Schroders and CalPERS Launch Climate Adaptation Framework to Target $1.3 Trillion Market

Quick Summary

The Climate Adaptation Investment Framework is a specialized tool developed by Schroders and CalPERS to help institutional investors identify and evaluate commercial opportunities in climate resilience. It categorizes 102 specific activities across infrastructure and technology, aiming to capture value from a market projected to reach $1.3 trillion by 2030.

How Does the Climate Adaptation Investment Framework Identify Opportunities?

The Climate Adaptation Investment Framework provides a structured methodology to move beyond simple risk mitigation. By evaluating 102 climate adaptation activities, the framework allows asset managers to distinguish between general economic resilience and bankable investment opportunities. It focuses on sectors such as resilient building infrastructure, advanced water management systems, and early-warning sensor technologies.

• 102 distinct activities analyzed for investment potential.
• $1.3 trillion projected demand for adaptation solutions by 2030.
• Cross-sector analysis covering infrastructure, tech, and services.

"Investors have traditionally viewed the physical impacts of climate change primarily as a risk to their portfolios, but there is another side to that equation," said Marina Severinovsky, Head of Sustainability, North America at Schroders. "Climate adaptation is increasingly becoming an economic and investment consideration in its own right, as businesses, governments and communities respond to a changing physical environment. Our aim with this framework is to give investors a clearer lens through which to understand how those changes could shape investment outcomes over time."

What Are the Economic Benefits of Investing in Climate Resilience?

The economic rationale for utilizing the Climate Adaptation Investment Framework is rooted in cost avoidance and long-term value preservation. Schroders' analysis indicates that the median adaptation activity generates $3.10 in avoided losses for every $1 of cost. This 3:1 return ratio highlights the strong economic case for proactive spending on physical climate impacts. However, the framework specifically warns that economic value creation does not always equal investor returns, requiring a deep dive into durable business models and cash flow stability.

"The need to build resilience is clear and growing. Not all adaptation solutions are investable on purely commercial grounds today; however, the framework Schroders has developed gives asset owners and investors a practical way to assess, compare, and prioritize investments. We hope it encourages productive conversations that strengthen portfolio and economic resilience," said Nelson Da Conceicao, Sustainable Investments Director, CalPERS.

Why Is the Collaboration Between Schroders and CalPERS Significant?

This partnership combines the global asset management expertise of Schroders with the long-term capital perspective of CalPERS, one of the world's largest pension funds. By creating a standardized classification system, they are establishing a common language for investors to discuss climate adaptation. This move is designed to standardize capital allocation toward projects that protect physical assets while delivering commercial financial returns, effectively moving climate strategy from a defensive posture to an offensive investment theme.

FF NEWS TAKE:

The launch of the Climate Adaptation Investment Framework marks a critical evolution in sustainable finance. For too long, "green" investing focused almost exclusively on carbon mitigation. By quantifying the 3.1x ROI on avoided losses, Schroders and CalPERS are proving that climate resilience is a massive alpha opportunity. This framework moves the needle by providing the analytical rigor needed to turn environmental necessity into a legitimate asset class for institutional portfolios.