With the climate changing before our eyes and global efforts to rein in greenhouse emissions accelerating, forward thinking businesses stand to capture value.

2016 is almost certain to eclipse records set in both 2015 and 2014 as the warmest year ever, with global average temperatures expected to be around 1.25 degrees above the mid 20th century average. In a recent survey, 77% of Australians agreed that the climate was changing

[https://climateinstitute.org.au/verve/_resources/COTN_2016_Final_WEB_260916.pdf].

The overwhelming consensus of scientists is that our use of fossil fuels (coal, oil and gas), combined with land clearing and certain industrial processes such as the production of cement is largely to blame.

What does all this mean for businesses? There are plenty of risks, particularly for firms that are high emitters whose products will increasingly be slugged with a rising carbon price, other sanctions, or consumer boycotts led by green groups. Then there are the direct effects, with droughts, heat waves, extreme weather, sea level rise and ocean acidification to contend with. Climate sensitive businesses such as coral reef tourism, wine producers, alpine sports operators and those with coastal-exposed assets are already feeling these effects.

But opportunities abound, and treating a changing climate as a market disruptor is helping organisations predict what might happen to their sector and where new sources of demand may develop.

The New Disruptors

We divide the climate adaptation market into several sectors:

  • Clean Tech – Products and services that substitute incumbents with less environmentally harmful alternatives that produce fewer greenhouse emissions. This sector has been around for a while and includes renewable electricity generation and many innovations to improve energy efficiency. However, it is still a fertile area ripe for entrepreneurs, with emerging technologies including transparent solar cells, which could replace entire building facades to dramatically increase localised energy production, particularly when combined with new battery storage options. Globally, clean tech investment is approaching $1 trillion per annum.
  • Consumer Green – This sector takes advantage of consumers’ (and some corporate purchasers’ desire to do something to be more environmentally sustainable. The more the effects of climate change are felt (along with broader pollution) the larger this market will grow. Think of toothbrush “subscription” services, “closed-loop” recycling services, the sharing economy and so on. Ultimately these offers are about using less raw materials and energy and producing less pollution and waste.
  • Adaptive Needs – As temperatures and sea levels rise, precipitation patterns change and more intense storms lash both country and cities, demand for a variety of products and services will increase. Infrastructure investment will eventually include a range of coastal defenses, moving key assets away from shorelines, and the overhaul of storm water systems in low lying areas. For example, Miami Beach, Florida recently undertook a US$400m project to raise the level of a section of iconic Alton Road and install a storm water pumping system to alleviate “sunny-day flooding” during very high tides. Additional innovation will be required in many sectors, such as agriculture, food technology, water, healthcare, construction and disaster mitigation.
  • Geo-Engineering – Ultimately it’s going to be necessary to suck some of the carbon dioxide and other greenhouse gases out of the atmosphere to stablise the climate. While early attempts at so-called carbon capture and storage have been disappointing, this is potentially a multi-trillion dollar industry if the technology can be proven. Another huge challenge will be reversing the ocean acidification and de-oxygenation associated with our greenhouse emissions before we choke the vital marine ecosystems on which a lot of our food supplies depend. Oh, and growing and preserving forests rather than clearing them is likely to become more lucrative in time as carbon markets develop.
  • Green Governance – Amidst all this innovation, there is plenty of “green-washing” going on, with many firms’ sustainability programs little more than marketing spin. While the ACCC is starting to clamp down on misleading environmental claims [https://www.accc.gov.au/system/files/Green%20marketing%20and%20the%20ACL.pdf], there is fertile ground for innovation in sectors such as product and business certification to help accurately inform consumers about the broad range of environmental considerations involved in their purchase decisions.

Within the next couple of decades or less we expect the effects of climate change will become too compelling to ignore, and it will leapfrog concerns such as the economy and national security to become the number one issue for politicians and the public. Well before that point, your business should be ready to compete in the climate adaptation market.

David McEwen is a Director at Adaptive Capability, providing strategic advice to help businesses create and preserve value in the face of climate change. He is also the author of the new book, Navigating the Adaptive Economy.