Global events since the publication of last year’s COP26 report highlight more than ever the dire need for an orderly and integrative transition, considering both climate and natural capital, to ensure social and economic as well as environmental wellbeing. The difficulties we face today — the cost of energy, shortages from concentrated supply chains or losses incurred by natural disasters both chronic and acute — are not inevitable parts of the low-carbon and nature-positive transition but instead a stark reminder that we are moving neither fast, nor comprehensively, enough.

It is against this backdrop that political leaders meet this month at the UN COP27 in Egypt. Developing countries, increasingly dismayed by the lack of support from developed countries to address ever apparent physical climate risks, have placed climate adaptation and its financing as a key negotiating point for COP27.

Climate adaptation refers to adjusting to and preparing for the changing climate – improving infrastructure to manage floods and rising temperatures, for example, or building resilience in natural ecosystems, cities and communities. The extent of action taken to address climate mitigation1, will directly impact the extent of climate adaptation required in the future.

Nevertheless, the climate pathways explored in the IPCC 6th Assessment Report on Climate Change, estimate the planet will still be exposed to a changing climate for decades to come due to the existing concentration of greenhouse gas emissions in the atmosphere. Despite this risk, there is a significant skew to climate mitigation in climate finance flows, with only 7% of all climate finance allocated to adaptation in 2021, according to a study by the Climate Policy Institute2. Within the green bond market, the Climate Bonds Initiative estimated 4% of green bond use of proceeds were allocated to adaptation and resilience in 2021, up from 2% in 20203.

Climate adaptation solutions within our Environmental Solutions strategies constitute a small proportion of the investment opportunity set. A bias to public expenditure and developing markets, insufficient scale and knowledge gaps represent constraints. However, we expect the opportunity set to grow with increased policy level awareness alongside a broadening of conceptual understanding of adaptation and growing focus from private sector corporates as they address climate risks within TCFD reporting obligations. Water and Agriculture are likely to be key areas of focus, as illustrated in the chart (below) showing the two sectors as the most prominent of the World Bank country recommendations for adaptation action.

Distribution of adaptation and mitigation recommendations, by sector

Distribution of adaptation and mitigation recommendations, by sector

Source: World Bank Group report, Climate and Development: An Agenda for Action. Available at: CCDR-SynthesisReport.pdf (

Our Environmental Solutions strategies invest across six environmental themes, of which Sustainable Oceans and Freshwater Systems has the highest exposure to adaptation. Within this, examples include our holdings of a US company that provides storm water management services, and a UK project that provides flood and sewer management infrastructure, helping to manage higher and more variable levels of precipitation. As awareness of the physical climate risks and the requirement to adapt to them grows, so does the importance of these services and the assets underpinning them. Exposure to adaptation solutions is not only gained through direct projects or services, it can also be incorporated into climate mitigation and biodiversity solutions by promoting co-benefits (or managing trade-offs) with adaptation. By presenting solutions that promote mitigation as well as adaptation, opportunities such as these can avoid mitigation and adaptation activities ‘competing’ for capital and are likely to grow significantly over time in our view.

Take the global food system for example. It contributes to 24% of global emissions4 and is a major contributor to freshwater depletion and deforestation. Policymakers are faced with the tough task of determining how to decarbonise the global food system, while at the same time people are struggling to afford their grocery bills. Solutions will have to come from a multitude of options across both the supply and demand side, as outlined in the chart (below).

Food systems emissions trajectory and mitigation potentials by transformation domain

Food systems emissions trajectory and mitigation potentials by transformation domain

Source: 2022 UN Environment Programme (2022) Emissions Gap report: The Closing Window – Climate crisis calls for rapid transformation of societies. Available at: Emissions Gap Report 2022 (

Many of these mitigation options have co-benefits with adaptation, such as the role of soil health in reducing erosion or support for wetlands which provide a buffer to extreme weather conditions. An effective transformation of the food system will need policy that cuts across multiple domains, taking into consideration the water-food-energy-climate nexus as well as the co-benefits between mitigation and adaptation solutions. Companies and securities that deliver solutions across these multiple domains are well placed to benefit in the long term.

One type of organisation that embeds intersecting development and environmental factors into its operations are development banks. These institutions will play an increasingly prominent role in the deployment of climate finance, as developed countries potentially look to them as a mechanism to honour their climate finance commitments to developing countries. Adaptation financing is gaining in prominence within their strategies, as demonstrated by the International Bank for Reconstruction and Development’s (IBRD) target to have at least 50% of climate finance allocated to adaptation within its 2021-2025 Climate Action Plan5.

Within the fixed income component of our strategies, we invest in the green bonds of development banks. These instruments provide a lens to individual projects as determined by their Use of Proceeds. This allows us to observe and assess how adaptation finance is deployed. For example, the green bonds issued by IBRD include the financing of an integrated irrigation system for climate resilient agriculture in Odisha, India. This project cuts across food security, climate mitigation and adaptation, highlighting its role in delivering across multiple policy fronts. This growing strategic importance in turn underpins the resilience in their credit investment profiles. Solving environmental challenges at pace will define this decade and likely the 21st century. Governments globally are recognising the role of the financial sector in meeting these challenges, as the transition is set to require unprecedented public and private investment to develop environmental solutions technologies to mitigate and adapt to climate change and restore natural capital. COP27 does not in itself represent a catalyst for transformational change, but successful negotiations would make an important contribution to building on the ongoing drumbeat of progress.

1 Climate mitigation refers to actions taken to reduce the stock and flow of greenhouse gases in the atmosphere.
2 Climate Policy Initiative. Global Landscape of Climate Finance 2021. Available at: Global Landscape of Climate Finance 2021 – CPI

3 Source: Climate Bonds Initiative.
4 WWF and UNEP. Enhancing NDCs for Food Systems. Available at: 200814_WWF_NDC_Food_V12.indd (
5 World Bank Group, Climate and Development: An Agenda for Action. Available at: CCDR-SynthesisReport.pdf (

The value of active minds: independent thinking

A key feature of Jupiter’s investment approach is that we eschew the adoption of a house view, instead preferring to allow our specialist fund managers to formulate their own opinions on their asset class. As a result, it should be noted that any views expressed – including on matters relating to environmental, social and governance considerations – are those of the author(s), and may differ from views held by other Jupiter investment professionals.

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