'It's clearly under-invested': Why VCs are turning to adaptation solutions

Climate adaptation focusses on the technologies and projects needed to adapt to already present climate effects.

Funding for this field (as well as the related concept of resilience) has long been in discussion at the global government level – namely at successive COP conferences – but is only recently emerging as an area of interest for impact-focussed investors.

"It's clearly under-invested when climate change is already here, the effects are already here and affecting especially the most vulnerable," says Arturo Benito, co-founder and CEO of Impact Bridge in Madrid.

The next big impact investment sector?

Indeed, speaking with European impact investors in 2025, adaptation has emerged as one of the clear trends for investors looking to have the most positive effect on the planet, while seeing financial returns. It is trickier than other areas of investments, however, often requiring longer-term investment timelines and less assured returns.

Despite this, there are already some outliers pushing into adaptation. The New York-based Lightsmith Group is one pioneer. Lightsmith chair Jay Koh has long been outspoken on adaptation. Other US heavyweights such as Blackrock are reported to be looking at adaptation.

Adaptation is trickier than other areas of investments, however, often requiring longer-term investment timelines

Arturo Benito, for his part, says that while adaptation has so far been an under-served investment segment (an assertion backed up by multiple studies), the realities of climate change will inevitably drive more demand for adaptation projects in the future, meaning opportunities for more forward-thinking and patient investors now.

Svein Ove Langeland, managing partner with impact mainstays Momentum Partners, also says that while the adaptation scene is still nascent, there are clear opportunities.

As one example of how impact can be paired with returns, he points to the increasing incentives for loan-issuing banks and insurance companies to take into account the damages climate events bring with them.

"We added climate adaptation to our mandate for (Momentum’s second fund), I think three years ago, and we also have it now in our new fund. Ten to twenty percent of our investments will be in that area. I think it's important to start investing in some of the companies and ideas that will help protect properties, protect people and also protect food."

Langeland points to one such investment, 7Analytics, based in Bergen, Norway. ‘7A’, profiled in our recent adaptation startups round-up, provide data services for early flood warning systems, as well as helping design infrastructure to cope with floods and excessive rainfall.

Projects to mitigate the impact of climate events and disasters – thereby protecting human wellbeing, as well as limiting damage to ecosystems and food security – are some of the clearest examples of investments that will, unfortunately, be likely to bear fruit. Langeland also describes how existing investments in climate mitigation projects can have adaptation impact as well.

Moving past an emissions-only focus

One common theme that emerges when talking about climate adaptation is the slight shadow it casts on emissions reduction efforts, acknowledging as it does that a lot of damage has already been done.

"I think traditionally, there has been a notion that if you invest in climate adaptation, you've already given up on cutting emissions,” says Langeland. “We should still do everything we can to cut emissions and get to net-zero as fast as possible. But even if we were to get to net-zero next year, we're already at a place where climate change impacts are hitting us harder than we had previously anticipated."

There has been a notion that if you invest in climate adaptation, you've already given up on cutting emissions

Putting climate equity in the portfolio

While there is clearly growing interest in adaptation funding, it is by no means clear that interest is growing fast enough to meet the hundreds of billions of dollars needed per year, particularly in the developing world.

Most investors concede that the developing countries who need adaptation financing the most are often overlooked compared to investment opportunities in the developed world.

Many adaptation and resilience technologies and projects can be applied globally, and their success in the 'Global North' can act as proof of concept and contribute to de-risking investments in the Global South, but worldwide implementation would still require financing to back it. "Adaptation funding, like most other funding, is definitely more concentrated to the developed world and that is definitely a worry," says Heidi Lindvall with Pale Blue Dot.

Arturo Benito with Impact Bridge said he sees a lot of potential in 'blended' finance, where public and philanthropic investments are combined to provide greater assurance and de-risking. Lindvall, meanwhile, has some thoughts on how European VCs can do more in the areas most affected.

"LPs and other capital providers can make a difference here by backing local VC funds and funds with a focus on adaptation and a mandate to invest in the Global South," says Lindvall. "Existing impact VCs with more concentrated geographic mandates can also play a part by investing in adaptation technologies that might be built here but can be used globally."