Why Investors Must Move Beyond Simple Climate-Friendly Portfolio Strategies – CleanTechnica

---

---

Do you know someone who is disinterested in climate change? Perhaps they think it’s not relevant to them or their lifestyle or culture. But they may wake up if you help them to see the link between investing and climate change. Climate change poses a threat to all of our retirement funds and long-term investments. Your pal may become become a lot more receptive to talking about climate-friendly portfolio strategies — and how it’s important these days to look beyond investments in individual companies to climate adaptation and resilience.

Financial analysts traditionally have determined how to advise their clients by looking at individual companies, the profits of those companies, and, perhaps, a little climate-friendly analysis as an add-on.

But stark investment realities have now set in. Extreme weather conditions brought on by climate change now cause excessive financial as well as structural damage.

Because climate change poses an enormous threat to the broader economy, looking at individual companies no longer is a sure bet. Managers who oversee investment portfolios must revisit their approaches. A June 2025 Sierra Club report to investors on climate change, in fact, makes the case that failure to do so “is no longer adequate or responsible.”

No longer is risk avoided just by trading assets or holding climate-friendly firms. ESG integration and shareholder divestment fall short. Instead of experiencing the market in “fleeting snapshots” from daily headlines or quarterly reports, which only tell a story of temporary dips and climate-friendly rallies, investors and their financial managers must diversify their holdings.

Investors must treat climate change not just as a risk to individual companies, Ben Cushing, sustainable finance campaign director at the Sierra Club, says, “but as a threat to the entire economy and long-term portfolio returns.” Rising global emissions are so dangerous to human life, Cushing continues, that “the only way to reduce that risk is to reduce real-world emissions.” So investor behavior must shift to “proactively mitigating systemic risk.”

Meaningful impact now depends on how different forms of capital — “particularly debt and equity financing, across primary and secondary markets” — mold investor leverage. Cushing outlines four key levers that should be deployed to safeguard portfolio value by driving real-economy decarbonization and strengthening market-wide stability.

1. directing capital;
2. engaging with companies;
3. supporting strong public policy; and,
4. holding financial intermediaries accountable.

The Triple Dividend of Resilience

We’re all looking for sure-bet investments. What would you do if someone told you that you could invest $1 now and get more than a $10 year in 10 years? That would be a good investment, right? Well, May 2025 WRI research finds that investing $1 in adaptation can yield more than $10.50 in benefits over 10 years. Partially, this reflects avoided losses from climate impacts. It also contains a wide range of economic, social, and environmental benefits that are generated even when disasters don’t occur. Monetized benefits in the study were unrelated to expected climate shocks — from job creation and productivity gains to healthier communities and environments.

Research used the “triple dividend of resilience” framework to capture three key categories of returns on adaptation investments:

• avoided losses;
• induced economic development; and,
• additional social and environmental benefits.

The researchers acknowledge that it’s often a challenge to fund adaptation due to a largely false perception that adaptation is unaffordable. Or that its incremental cost competes with other national development priorities.

That’s not the case, according to the WRI data analysis. In fact, the triple dividend framework reveals that many investments flourish when adaptation efforts are added into the mix.

So what we’re learning here is that adaptation offers much more than a response to the climate crisis — it is also one of the smartest investments of our time so that “good adaptation is, in fact, good development.”

As a result of the study findings, WRI has called on government leaders to treat adaptation as an engine for economic opportunity and to fully integrate resilience into national development strategies. A standardized approach to measuring and reporting adaptation outcomes will be the next step in order to improve investments’ comparability, transparency, and accountability. The triple dividend of resilience approach could be applied to improve appraisal methods for adaptation investments. Doing so would more accurately demonstrate the diverse returns generated, so investors would be more motivated to invest and reduce the adaptation finance gap.

Walking the Talk of Adaptation-Minded Investing

British International Investment (BII) is the UK’s development finance institution and impact investor. Last year BII invested over $900 million in companies leading the fight against the climate emergency in emerging markets. The amount comprised 41% of its overall commitments for the year.

The organization raised the stake significantly in just a few years — up from just $104 million (£80 million) in 2020. The company’s climate finance assets now make up over 26% of its entire portfolio, up from just over 15% in 2020. Over the last three years, BII has invested over $2 billion in climate finance.

Leslie Maasdorp, the Chief Executive of BII, says, “Our purpose is to reduce poverty and aid dependency in developing and emerging economies. We can’t do that unless we support our partners to meet the challenge of a rapidly changing climate and to seize the economic opportunities that the green transition provides. That is why climate finance is such a critically important element of our work and will remain so into the future.”

Climate-Friendly Earth Science Data and Investing for Adaptation?

Earth science data has become a tool for investment houses to gauge the long-term value of their clients’ portfolios. It tells a revealing story about climate change and its effects on the Earth. It can aid decisions how to move beyond climate-friendly companies to areas in which stockholders can deploy climate adaptation and resilience investment.

• Between 2019 and 2024, global mean sea level has also increased by around 26 mm, more than doubling the long-term rate of 1.8 mm per year seen since the turn of the twentieth century.
• Global land precipitation exhibited large interannual variability due to El Niño.
• Emissions of greenhouse gases, principally from the burning of fossil fuels, but also related to deforestation, remain at a persistent high.
• Greenhouse gas concentrations in our global atmosphere continue to increase.
• Improvements in air quality are simultaneously reducing the strength of aerosol cooling.
• The Earth’s energy imbalance continues to grow, with unprecedented flows of heat into the Earth’s oceans.
• Observed global average surface temperatures continue to rise.
• Human-induced warming continues to increase at a rate that is unprecedented in the instrumental record.

A United Nations study projects the global demand for climate adaptation and resilience investments will rise to between $0.5 trillion to $1.3 trillion a year by 2030.