Climate adaptation market projected to quadruple by 2050: GIC

Investment opportunities across public and private debt and equity are also expected to surge.

Worldwide annual revenues from a set of climate adaptation solutions are projected to grow to S$5.19t (US$4t) by 2050 from S$1.30t (US$1t) in 2025, according to GIC. 

Of this, GIC estimates that S$2.59t (US$2t) will be additional revenue growth from global warming, it said in its latest analysis in partnership with Bain & Company.

Investment opportunity set across public and private debt and equity, meanwhile, is seen to reach S$11.69t (US$9t) by 2050 from S$2.59 (US$2t), with S$3.90t (US$3t) representing an incremental increase due to global warming. 

“Whilst our model conservatively assumes adaptation demand will be reactionary, greater awareness of physical risks may prompt a shift to anticipatory action, accelerating revenue growth and related investment opportunities before 2050,” GIC said.

The report noted that opportunities are still significant regardless of the climate scenario. 

“Variation in estimated value is +/-4% across scenario bookends, as projected temperature differences over the next 25 years are minimal across scenarios. This suggests investors can build conviction in this space without needing to predict the precise climate pathway,” it added.

GIC expects adaptation revenues in 2050 to exceed projections by 61%, reflecting challenges in translating climate science into long-term business implications. 

The ongoing dependence on historical data for forecasting amongst most financial planning and analysis teams and sell-side analysts generates an information gap. This presents an opportunity for long-term investors to invest in a sector where increasing demand for adaptation solutions could benefit earnings.

"Whilst decarbonisation remains essential to mitigating emissions, our research highlights climate adaptation as a complementary investment theme—one that is gaining importance as the physical impacts of climate change become more pronounced," GIC said. "Both offer valuable opportunities for long-term investors, addressing different but urgent dimensions of the climate challenge."

S$1 = US$0.77