Tenzin Seldon, Founder & Managing Partner, Pulse Fund.
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A year after the Palisades and Eaton fires destroyed close to 13,000 homes, Los Angeles had issued about one residential rebuild permit for every five homes it lost, and that was while permitting at roughly three times its historical pace. The insurance money moved considerably faster. Roughly $40 billion in insured losses was paid out on what became the costliest wildfire event ever recorded, and it went where insurance money is designed to go, which was putting back what was there before.
I have spent 20 years around climate capital, and this is the part that should trouble anyone allocating it: Almost none of the money that arrives after a disaster is structured to reduce the cost of the next one. We finance restoration on a timeline set by claims adjusters while the underlying risk keeps compounding, and we repeat that every fire season and every hurricane season, largely because the alternative of investing in resilience beforehand offers institutional investors very little they can actually buy.
The proportions are stark once you look at them. Based on data and my calculations, less than 4 cents of every dollar spent on climate globally goes toward adapting to conditions already locked in, with the rest directed at reducing future emissions. Both matter. The imbalance persists because mitigation spent the last decade building companies with customers, contracts and unit economics, and adaptation hasn’t yet done that work.
The demand signal itself is not in question. A Treasury review of 246 million homeowners policies found nonrenewal rates roughly 80% higher in the ZIP codes most exposed to climate risk, where households already pay 82% more in premiums than households in the least exposed areas. Insurers have been underwriting this risk with real money for years, which tells you the market accepted the premise some time ago. The gap sits further downstream, in the near absence of companies whose product reduces the loss rather than repricing it.
UNEP puts private capital flowing into adaptation at roughly $5 billion a year and estimates realistic near-term potential at 10 times that, which leaves about $45 billion of addressable demand with almost nothing built against it. A gap that size in a market with this much visible demand usually points to a supply problem, and in my experience it almost always means the business models haven’t been worked out, rather than that the customers are missing.
Mitigation went through a version of this and the process was painful. For years, climate companies could raise on impact and policy tailwinds, and then the market stopped accepting that, on the reasonable grounds that a product which isn’t cheaper, faster or better than the incumbent will eventually lose to the incumbent. A great many companies didn’t survive the transition. The ones that did are more durable for having gone through it, and they can sell into any policy environment, which was always the point. Adaptation and resilience hasn’t had that reckoning, and I don’t expect significant private capital until it does.
What capital has found its way into adaptation has concentrated in one layer of the problem, which I think of as eyes on the sky: the satellites, catastrophe models and analytics that identify where risk sits and how it is shifting. ICEYE’s $521 million raised this year was the largest climate deal outside energy and transport, and the logic behind that category is sound, since insurers and asset owners will pay real money for better information about assets they already hold. Pulse Fund’s portfolio company Floodbase operates here. The category is filling up, though; differentiation is getting harder to defend, and better information about where a fire will burn improves how the loss gets priced without changing how large it is.
The other layer, which I call boots on the ground, covers companies that physically harden buildings and infrastructure, keep people safe and productive through extreme conditions, and restore operations afterward. When you do the math, more than 90% of tracked adaptation financing still comes from public budgets, and venture capital has been close to absent. Most of that $45 billion of whitespace sits here, in a market where the buyers are identifiable and the problem is stubbornly physical.
Consider what a rebuild for a city like Altadena’s actually requires. Housing that can be manufactured off-site and delivered in weeks rather than framed on-site over years, priced to clear insurance proceeds instead of exceeding them, would find demand well beyond any single fire. The same reasoning extends to heat, which now costs the U.S. economy an estimated $220 billion a year in lost productivity concentrated in construction and manufacturing, where the buyer is an employer with crews outdoors in August and a measurable output problem. Business continuity is a third: Midsize companies have paid for cyber incident response for a decade, and very few have anything comparable for the week a hurricane takes a facility offline, though the enterprise logic is identical and so is the recurring revenue.
None of this requires believing anything in particular about climate policy. It requires believing that these losses are large, recurring and increasingly well-documented, and that a market which currently transfers them through insurance will eventually pay for products that reduce them. Founders working here should be able to say whether their revenue holds up without grant cycles or a favorable policy window, because the ones who can will still be operating in 10 years. For investors, the case to make to LPs is that adaptation sits early in the same maturation mitigation has already been through, and that what comes out of it will be companies solving physical, urgent, well-funded problems. The next fire is already sitting in someone’s loss model, and the only real question is whether the capital shows up before it burns or after.
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