Venture capital for climate adaptation and resilience in North America

Executive summary

Climate adaptation and resilience is becoming an unavoidable investment need, yet venture capital (VC) remains largely focused on mitigation. Darya Jalali examines why North American climate VC funds underinvest in adaptation and resilience, drawing on market analysis and interviews with ten climate-focused investors. Darya shows that adaptation is not necessarily un-investable, but it needs clearer market demand, better metrics, mandate fit, and catalytic ecosystem support before VC capital can scale.

The challenge: why is venture capital not investing in climate adaptation and resilience?

Climate damages are rising, adaptation finance remains far below what is needed, and private capital provides only a small share of tracked adaptation funding. VC has helped scale climate mitigation technologies, but adaptation and resilience solutions often sit outside the familiar VC playbook: they can be context-specific, hardware-heavy, difficult to measure, and framed as public goods. This study asks what keeps VC funds from investing in climate adaptation and resilience, and what conditions could change that.

Data and method

The study uses an inductive qualitative research design focused on north America. It combines document analysis of academic literature, industry reports, market data, fund activity, deal flow, and sector trends with semi-structured interviews with 10 VC investment professionals from climate-focused funds.

Interview insights were triangulated against the broader document analysis and assessed through reflexive thematic analysis. The research distils five barrier themes: market and financial conditions, measurability and impact metrics, structural constraints, information and definitional barriers, and policy and regulatory gaps. It also distils four enabling conditions: market and financial enablers, policy and regulatory enablers, strategic reframing of adaptation and resilience, and catalytic capital and ecosystem support.

Findings

• The risk-return profile does not yet fit the VC model. Investors repeatedly cited weak customer demand, unclear exit pathways, perceived lack of venture-scale ROI, high capital expenditure, and long payback periods. These concerns make adaptation and resilience feel harder to underwrite than mitigation, even for climate-focused funds.
• The value of resilience is hard to quantify. Adaptation often creates value by preventing future losses, but avoided damage is difficult to model, monetise, and compare across sectors. The lack of standardised resilience metrics leaves many investors falling back on greenhouse-gas abatement metrics, which disadvantages companies whose main value is adaptation rather than decarbonisation.
• Fund mandates are a structural filter. The most frequently discussed barrier was mandate fit. Many climate VC funds are explicitly or implicitly built around mitigation and GHG reduction, so adaptation and resilience companies can be screened out before their commercial case is fully assessed.
• Definition and data gaps hide the market. A lack of standardised adaptation and resilience taxonomies makes the sector hard to track, benchmark, and communicate. Underreporting of adaptation deals reinforces investor hesitation by making the opportunity pipeline look smaller and less mature than it may be.
• Government and corporates can create bankable demand. Investors pointed to the need for credible policy signals, risk disclosure mandates, corporate procurement, and insurance-sector engagement. These can convert physical climate risk into a clearer demand signal for resilience technologies.
• Strategic reframing can make adaptation investable sooner. Rather than treating adaptation and resilience as one broad category, investors respond better to sector-based framing such as water technology, resilient agriculture, climate analytics, infrastructure resilience, or supply-chain risk tools. Dual-benefit companies with mitigation and adaptation outcomes may be the easiest near-term fit for existing climate mandates.
• VC cannot do this alone. Adaptation and resilience need a fuller ecosystem: accelerators, university partnerships, concessional capital, blended finance, first-loss guarantees, and government-backed funds that can de-risk early-stage markets and crowd in private investors.

Bottom line: venture capital can only help scale climate adaptation and resilience if the market is reframed

Reframing should be around bankable sector opportunities, credible metrics, clearer demand signals, and catalytic support that de-risks early investment.

Implications for decision-makers

For funds and government-backed investors

• Integrate adaptation into the mandate. Track existing portfolio companies with adaptation co-benefits, build a sector-based adaptation investment thesis, and work toward formally including adaptation and resilience as a Climate Tech Fund pillar.
• Use catalytic capital deliberately. Government-backed investors can absorb early-stage risk, validate emerging markets, and crowd in private capital through concessional tools, co-investment, and patient capital structures.
• Build the ecosystem, not just the portfolio. Funds can convene corporates, insurers, SMEs, entrepreneurs, universities, and investors to validate demand, strengthen deal flow, and support adaptation-focused accelerators or programmes.

For venture capital funds

• Look for sector-specific entry points. Adaptation may be easier to invest in when framed as investable verticals such as water, food systems, resilient infrastructure, climate intelligence, and disaster response rather than as a broad public-good category.
• Do not rely only on carbon metrics. Funds that use GHG abatement as the dominant climate KPI risk overlooking commercially valuable resilience technologies. Adaptation-specific metrics and dual-benefit screening can widen the investable universe.

For policymakers

• Create long-term, bankable signals. Policy should move beyond broad adaptation goals toward incentives, procurement frameworks, risk disclosure, and mandates that create demand investors can underwrite.
• Support standardisation. Shared taxonomies and resilience metrics would improve market visibility, reduce investor uncertainty, and help adaptation companies communicate value more consistently.

For adaptation and resilience entrepreneurs

• Translate resilience into buyer value. Startups should make customer pain points, avoided costs, payback logic, and procurement triggers as concrete as possible, especially where benefits are preventive or counterfactual.
• Lead with the investment frame investors understand. Where possible, communicate sector vertical, customer demand, revenue model, exit logic, and mitigation co-benefits alongside the wider resilience impact.

Author

Darya Jalali

Darya is a recent gradate from the MSc Climate Change Finance and Investment at the University of Edinburgh Business School. She is now an Investment Principal at InBC in Canada, a $500M strategic provincial investment fund focused on various sectors including clean tech.