The Climate Investment That Promises 400 Percent Returns

Real Estate

Few investments produce the rich returns that climate adaptation does, but the pace of climate adaptation in the United States continues to lag the pace of climate change.

That is mostly because of perception, according to Roger Polwarty, a senior scientist with the National Oceanic and Atmospheric Administration who studies risk management and adaptation.

“Adaptation and resilience are not seen as representing absolute goods, actually goods that form the basis of human security, ” Polwarty said last week. “We see them as add-ons. We see them as extras…. We have not made the case that adaptation itself or resilience itself is an absolute good.”

But the case has been made in dollar signs. Since at least 2005, experts have known that every $1 spent by the Federal Emergency Management Agency on mitigation saves U.S. taxpayers $4. And the benefits do not wait in some distant future. Some benefits, such as jobs, accrue immediately. A 2017 update to that 2005 study looked at 23 years of past federal expenditures and found a national benefit of $6 for every $1 invested.

The benefits vary with the type of risk, but the returns are consistently positive, and they usually arrive sooner than expected:

“We know that putting in adjustments to buildings, structures, improving our investments can give us a 5 to 1 return on wind, in some cases 7 to 1 on flood, hurricane, and storm surge,” Polwarty said in a webinar hosted by NOAA. “Every $1 provides about $7 if we improve our codes within an urban interface. That’s the issue that we’ve actually shown, and we’ve learned this over time, that on average $1 in investment saves us about $4 in long-term risk.”

“So we do have a sense of the upfront benefits,” he said, though communities and governments may not yet share that sense.

“One of the biggest barriers that we identify in the context of what stops us from adapting is the cost. We say, ‘Oh it costs too much to do up front, and we lose money over time.’”

Over time, the benefits can be enormous.

According to the Adaptation chapter of the Fourth National Climate Assessment, which Polwarty helped author, with cost-effective adaptation today, damage to coastal property could cost up to $820 billion by 2100.

With no adaptation: $3.6 trillion.

Nonetheless, the way to get communities to invest in adaptation, Polwarty said, is to emphasize the short-term benefits. With climate impacts already affecting communities, that shouldn’t be difficult.

“Unless we can in fact show that the adaptations help us with near-term risk—hurricanes, droughts, floods, land degradation issues, other things we’re experiencing in the near term—the point being made will always be a sticking point.”

Watch all of Polwarty’s presentation on adaptation costs:

Leave a Reply

Your email address will not be published. Required fields are marked *