Key Takeaways:
- Investors pivot to “resilience” as the preferred term for climate-focused investments, replacing “ESG” due to political and market pressures.
- Extreme weather costs escalate, with climate-related disasters causing $2 trillion in economic damages over the past decade.
- Major financial players adapt, with banks and asset managers emphasizing adaptation finance while navigating U.S. political headwinds.
A Shift in Terminology
The investment world is moving away from the term ESG in favor of “resilience” when referring to climate-related financing. The change reflects both a marketing strategy and a response to political pressure, particularly in the U.S.
“In the beginning you had ‘social’ and ‘responsible investing’ and then it became ‘ethical investing’ and then a whole host of other things have sort of emerged from that,” said Jason Britton, chief product officer at asset manager Sphere. He called “resilience” the latest buzzword in a long line of sustainability-related terms.
Resilience Gains Traction
The concept has gained traction with major institutions such as BNP Paribas, the United Nations World Food Program, the European Commission, and DP World. It’s also showing up in corporate investment strategies.
Last week, Standard Chartered signed a deal for Chinese solar equipment designed to withstand extreme weather. Marisa Drew, the bank’s chief sustainability officer, underscored the urgency, citing hurricanes and wildfires that caused over $500 billion in damages.
“What we’re seeing in response to these devastating events is growing demand for investment in resilience, to mitigate economic losses caused by extreme weather events,” she said.
Climate Risks and Political Pressure
As climate disasters intensify, businesses and investors are integrating resilience into their strategies. Andy Tam, VP of energy management and decarbonization at DP World, noted that the company is adapting to climate risks such as rising temperatures and heavier rains, upgrading infrastructure in high-risk areas like Dakar.
Meanwhile, the political landscape in the U.S. is adding to the shift. Former President Trump has called climate initiatives a “scam” and vowed to halt offshore wind projects. Major financial institutions, including BlackRock, JPMorgan, and Goldman Sachs, have pulled out of the Net Zero Asset Managers initiative amid regulatory scrutiny, though they maintain commitments to climate goals.
Climate Investments Remain Strong
Despite the political pushback, climate-related investments surged to $2 trillion in 2023, according to BloombergNEF. Long-term investors, particularly pension funds, emphasize that financing adaptation efforts is essential for futureproofing investments.
“In that context, it is essential to ensure that your company is able to handle these uncertainties, this volatility,” said Sylvain Santamarta of Boston Consulting Group. “That to me is what resilience really is about.”
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