Introduction

Climate adaptation is a necessity and investment opportunity, complementing decarbonisation. Research has focused on emissions reduction, with adaptation overlooked due to perceptions of it being a government role. Increasing physical climate risks require scaling adaptation across governments, businesses, communities, and households, creating private sector opportunities to build resilience.

This study with Bain & Company reviewed literature and interviewed experts from climate science, insurance, and weather modelling. Twenty-one discrete adaptation solutions were identified, their total addressable market (TAM) sized, and investment potential assessed. The concept of climate elasticity of demand was introduced to measure the share of market revenue driven by climate change.

Section I: Methodology

The Climate Bonds Resilience Taxonomy lists over 1,400 adaptation solutions, many serving both mitigation and adaptation. The process involved:

• Hazard materiality assessment: Analysis of historical losses and hazard projections identified five priority hazards- storm, flood, wildfire, heat stress, and water stress.

• Solution screening: Criteria such as low maladaptation risk, minimal harm to sustainability objectives, and relevance to hazards reduced the list to ~50 tangible solutions, further refined to 14 categories and 21 discrete products.

• Revenue TAM sizing: Modelling for 2024–2050 covered four scenarios- stable temperature (reference), base case (2.7°C), low case (1.4°C), and high case (>4°C). Climate elasticity of demand accounted for hazard frequency, intensity, exposure, and damage pass-through rates.

• Investment value sizing: Data from ~49,000 entities was used to map companies with substantial exposure, with valuation multiples translating future TAM into enterprise value projections.

Section II: Key findings

In the base case, TAM is projected to grow from ~US$1tn in 2024 to US$4tn by 2050, with US$2tn from global warming. Investment value could rise from US$2tn to US$9tn, with US$3tn linked to warming-driven demand.

Scenario variation by 2050 is minimal (+/-4%), reducing the need to predict exact climate pathways in the near to medium term. Revenues in 2050 are forecast to exceed historical trend-based projections by 61%, reflecting the gap between climate science and financial modelling.

Demand is modelled as reactionary but could grow faster if anticipatory actions increase. Growth will be driven by technological innovation such as weather intelligence and greater uptake of mature solutions like weather-resilient building materials.

Section III: Select climate adaptation solution examples

• Weather intelligence: Provides actionable insights for industries such as aviation, agriculture, and renewable energy. Forecast to grow from a small base to over US$40bn annually by 2050, a 16-fold increase.
• Wind-resistant building components: Includes reinforced roofs, high-strength windows, and structural reinforcements. Demand expected to rise from ~US$40bn to over US$650bn by 2050, driven by insurer requirements, stricter codes, and consumer demand.
• Flood-resistant construction materials: Includes waterproofing products, sealants, and permeable surfaces. Market could grow to over US$680bn by 2050, especially in Europe and Asia, as flood risks rise and regulations strengthen.

Conclusion

Climate adaptation offers a potential US$9tn market by 2050, resilient to near-term climate scenario differences. While decarbonisation remains critical, adaptation provides distinct, complementary opportunities for long-term returns. Advances in climate science, engineering, and taxonomies will likely expand opportunities, requiring ongoing industry–investor engagement.