A new framework from Schroders and CalPERS finds the adaptation measures that prevent the most damage offer private investors the weakest returns. Resilient buildings, supply chains and grid resilience are among the few areas that score well on both.
Schroders has published a framework that scores 102 climate adaptation activities by the physical losses each one prevents. It then sets those scores against the returns investors have earned in the matching sectors. The asset manager built the practical side of the work with CalPERS, the largest US public pension fund.
The Adaptation and Resilience Imperative, gives investors a map of where impact and profit overlap. Its central finding is that they seldom do. The measures that prevent the most damage mostly depend on public money. The highest returns come from activities in the middle of the impact ranking.
How the framework measures impact
The core metric is an Avoided Loss Benefit Cost Ratio. It divides the present value of losses an activity prevents by the present value of its costs. In effect, it measures what doesn’t happen: the flooded warehouse, the failed harvest, the hospital overwhelmed in a heatwave.
On that basis, 95 of the 102 activities avoid more loss than they cost. The median ratio is 3.1x and the mean is 3.8x, across a range of 0.6x to 11.8x. All seven activities below 1.0x are digital or enabling tools, whose value arrives indirectly through other interventions.
The report works through advanced irrigation as an example. At representative scale, it models US$34.2 million of discounted avoided crop losses against US$14.8 million of discounted costs. That gives a ratio of 2.3x.
Schroders applies a single 10% discount rate to every activity, so the figures are conservative for long-lived assets. Its seawall example scores 10.3x under the model. At a 3% social discount rate, with losses growing 4% a year, the same seawall scores 51.3x.
The highest-impact activities
Direct interventions and warning systems lead the ranking. Evacuation planning and infrastructure tops the list at 11.8x, followed by storm-resistant construction at 10.9x. Early warning systems and seawalls both score 10.3x, while heat-health warning systems reach 9.7x.
Climate-resilient building materials (9.5x), emergency response systems (9.2x) and climate-resilient road construction (8.5x) complete the upper tier. Activities targeting a single hazard score a median 3.6x, against 2.2x for multi-hazard activities.
Impact and returns point in different directions
The report maps each activity to its closest investable sector and applies that sector’s observed return range. Climate analytics and software lead at 17% to 23%. Wildfire technology follows at 16% to 20%, with climate-resilient agriculture at 15% to 20%.
Grid resilience and energy storage span 10% to 25%, while catastrophe bonds and insurance-linked securities return 11% to 20%. Supply chain and logistics platforms sit at 13% to 17%. By contrast, flood and coastal protection, heat resilience and nature-based assets cluster at 8% to 12%.
“There is no systematic relationship between avoided-loss BCR and expected investor return,” the authors write. Several of the highest-return activities, such as climate analytics and catastrophe bonds, sit in the middle of the impact distribution.
The gap is clearest at the top of the impact list. Evacuation planning, early warning systems and heat-health warning systems all rank in the top five. The report groups them with public goods that have no direct revenue model. Seawalls, also in the top five, fall in the flood and coastal protection band of 8% to 12%. That is among the lowest ranges in the table.
The executive summary links the gap to policy. “It is telling that the relationship between the social value (benefit) of the 102 activities examined and the investment returns they have achieved is weak; policy incentives have not supported attractive returns in the most beneficial areas.”
Where impact and returns meet
A handful of activities score well on both counts. Storm-resistant construction and resilient building materials rank second and sixth for avoided losses. The report places building resilience in an 8% to 14% return band.
Warehouse climate control (6.8x) and climate-resilient supply chains (6.6x) also make the top 20. Supply chain and logistics platforms carry one of the higher return ranges in the report. Similarly, microgrids and distributed energy score 5.8x, in a grid resilience sector returning up to 25%.
The report also flags 27 dual-benefit activities that cut emissions as well as losses. Each clears a 5x ratio and avoids more than 50 tonnes of CO2 equivalent per US$1 million invested. They cluster in nature-based solutions, digital and data services, precision agriculture and climate-resilient infrastructure.
“Investors seeking above-market returns will concentrate on the technology-enabled and financial-innovation categories, characterized by strong market growth and scalable business models,” the report concludes.
The gap public money still fills
At the other end sit activities with high social value and no revenue model. These include community-based adaptation and indigenous knowledge integration. The report calls this “a reminder that a purely commercial approach to adaptation will leave critical gaps.”
Private capital remains small. Climate Policy Initiative figures cited in the report put tracked private adaptation finance at about US$4.7 billion a year. The UN Environment Programme’s Adaptation Gap Report 2025 says targeted policy and blended finance could lift this towards US$50 billion.
“The need to build resilience is clear and growing,” said Nelson Da Conceicao, sustainable investments director at CalPERS. “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.”
What it means for listed portfolios
Schroders applied the framework to the 2,476 constituents of the MSCI ACWI index. Only 268 companies, or 11%, register any score. A small group of HVAC, water and engineering names leads, including Johnson Controls, Carrier, Daikin, Xylem and Jacobs.
Because these are liquid large caps, investors can raise exposure cheaply. At roughly 9 basis points of tracking error, the weight in adaptation solutions rises from about 3% to 12%. Beyond that, exposure has to come from small caps, private equity or infrastructure.
The authors are cautious about returns. They find “no well-documented evidence of a durable ‘adaptation alpha'”. They treat being adapted as a mark of company quality, which markets may not yet price.
How the framework compares
Other banks have published adaptation research. Goldman Sachs Research set out where it expects investment tailwinds across corporates, households and governments in September 2025. In April 2025, J.P. Morgan Asset Management published a paper on investor participation citing an average 4:1 benefit-cost ratio for adaptation.
Schroders goes further in one respect. It scores every activity on a common avoided-loss basis, then tests each against sector returns and listed-market exposure. Management consultancies have sized the market separately. Boston Consulting Group projects annual demand of US$0.5 trillion to US$1.3 trillion by 2030.
“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,” she added.
The losses that don’t happen
The framework’s value lies in making avoided damage visible to capital markets. Storm-proofed buildings, resilient supply chains and hardened grids already offer both impact and return. For evacuation routes and early warnings, the losses they prevent still depend on public budgets.
