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Surviving climate change is not going to be cheap.
The United Nations estimates the total cost to society will be at least $54 trillion by the end of the century. So arguably what we need now is private money and entrepreneurs to get in the game, funding and developing adaptation technology.
One of the first to do that is Lightsmith Group, a private equity firm.
“I think it’s one of the earliest attempts to try to look at adaptation resilience as an investable opportunity,” said managing director Jay Koh.
Most investment so far has gone toward mitigation — trying to reduce emissions via measures that, say, improve energy efficiency or the outlay of funds for a community to recover from an extreme weather disaster. The bulk of that spending is driven by governments or nonprofits, Koh said. Only about 5% of climate finance is going toward adaptation.
That leaves a big funding gap, Koh said: $300 billion a year by 2030 in developing countries alone. So there’s a serious need, but there’s also money to be made for companies that can come up with great solutions — and scale them. That’s where Lightsmith Group comes in.
“Our role is to find companies like that, with great management teams already growing in the real economy that can then be accelerated in their growth that will generate better returns for investors and also a better outcome for society,” Koh said.
So what’s that kind of company look like? Koh said he divides climate adaptation firms into two categories: “MacGyver” or “McFly.”
Television’s MacGyver used whatever he had at hand to get out of jams, and that’s what Koh’s first category of companies is doing, too: Things like using artificial intelligence to model risk and scaling existing technology — like drip irrigation, drought-resistant seeds or internet-connected sensors — and making them cheaper.
Marty McFly, from “Back to the Future,” could use tools from the future to change the course of events. For Koh, that’s akin to entrepreneurs with crazy moonshot ideas — materials we haven’t yet invented or innovative solutions, like distilling clean water from the air.
But before we can get any of that, he said more investors need skin in the game.
“Without being able to harness the flow of private capital, we are going to face a much more challenging experience with the effects of climate change,” Koh said, “over the next several decades and potentially the next several generations.”