Climate change is one of the biggest global challenges we face today, and it will require a huge amount of investment to drive the change and innovation needed to make a difference.
For investors who want to weigh environmental impact alongside financial factors, climate investing could represent an opportunity.
In the past, climate change efforts have focused on prevention, but there has recently been a shift towards adaptation. Read on to find out what that means for investors.
Climate adaptation finance is currently falling short
In June 2025, according to the UN’s Principles for Responsible Investment (PRI), in 2024, average global warming reached 1.55°C above the pre-industrial average. This marked the hottest year in global temperature records going back to 1850, and potentially as far back as the last 100,000 years.
In addition, 2025 saw extreme climatic events in different parts of the world, including record-breaking rainfall and flooding in southern Spain and contracting sea ice in both the Antarctic and Arctic.
The organisation states that without decisive action, growth in global GDP would be 30% lower by 2100 due to climate change. However, the severity of economic impacts from climate change will depend on mitigation efforts.
Indeed, an article published in June 2025 by the research community Nature Portfolio suggests economic losses due to extreme weather events in the EU alone totalled €52.3 billion in 2022.
While limiting the effects of climate change remains essential, global events highlight why adaptation is so important – many communities and ecosystems are already dealing with the effects of rising global temperatures.
Climate adaptation refers to the process of adjusting to the current climate and anticipated climate impact. So, what might climate investing look like?
Climate adaptation will affect many sectors, and projects could range from reinforcing bridges to withstand intense storms to transitioning agricultural practices in areas experiencing water stress.
The PRI states the cost of financing adaptation measures globally could run into the trillions of dollars by 2030, and that developing countries face an annual adaptation finance gap of approximately $187 billion to $359 billion (£141 billion to £271 billion).
As an investor, climate investing could represent an opportunity to seek returns while having a positive environmental impact.
If you’re interested in climate investing, clarifying your personal goals and values could be a useful place to start. Is there an area of climate investing you want to focus on, such as green energy or projects that support communities?
From here, you can work with your financial planner to review climate-focused funds or investments to assess how they could support your financial objectives as well as your values.
Climate change presents investment risk
As well as investing in climate change solutions and adaptive measures, investors might want to consider climate investing from a risk perspective.
As extreme weather events become more frequent, businesses are more likely to be adversely affected by them, either directly or through their supply chain. This could present a financial risk to investors.
Investing in companies that are actively engaging with climate adaptation and mitigation could help you balance risk in your investment portfolio and improve resilience.
Of course, there will still be risks involved with investing, and it’s important to review opportunities in line with your risk profile and investment goals. Your financial planner could help you assess how climate investments might fit into your current portfolio.
Do you want to make ESG factors part of your investment strategy?
If you’d like to talk about climate investing or how to integrate other ESG (environmental, social, and governance) factors into your portfolio, please get in touch.
Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
The value of your investments (and any income from them) can go down as well as up, and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.