As climate change threatens insolvency, adaptation funds have become a form of value capture.
When Neptune Insurance, the largest private flood insurance provider in the US, went public last October, it quickly gained a multi-billion dollar valuation. For investors, it has shown that climate adaptation can be both profitable and scalable and that markets are willing to reward business models built around adaptation rather than avoidance.
Built on an AI-powered underwriting that integrates satellite imagery and forward-looking weather data, Neptune operates on the assumption that accurately pricing climate risk can reverse uncertainty rather than reverse it. During Hurricane Helene, the St. Petersburg, Florida posted an average loss of 18 percent—drastically exceeding the federal government’s National Flood Insurance Program—while offering premiums 30% to 40% lower than alternatives.
“What we’re seeing in real time is that buildings that were once considered uninsurable are becoming uninsurable once they’ve been rebuilt to modern codes and upgraded,” said CEO Trevor Burgess. “That’s getting used to the weather in practice.”
Power is important. The global investment opportunity for climate solutions is expected to grow from $2 trillion today to $9 trillion by 2050, according to a report from GIC, Singapore’s sovereign wealth fund. The 2025 report, conducted with consultancy Bain, predicts annual revenue from climate adaptation solutions—including climate intelligence systems, wind-resistant building components, flood protection infrastructure, and water conservation technologies—growing from about $1 trillion today to $4 trillion by 2050.
IP&C Innovation
That power is one reason the insurance industry is looking for new ways to help clients manage their risk.
“The shift in mindsets of insurers to find new and innovative solutions is the highest I have ever seen, especially in P&C insurance, where carriers are leading the way with AI-led solutions to learn and manage climate risk,” commented Adil Ilyas, head of the insurance group at Genpact, a center of services and technology experts working on digital transformation and AI. He points to AXA, Zurich, Allianz, and others that have introduced emergency insurance solutions that provide organizations with quick cash and cash flow following a disruptive event.
The acceleration of climate change adds urgency to the opportunities. On LinkedIn, Allianz board member Günther Thallinger wrote in March 2025 that climate change is on its way to changing life as we know it: “We are rapidly approaching temperatures—1.5°C, 2°C, 3°C—where insurers will no longer be able to cover many of these risks. It is not protected.”
Allianz’s 2025 report, “Climate Risk and Business Valuation,” looks at industries facing immediate risk, disrupted supply, and important questions about future supply reliability.
“We are seeing a major repricing event that will take place over the next few decades,” said Lead Investment Strategist and co-author Jordi Basco Carrera. “The question is, is it happening in an orderly way or are we seeing a disorganized transition that is causing massive volatility and value destruction.”
The report examined how different climates could affect the valuations of companies in 10 sectors in the US and Europe, using discounted cash flow models and interest coverage ratios.
Under the Net Zero 2050 scenario, which represents an aggressive climate policy with carbon reduction targets, European real estate faces a staggering 40% correction in prices. Communications and consumer staples also see major obstacles. In the US, the health care and consumer discretionary sectors will each decline by about 16% while energy and basic utilities face a slight decline of 6% to 7%, reflecting adaptation to renewables and material demand.
The alternative—a delayed transition state in which policy intervention is delayed—creates even more dangerous forces.
“Delayed change is not a soft landing,” observed Basco Carrera. “It saves the power to fix violence much later. Sectors that seem to benefit in the short term are accumulating hidden risks.”
For CFOs who manage enterprise risk, any situation creates a new urgency. Traditional insurance will not be able to adequately protect against the systematic repricing of commodity prices driven by climate change policies. Coverage often compensates for different physical losses—a flooded warehouse, a hurricane-damaged property—but does not provide protection against the gradual or sudden decline of entire portfolios as carbon-intensive business models become economically unviable.
From Measuring Risk to Investing Opportunity
This is where adaptation funds come in as not only risk management, but a way to capture value in times of change.
Sectors that invest early in climate change are showing remarkable resilience across the board, according to Allianz research. Technology and healthcare show strength under all the climate scenarios analyzed while energy sectors diversifying into renewables and utilities and advanced infrastructure face smaller adjustments than those that maintain status quo operations.
Allianz’s research approach was innovative, Basco Carrera noted, using data from the Network for Greening the Financial System (NGFS), a voluntary, international group of major banks and others founded in 2017 to manage climate-related risks in the financial sector.
“We’ve integrated three NGFS transition scenarios into traditional financial valuation methods,” he explains. “This not only allows us to see which sectors are at risk, but more specifically how much is at risk and how much time is set. That granularity is what CFOs need to make decisions about the allocation of funds.”
The analysis introduced the concept of “Climate Elasticity of Demand,” a measure of how global warming affects the demand for goods and services. What has emerged is a sophisticated view of how climate change will adjust entire markets, not just harm individual commodities. Companies that produce flood-resistant construction materials, for example, don’t just profit from replacing damaged materials after disasters. They are capturing sustainable market share as building codes tighten, insurance companies mandate durability standards, and property developers realize that weather-resistant buildings command higher valuations.
Real estate provides an example of adaptive intelligence in action.
Munich Re’s Location Risk Intelligence tool helps users determine their expected annual weather-related losses, according to Thomas Walter, Munich Re’s product marketing manager. A US real estate investment firm using a multi-million dollar building inspection tool discovered that the building was in a flood-prone area, prompting the company to leave. A few months later, a major flood hit the building.
“They avoid both loss and depreciation,” says Walter.
Returns Beyond Avoided Losses
The investment case for adaptation is strengthened when the full spectrum of value creation—not just disaster cost avoidance—enters the picture.
The World Resources Institute, a non-profit global research organization based in Washington, DC, analyzed 320 adaptation and resilience projects across the fields of agriculture, water, health, and infrastructure. Its research found that cumulatively, the investments analyzed cost more than $133 billion and were expected to generate $1.4 billion in benefits over 10 years. Individual investments produced an average return of 27%.
These figures are likely too low, says WRI senior fellow Carter Brandon: “We found that only 8% of investment estimates estimate the full monetization amounts of these benefits, suggesting that the $1.4 billion plus rate of return is probably a very low estimate.”
In a recent WRI report, Brandon and colleagues presented a “Triple Dividend of Resilience” framework that addresses the avoided losses from climate events, the economic development created, and the additional benefits.
“By positioning portfolios to respond quickly to emerging climate policies and market dynamics, investors not only limit potential losses but also take advantage of the opportunities presented by the growing green economy,” continued Brandon.
