-based insecticides that enhance crop protection while promoting farm safety and biodiversity, and are gentler on beneficial crop insects such as bees and safer for fish and other wildlife.

Achieving resilience at scale: Leveraging technology developments

The industry pipeline for adaptation technology—whether hardware or software—looks extremely promising. We are seeing new solutions emerge that can leverage detailed environmental data to deliver risk intelligence about all manner of climate hazards, such as the impact of water stress on industrial plants, rainfall on agribusiness and flood risk on real estate, to name a few. As that data become more readily available, market participants are engineering a more mature risk response.

Groundbreaking technical developments in hardware and software are making the task easier. Since the early 2000s, data collection—on land, in space and below the sea—has become simultaneously richer and cheaper, facilitating predictive advances. The widespread commercialization of satellite data, for example, is making the collection and distribution of environmental data more accessible and affordable.14 Data gathering on land is also becoming simpler as costs for smart sensors, which are linked via the Internet of Things (IoT), continue to decline.

Hardware upgrades have, of course, been paralleled by software developments, especially in cloud data storage, distribution and processing. These systems now deploy sophisticated algorithms, including AI applications, to power analysis. Drawing on richer data from a variety of sources, these new software tools are driving actionable insights.

Investment implications

As we look ahead at the emergence of climate risks, we believe that technology solutions will play a critical role in addressing both acute and chronic hazards. The current underallocation of capital to climate adaptation likely stems from the complex nature of the threats, which blend environmental risks with racial, political and socioeconomic challenges. The adaptation gap represents a stark market inefficiency, and climate-focused investors across all asset classes may benefit by directing more attention to adaptation solutions.

Closing the gap calls for investment ingenuity as well as environmental and social insight because climate risks—and the solutions required to address them—disproportionately influence the lives and livelihoods of racial and ethnic minorities. Thoughtful investors recognize that those closest to the problem are often closest to the solution but furthest from the capital and resources. Effective adaptation efforts must therefore encourage inclusive economic growth, preserving and enhancing economic outcomes for vulnerable and low income communities. And now more than ever, diverse investment managers and teams are needed to research and cultivate investment theses that reflect the concerns of multiple stakeholders: communities, regulators, policymakers and businesses.

As climate technology companies look to scale their products and platforms, solutions will continue to emerge that deliver measurable economic benefits for customers and their communities. The best among those offerings will support a just transition to a low carbon future and, in so doing, enjoy a sustainable competitive advantage.

With input and review from Kathy Baughman-McLeod, Director of the Adrienne Arsht-Rockefeller Foundation Resilience Center

1 Daniel Trotta and Brad Brooks, “Western states reach ‘historic’ deal to help save Colorado River,” Reuters, May 23, 2023.
2 This figure reflects the average of an estimated required climate investment of USD 3 trillion to USD 5 trillion per year by 2050. “Climate Finance Markets and the Real Economy,” Boston Consulting Group and the Global Financial Markets Association, December 2020.
3 In the two decades between 1995–2015, researchers documented more than 7,000 major environmental disasters, which caused trillions of dollars in damage and killed more than 1.35 million people worldwide. In this same time period, more than 3x the number of people died per disaster in low income countries than in high income countries. Source: “The human cost of natural disasters 2015: A global perspective,” Centre for Research on the Epidemiology of Disasters (CRED), March 2015.
4 “The Long-Term Strategy of the United States: Pathways to Net-Zero Greenhouse Gas Emissions by 2050,” U.S. Department of State and U.S. Executive Office of the President, November 2021.
5 Amir Jina, “Climate Change and the U.S. Economic Future,” Energy Policy Institute at the University of Chicago.
6 CRED, “The human cost of natural disasters.”
“Climate Change and Social Vulnerability in the United States: A Focus on Six Impacts,” U.S. Environmental Protection Agency (EPA), September 2021.
8 EPA, “Climate Change and Social Vulnerability.”
9 EPA, “Climate Change Indicators: Wildfires.”
10 Ian P. Davies, Ryan D. Haugo, James C. Robertson and Phillip S. Levin, “The unequal vulnerability of communities of color to wildfire,” PLOS ONE, November 2, 2018.
11 Brian E. Hoff, “Outsmart Vegetation-Related Power Outages,” T&D World, August 8, 2022.
12 Alisha Coleman-Jensen, Matthew P. Rabbitt, Christian A. Gregory and Anita Singh, “Household Food Security in the United States in 2020,” U.S. Department of Agriculture Economic Research Service, September 2021.
13 Regrow Ag was recently recognized by Fast Company as the No. 1 most innovative company in agriculture for 2023 and was ranked No. 41 in the magazine’s list of the 50 most innovative companies worldwide.
14 Innovations in space engineering and efficiency, inspired by the growth of commercial space launch providers such as SpaceX and Rocket Lab, have contributed to a 95% decrease in satellite launch costs since 1980. Source: Ryan Brukardt, “How will the space economy change the world?” McKinsey & Co., November 28, 2022.