It’s Time To Build The Adaptation Economy
Abby Ross, CEO, The Resiliency Company
Before founding The Resiliency Company, I was an entrepreneur. A byproduct of spending time raising capital is that I have gotten used to looking at opportunities for returns on innovative businesses. And because my network is still full of investors, I often end up in conversations about the opportunities of equity investing in adaptation and resilience.
As a consequence, I have been kicking around a thesis in my head about the adaptation economy. A couple of weeks ago, I wrote it up for The Epicenter, The Resiliency Company’s publication in which sector leaders share examples and perspectives on making America’s physical infrastructure resilient. Here’s a summary:
Adaptation will touch everything. It’s not as narrow a category as ‘climate mitigation’. Instead, it includes multiple sectors and industries – from manufacturing to real estate and financial services to supply chain management and logistics. It’s not always tagged as “adaptation”, but these are the sectors responsible for responding to the shocks and stressors from the changed and changing weather. In the 1990s, the U.S. spent an average of $80 billion annually on the adaptation economy. Today, U.S. annual spending on the adaptation economy has reached almost $1 trillion.
Resilience makes for more durable investments. Investments with an adaptation/resilience lens will end up being better, more durable, particularly during times of unpredictability. So much so, that adaptation will become an investing lens, a way of looking at where and how to allocate capital.
There is predictable growth and demand. The growth of the adaptation economy is based on the understanding that there are costly, frequent, severe disasters. We have maps and models for where it’s going to get hotter, colder, wetter, drier, and more dangerous. And all of our infrastructure and systems are going to need to adapt. Jay Koh, the co-founder of the Lightsmith Group, a leading private equity firm focused on climate adaptation, described it like this on the Climate Rising podcast: “You know more about how climate change is going to unfold than you do about the path of inflation, interest rates, consumer behavior, artificial intelligence.”
It’s still early and under-served. Adapt Unbound has begun tracking investors in the adaptation economy. So far, they have a database of 100+ investors active in the space across all asset classes. But the numbers are still small relative to the size of the opportunity, especially in early-stage equity investing.
I’ve found that several investors and funds have portfolio companies that contribute to the “adaptation economy” but they aren’t recognized as such. These companies are there because they realize a sector is changing because of the changed and changing weather and see an opportunity to add value. Whether we name it or not, it’s time to build in the adaptation economy by betting on the companies reconfiguring and rebuilding America’s physical and financial infrastructure.
Per my Epicenter article, there are several investors that speak on this thesis like Jay Koh from The Lightsmith Group and Chris Goolgasian from Wellington Management that I highly recommend for making the case.
If you’re an investor, I’d love to hear from you. Does the argument stack up? Are things aligned for the adaptation economy to grow? Or do you see obstacles?
Abby Ross
Founder & CEO, The Resiliency Company
abby@resiliency.com
Photo credit: Shutterstock/BOY ANTHONY
