Sharing our insights into the biggest sustainability challenges facing our urban environment. Our previous issues of the UNSUSTAINABLE series have explored cooling, windows, concrete & cement, steel, water scarcity, industrial heat, and biodiversity data. In this post, we explore our UNSUSTAINABLE adaptation gap and the solutions emerging to prepare for the inevitable future changes in our climate.
The urgent need for adaptation
We’re facing a stark reality: global temperatures are projected to reach 2.6–2.8°C above pre-industrial levels by 2100, and we are already feeling the heat. From 2011–2020, global temperatures averaged 1.1°C above pre-industrial levels. For the 12 months preceding July 2024, global temperatures reached 1.5°C above pre-industrial levels. Current NDCs are projected to result in 2.6-2.8°C warming above pre-industrial levels by 2100.
This warming is causing more frequent and severe climate hazards such as heatwaves, drought, heavy precipitation, and tropical cyclones, with devastating human and economic costs. Between 2000–2019, 500,000 lives were lost annually due to excess heat. In 2022 alone, 43,000 lives were lost in Somalia due to drought and 4,000 lives lost in Pakistan and India due to flooding. Globally in 2023, there were an estimated $300 billion — 400 billion of economic losses due to natural disasters. Just the 2024 Atlantic hurricane season is estimated to have caused total economic losses of $500 billion, with hurricane Helene estimated to have killed 214 people. Urgent adaptation is needed to manage current climate impacts and prepare for inevitable future changes.
Cities at the forefront of change
Cities are particularly exposed and vulnerable to climate hazards. Urban systems connect and concentrate people, assets, and energy use. Over half the global population already lives in cities — a figure set to rise to 68% by 2050. In Europe, urbanization is even more pronounced, with 75% of the population in cities, expected to exceed 80% by 2050. Meanwhile, cities consume 75% of global energy and house much of the world’s key infrastructure.
Cities also magnify the impact of climate hazards:
- Cities & extreme heat: Many of the worlds largest cities will be exposed to deadly temperature and humidity levels at 2°C warming. The urban heat island effect can increase surface temperatures in urban areas by as much as 10–15°C compared to surrounding regions.
- Cities & flooding: More than 90% of urban areas are coastal, and >1 billion people located in low-lying cities are expected to be at risk from coastal-specific climate hazards by 2050.
- Cities & drought: One in four of the world’s largest cities are in water stress and source their water from up to 500 km away. At just 2°C warming, an additional >400 million urban residents than today are estimated to be exposed to water scarcity from severe droughts.
As urban populations grow and climate impacts intensify, cities must urgently adapt to protect people and infrastructure.
The adaptation funding gap
Despite its importance, adaptation is seriously underfunded. While global adaptation financing needs are estimated at $1.1 trillion per year between 2021–2030, current spending is just $63 billion annually — only 5% of total climate finance. Urban adaptation is even more neglected, with just $10 billion spent globally in 2021/2022, representing a mere 1.2% of urban climate investments. Bridging this gap is essential for safeguarding people and the economy from escalating climate risks.
Adaptation presents a compelling economic case despite facing numerous challenges. Investing $1.8 trillion globally from 2020 to 2030 across 5 key adaptation solutions could yield $7.1 trillion in net benefits, with early warning systems alone delivering benefit-cost ratios of up to 10x. Put another way, and deftly concluded in the Stern Review, “the benefits of strong and early action far outweigh the economic costs of not acting”. However, scaling adaptation solutions faces significant hurdles. Budget limitations often deprioritise adaptation, solutions can be hard to sell given they address only 1 in multiyear events, and the need to tailor solutions to local conditions present challenges to scaling across geographies. Overcoming these barriers is essential to unlock the full potential of adaptation technologies.
Bridging the adaptation gap with venture capital
While ongoing investment in GHG mitigation is essential, venture capital has a vital role in accelerating innovation and bridging the adaptation funding gap. According to PwC (2024), adaptation and resilience accounted for 12% of venture’s climate tech investment value and 28% of deals in the first three quarters of 2024, emerging as a key theme amid a year on track to be the hottest ever recorded. We are exploring key subsectors of urban adaptation to identify VC-backable solutions.
Climate risk intelligence and insurance
Climate risk data has wide applicability to inform businesses and investors. With improved climate risk information insurers perform better analyses; financial institutions and corporates can build resiliency, reduce losses, and disclose risks; real estate companies can better manage buildings and portfolios; and governments can provide early warnings systems and emergency responses through improved climate intelligence. Improved understanding of climate risk has led to the development of new business opportunities such as parametric insurance (payouts based on predefined events or conditions rather than the actual loss incurred) that can help close the insurance coverage gap and improve the speed of payouts.
Physical risk quantification modeling has a large potential market but companies must navigate uncertainties due to varying accuracy and cascading impacts across hazard types, challenges in spatial and temporal resolution of data, and uncertain emissions scenarios, all while addressing customer concerns about model transparency, reliability, and accuracy. We see particular potential in (1) hyperlocal sensors that can facilitate disaster response and early warning systems, (2) asset level risk analytics, and (3) corporate operations risk analytics.
Urban monitoring & planning
Cities increasingly need tools to address the impacts of climate change. Cities in emerging markets alone require over $147 billion annually in financing until 2030, rising to $165 billion annually until 2050 to adapt to climate change. Meanwhile, over 60% of European cities plan to boost climate investment through 2026. However, resilient urban planning is hindered by uncertain climate outcomes, lasting impacts of current decisions, and budget constraints. Many cities are already incurring billions in climate-related losses, yet lack the tools for data-driven decisions on climate risk. We’re excited by climate resilient urban planning tools that enable both prediction of future risk and also translation of that risk into human impacts and vulnerability.
Water management
Billions of people are already affected by water stress, and global water use is projected to increase by 20–50% by 2050. Climate change further exacerbates the gap between water demand and supply, with shifting precipitation patterns, reduced snowpacks, higher evaporation rates, potential salinization of aquifers due to rising sea levels, and added pressure on wastewater systems from flooding. Currently, 30% of municipal water is lost, mostly due to leaks, and 50%-80% of wastewater is discharged untreated. By 2030, there will be an estimated 40% gap between water demand and supply if current practices continue. The cost of water risks to businesses could be >5x the cost of taking action now to address those risks.
Innovative solutions are emerging to address these challenges through new water generation methods, digital tools for efficiency, and improved wastewater treatment and monitoring. We’re particularly excited by building leak detection, which offers up to 20%-30% water savings and avoided property damage with 12-month paybacks, and wastewater management, which has a large market and increasing regulatory pressure.
Find out more in UNSUSTAINABLE: Water Scarcity
Cooling
As global temperatures rise, cooling demand will accelerate to protect public health and enhance infrastructure resilience. Global demand for AC units expected to triple by 2050, with half of the global expansion in just India and China. This surge in demand will strain the energy grid, as cooling can account for up to 50% of peak load in some regions, and drive up emissions, with AC already responsible for 1.5 Gt CO2e (~3% of global GHG emissions).
To enable adaptation without further adding to climate change, we must tackle three problems: improving energy efficiency, managing grid load, and reducing high GWP refrigerants, all while addressing affordability to ensure access for those in geographies that need it most. We currently see huge commercial opportunity in companies that can offer commercial space cooling units with quick paybacks and those targeting the significant energy use for dehumidification. Meanwhile, passive cooling solutions like reflective urban landscapes (e.g., pavements and roofs) can mitigate the heat island effect and reduce urban temperatures by between 2°C and 4°C despite challenges in defensibility.
Find out more on high efficiency space cooling in UNSUSTAINABLE: Cooling
Grey, green, & blue infrastructure
Adaptation could spur a significant infrastructure investment in urban areas to both weatherize existing infrastructure (e.g., electricity, water, and transport systems) and develop new infrastructure (e.g., seawalls, green roofs). For example, a 2019 study found the US may need to spend $416 billion on seawalls by 2040. Simultaneously, cities are embracing urban nature-based solutions as cost-effective solutions to lower temperatures, recharge aquifers, provide coastal flood protection, and reduce stormwater runoff. Numerous cities are enacting policies to expand green spaces, with Lisbon aiming for 90% of its 2030 population to be within 300m of a green area larger than 2000m2, and Paris targeting 300 hectares of new green space by 2030.
These adaptation efforts present opportunities for low-carbon materials in infrastructure projects (e.g., low-carbon cement, concrete, and steel) and improved biodiversity monitoring tools for urban greening initiatives, while challenges remain in finding defensible solutions for certain adaptation solutions, such as water diversion systems, permeable pavements, and green roofs.
Find out more about materials for grey infrastructure in UNSUSTAINABLE: Cement & Concrete and UNSUSTAINABLE: Steel and about data tools for green and blue infrastructure in UNSUSTAINABLE: The Biodiversity Data Gap
2150 take
The urgency of climate adaptation is undeniable. At just 1.1°C of warming, we are witnessing catastrophic floods, hurricanes, and droughts. With temperatures projected to rise to 2.6–2.8°C above pre-industrial levels by 2100, we will continue to face devastating human and economic consequences. Cities, as epicenters of population, infrastructure, and economic activity, are both highly exposed to these challenges and uniquely positioned to drive the adoption of adaptive technologies.
Venture capital can play a pivotal role in closing the urban adaptation gap. At 2150, we see immense commercial and impact potential in various adaptive technologies, from high-efficiency cooling to advanced water management and physical climate risk intelligence. Yet adaptation also poses unique challenges: location-specific solutions, scalability barriers, unevenly distributed impacts, and high project costs — all compounded by a lack of standardized metrics for progress and equitable cost-sharing mechanisms. Tackling these challenges demands coordinated efforts and diverse funding mechanisms, with venture capital as just one part of a much wider mobilization of finance and solutions. While agreements such as the COP29 target of $300 billion in annual climate finance flows from developed to developing countries by 2035 are a step in the right direction, adaptation efforts must receive far greater focus to effectively manage the impacts of our rapidly changing climate.
Here at 2150, we see urban adaptation as one of the biggest challenges of our time, and we are passionate about supporting the innovators that are reimagining cities for a more resilient and sustainable future. If you want to learn with us or if you’re creating new solutions for urban adaptation, please reach out!
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2150 is a venture capital firm investing in technology companies that seek to sustainably reimagine and reshape the urban environment. 2150’s investment thesis focuses on major unsolved problems across what it calls the ‘Urban Stack’, which comprises every element of the built environment, from the way our cities are designed, constructed and powered, to the way people live, work and are cared for. Find out more at www.2150.vc
