BCG, Temasek see investment opportunities for private capital – in climate projects needing trillions in funds

[SINGAPORE] Yearly financing for climate adaptation and resilience projects could be between US$500 billion and US$1.3 trillion by 2030, with the amount expected to grow even larger thereafter amid worsening extreme weather events, a report has found.

The study, The Private Equity Opportunity in Climate Adaptation and Resilience, was launched by Boston Consulting Group and Temasek on Wednesday (May 7) at Ecosperity Week 2025, a sustainability event.

The rising need for financing is evident, as 87 per cent of countries now have at least one national-level climate adaptation policy, strategy or plan in place, the report showed.

Despite the projected growth in expenditure, current global spending on climate solution projects is only about US$76 billion a year, with public sources contributing the bulk of the amount.

“To meet the rising needs by 2030, there is an opportunity for private investment in the current gap,” the authors of the report said, also noting that the need for solutions is generating emerging value pools across value chains.

Such projects range from flood defence and wildfire protection to climate intelligence and water efficiency technologies.

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Motivated to clear the misconception of climate projects being complex and nascent, lead author Daniel Oehling, a managing director and partner at BCG’s Singapore office, said the report laid out the different types of investment opportunities in seven impact themes. 

“There are many companies that are sizeable today, are specialised in what they do, highly profitable and fit-to-build for private industry networks,” he said. 

Examples with opportunities for both investments and exits include the flood defence business. 

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In particular, the market for flood defence products, estimated at more than US$2 billion in 2024, would grow by 12 to 15 per cent at a compounded annual growth rate over the next five years. Its Ebitda (earnings before interest, taxes, depreciation, and amortisation) margin is estimated at 20 to 30 per cent, based on the report.

The segment is where several ventures, such as Germany’s IBS Technics and Norway’s AquaFence, are at different stages of growth.

The report also identified five factors that can help private equity investors determine the most promising projects, and assess their attractiveness in both the short and medium terms.

Projects that have pulled in high levels of investment activity but are putting out weak forward-looking signals include smart-grid management and precision agriculture. 

On the other hand, projects in climate-resilient building design, as well as rainwater and run-off harvesting, are projecting strong forward-looking signals, but are getting limited investment traction. 

At the same time, the report also warns investors to be mindful of potential conflicts in the environmental outcomes of some solutions. 

For example, manufacturing of concrete and steel, while playing important roles in fortifying infrastructure assets against extreme weather, consumes large amounts of energy and carbon. 

“Investors in solutions such as low-carbon concrete and green steel, which address both climate adaptation and resilience and other environmental objectives, stand to benefit more in the long term,” it said.

Speaking at a panel at the launch of the report, Jay Koh, co-founder and managing director of climate-resilience focused private equity firm The Lightsmith Group, highlighted the importance of investing in scalable solutions now, “so that 15 years from now, when that inevitable future has arrived, we have the solutions available at scale to try to combat that”.