Investing in Climate Adaptation

Co-authored by Hanel Baveja, Mona Alsubaei

The USV Climate Fund is focused on companies that provide mitigation for, or adaptation to, the climate crisis.  

Mitigation means drawdown of existing greenhouse gasses and reducing future emissions.  For example, sequestering carbon with microalgae or switching to nuclear power.  Adaptation means reducing vulnerabilities to the climate crisis and building local resilience.  For example, advance + real-time flood prediction to prevent loss of life, or low-cost air conditioning to mitigate heat stress.

While both critical, mitigation and adaptation are not equivalent.  Mitigation addresses the root cause of the climate crisis (emissions) while adaptation addresses its effects.  The benefits of mitigation are also evenly distributed in time (current & future generations benefit) and space (impact is global).  

Conversely, the costs and benefits of adaptation tend to be local.  Too often, the burden of adaptation falls on vulnerable communities even though high income nations, and lifestyles, bear outsized responsibility for the climate crisis.  

That said, climate change is unfortunately here and now.  Billions are already exposed to dangerous heat waves, deadly flooding, and catastrophic wildfires.   While venture investment into mitigation remains critical, it’s important that adaptation is not overlooked – both will play critical roles as the climate crisis deepens.

To date, most climate venture dollars have been deployed into mitigation – nearly 60% into mobility alone.  In contrast, public funding accounts for more than 98% of the $30B in annual adaptation spend.  It is widely recognized that public finance alone will not meet the current funding gap in adaptation.  And sadly, as we become increasingly off-track in achieving our climate goals, the need for near-term, deployable adaptation measures is compounding. 

Source: World Bank via UNEP (2018)

Technology has a meaningful role to play in broadening access to adaptation measures.  At USV, we’re most interested in categories where a business model or technological innovation will bring down costs and improve quality of life for a large number of people. This includes measures that help people respond to climate stress today, as well as leapfrog into more resilient infrastructure over the long-term.

There are many challenges to investing in adaptation.  Adaptation must address chronic risks (summer heatwaves) and acute shocks (climate related disasters).  For start-ups, it can be especially hard to build a business around 1-in-X year events.  Adaptation measures are also deployed hyper-locally.  Start-ups will need to be creative about their go-to-market strategy and how to build for scale while respecting local communities and context.  Finally, the communities hit first and hardest by the climate crisis are often the least resourced.  Many face restricted access to capital, limited social safety nets, and frequently lack a seat at the table – customer groups that have not always been well-served by tech companies.

We have invested in one adaptation company to date, FloodMapp, and would like to invest in many more.  Some areas we are currently exploring include –

  • Reducing heat stress: Technologies that bolster the cold chain or expand access to efficient refrigeration and cooling at scale
  • Advancing food security:  Solutions that work within existing agricultural distribution networks (faster deployment) to reduce inputs, increase yields, and improve post-harvest transport / storage
  • Improving early warning systems:  Platforms that improve decision-making and preparedness around unsafe weather events (floods, fires, poor air quality, etc.)
  • Scaling resilient infrastructure:  Low-cost, modular technologies as well as nature-based solutions that harden existing infrastructure and reduce the risk of climate-related disruptions
  • Improving water and wastewater systems:  Companies that reduce water contamination, improve wastewater and stormwater management, and expand access to clean drinking water

We expect that many founders of adaptation companies will bring a unique point of view, and in some cases lived experience, about how to deploy and scale in their home geography. If you are building a company that will help a large number of people adapt to the climate crisis  – more affordably, more safely, and with greater dignity – we’d love to hear from you.

Special thanks to Juliette Murphy for her edits and contributions to this post.

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