Catalyst with Shayle Kann - The rise of climate adaptation tech

Episode Date: September 5, 2024

Cutting emissions is essential to avoiding the worst of climate change, but we also have to deal with the impacts of climate change happening now. Fortunately, there’s a growing list of technologies that could help us adapt — and potentially turn a profit for investors, too. Will these emerging adaptation and resilience (A&R) technologies take off as an investment category? In this episode, Shayle talks to Katie MacDonald, co-founder and managing partner at Tailwind. They talk about the areas of application – like wildfire prevention, air filtration, health monitoring, and more – that are attracting the attention of governments, corporations, and investors. But the space is young and still needs metrics and definitions, which is why Tailwind developed a taxonomy of A&R themes and sectors and plans to release an “innovation playbook” with market insights in the fall.  Shayle and Katie cover topics like: Defining the scope of A&R  Attracting resilience-curious investors to the space The co-benefits with mitigation How to measure the success of A&R Growing demand signals from governments, such as California’s climate risk disclosure requirements Recommended resources Tailwind: Taxonomy for Climate Adaptation and Resilience Activities S&P Global: Risky Business: Companies' Progress On Adapting To Climate Change Bloomberg Law: States Forge Ahead on Climate Disclosures as SEC’s Plan Drags on Catalyst is brought to you by Anza Renewables, a data, technology, and services platform for solar and storage buyers. Anza’s real-time market intel equips buyers with the essential data they need to get the best deals. Download Anza’s free Q2 Module Pricing Insights Report at go.anzarenewables.com/latitude  Catalyst is brought to you by Kraken, the advanced operating system for energy. Kraken is helping utilities offer excellent customer service and develop innovative products and tariffs through the connection and optimization of smart home energy assets. Already licensed by major players across the globe, including Origin Energy, E.ON, and EDF, Kraken can help you create a smarter, greener grid. Visit kraken.tech. Catalyst is brought to you by Antenna Group, the global leader in integrated marketing, public relations, creative, and public affairs for energy and climate brands. If you're a startup, investor, or enterprise that's trying to make a name for yourself, Antenna Group's team of industry insiders is ready to help tell your story and accelerate your growth engine. Learn more at antennagroup.com.

Latitude Media, podcast at the frontier of climate technology. I'm Shail Khan, and this is Catalyst. We need like a project drawdown for resilience, or we need like a speed and scale for resilience. Well, it's the market that we wish just didn't have to exist, but does and is actually pretty interesting. It's climate adaptation tech. When utilities need flexible capacity they can count on,

they turn to Energy Hub. Energy Hub works with more than 170 utilities, coordinating over 2.5 million devices to manage 3.4 gigawatts of flexibility, built for the moments when utilities can't afford uncertainty. Energy Hub builds and operates virtual power plants that utilities actually stake their grid planning on, coordinating EVs, batteries, thermostats, and more

through a single platform built for utility scale. Predictive, verifiable, and designed to perform when it counts. Learn more at energyhub.com. Trillions of dollars are flowing into clean and critical infrastructure, but those investments aren't driven by technology alone. They're shaped by markets, by policy, by capital, and by the institutions that connect them. I'm Alfred Johnson, CEO of Crux, and host of a brand new podcast, Critical Capital. Each episode, I talk with people deploying capital, shaping policy, and building the clean economy. Tune in as we unpack how progress is actually made. Listen to Critical Capital on Spotify,

Apple or wherever you get your podcasts. Catalyst is supported by Fish Tank PR. An award-winning PR firm focused on climate and energy tech, renewables, and sustainability. Fish Tank is known for generating prominent and effective media coverage for the brands they work with. If you want a PR partner that's thoughtful, shoots straight, and gets results, you'll like Fish Tank PR. To learn more about Fish Tank's approach, visit fish tankpr.com. That's F-I-S-C-H-F-Tankpr.com. I'm Shail Khan. I invest in revolutionary climate technologies at energy impact partners. Welcome.

All right, here's how I've always thought about it. If you imagine that it's a zero-sum game in the world, and to be clear, that's not always true. But if you had to decide how much of the world's resources to dedicate toward climate change mitigation versus climate change adaptation, you probably start at the beginning by driving everything you possibly can into mitigation under the thesis that if you're successful, you basically never need to invest in adaptation at all. But then assuming that you're not entirely successful and the effects of climate change really begin to strike, of course, then you need to begin investing in adaptation as well. And the further off track you get, the more you need to shift toward adaptation. So there's some balance at any given time. The worse we're doing on mitigation,

the more we shift toward adaptation. And of course, this is complicated by the fact that oftentimes the investments you might make in the technologies to mitigate climate change may also have benefits as far as adaptation and resilience go, and vice versa. You can invest in stuff for the purpose predominantly of adaptation that is also going to help with mitigation. But regardless, if you think of them as a sort of push-pull, I think it's kind of an interesting theoretical exercise. The more practical one, though, is right in front of us right now, which is if you're a climate tech investor or aspiring entrepreneur, how should you be thinking about adaptation and resilience? And honestly, what technologies and categories actually comprise adaptation and resilience?

Is it everything? Is it nothing? Is there a way to define this such that we can track it as its own investment category alongside climate change mitigation? So that's the question at hand. And it's the one that has led Katie McDonald, who's today's guest, to shift her focus entirely into, as she calls it, adaptation and resilience world.

She's the co-founder and managing partner at Tailwind Climate, which is an investment firm focused on this category. And because it's such a new category, she's also doing a lot of work trying to help the ecosystem define itself. So spoke to her a lot about what is adaptation and resilience from a tech and investing standpoint, and what are the areas within that market that could be investable?

Here's Katie. Katie, welcome. Thanks for having me, Shale. Great to be here. Let's talk about adaptation, climate adaptation and climate adaptation investing. Starting with a bit of a definition, I guess. When I think about climate adaptation, you know, you can define it so broadly, I think, as to have it lose some of its value. There's like some risk of that as we talk about this.

And I know you've been spending a lot of time thinking about it. So how do you define what fits into the category of climate adaptation technology? Great question. So I will first heartily agree with you on this. There are a lot of definitions floating around. There's a lot of confusion. There are also a lot of people that insist on using the term resilience instead of adaptation. So at tailwind, we kind of, we believe that these definitions need to be hybridized because being resilient systemically, whether it's like ecologically or socially or economically to climate hazards is super important. But you also have to be able to adapt. You have to be able to like adjust. to those hazards as they occur. So we created kind of our own joint definition of what we call A&R solutions, so like adaptation and resilient solutions. And these for us are any products or services that helped predict, prevent, mitigate, or enable recovery from climate hazards. And those could be like wildfire, heat, extreme weather, flood, et cetera. And we think that that allows us to really balance this idea of systemic functional integrity over a long period of

also while recognizing the fact that these systems are like actively adjusting to some of these hazards. And some of this stuff presumably overlaps with mitigation too. Like maybe a classic canonical example here. Let's just say I put a power wall in my house, right? And I'm in California, so I'm in wildfire territory. That power wall is probably load shifting me a little. Like it serves a climate mitigation purpose, depending on how I'm using it. But I'm also probably putting it there to deal with proactive outages, the PG&E. is going to implement as a result of wildfires, presumably that function is an adaptation function if you believe that increasing wildfires is an outcome of climate change, right? So can you have the same thing be a mitigation thing and an adaptation thing depending on how it's used? 100%. I think that this question hits on one of the most exciting things for me, having entered the resilience and adaptation space from mitigation, is that there are like a bunch of different examples of technologies from the mitigation space, like the example you provided of energy storage,

that are producing co-benefits. They're lowering greenhouse gas emissions while enabling society to be more resilient to climate change. So you've got energy storage and microgrids. You could argue that like the four million or some odd folks that signed on for residential solar in 2023 are absolutely achieving resilience for their homes, you know, like off-grade energy or energy independence. And then you also have stuff like wildfire tech, wherein if you're able to, to prevent a wild land from lighting a fire, you're reducing emissions, right? So you're doing both. The same could be said for some natural carbon solutions that are enabling soil carbon to just be trapped in the soil instead of released. So we have like myriad examples of these solutions

producing co-benefits. And I actually think that if you accounted for all of the incidences of these co-benefit creating technologies, the numbers in terms of technologies we see today as being adaptation and resilience would be far, far higher than we currently know. So that's where, to me, the risk is like, as we start to explore the contours of this category, the risk to me is not that we don't find anything that qualifies. It's kind of the opposite. It's that, like, it turns out everything counts. And then, again, we lose the value of the definition. So is there anything that you think of that people maybe think of as adaptation and resilience that you would say is out of scope? That's a good question. So I think, you know, one

funny thing that we struck upon when we started tailwind is that we would call people, whether they were folks at banks or corporations or the government, be like, what do you think about when you think about adaptation and resilience solutions? And obviously people are like sea walls. And that's been a kind of funny refrain that we've heard from the broader community. This is very common that like the vast majority of Americans that have been confronted with this concept are thinking about public infrastructure when they answer the question of what solutions might look like in the space. one thing we did at Tailwind in order to kind of crack open the question you asked and sort of debunk like what even falls into this space is we built out an adaptation and resilience investor taxonomy

that we actually released earlier this year with support from Climate Works. And this is essentially our best cut at like a functional worldview that we could use here. So like for instance, obviously those of us that have been in mitigation forever are super familiar with like the five major greenhouse gas-emitting sectors. Resilience has, like, not had any kind of functional breakdown like that. So what we did is we looked at, like, okay, what are the global IPCC goals on this topic? What are the SDGs that relate to climate resilience? We looked at all these frameworks, and we were able to get down to eight different thematic areas that we believe are critical to this space, and then 35 sectors that fall underneath each of those functional areas.

Yeah, I want to get to that because I think it is a useful frame and it's useful to think about what fits here. As you said, I live in mitigation world predominantly. And in mitigation world, it's pretty easy to figure out what's going to fit. You go where the emissions are. Totally. What I describe it to people, I say, you know, decarbonization to a first order requires the transformation of five and a half sectors of the economy. The five that you're imagining, which is energy, transportation, mobility, industry, food and ag and buildings, right? and that's where all the emissions come from effectively.

And then the half is like carbon management, which is a sector we need to basically create from scratch. So that's fairly straightforward, because you can look at the pie of global emissions and just break it down according to those categories. Yes. Tougher to do with adaptation, because I guess you have to look at it through the opposite lens,

which is basically where are the impacts? What sectors are the impacts felt most strongly? And thus, where is their technology to be applied to make those impacts less severe? So I don't think we're going to talk through all 35 of the, the subcategories, but maybe list out the eight core themes, and then we could talk about a couple of them in more detail. Yeah, that sounds good.

So you're exactly right in the sense that, you know, as we're sort of, our heat-seeking missile in this exercise was definitely not greenhouse gases, right? We're primarily looking at two things. One, where are we going to have major negative consequences in terms of, like, human health, so like physical human assets? And then secondarily, where are we going to have major value at risk when it comes to economic assets. So you can think of those two things as tools that we're using, sort of like our metal detector for the major areas we wanted to focus on here. And to your point about the eight

sectors, we essentially landed on the following ecosystems, infrastructure, social systems, which I'll say includes things like defense and also migration and other hot topics like that. Health, which of course rarely shows up in the mitigation space as it's on call out, water and sanitation, cities and settlements, which includes buildings, industry and commerce, and food agriculture and forestry. So those are like hot topic areas, and I'm happy to talk through a few of those. Yeah, well, why don't you pick? I mean, I guess one of the questions is, okay, so if we're going to define adaptation and resilience as an investment category, right, in the same way that mitigation is clearly an investment category. Now, mitigation as well,

you know, I've periodically said, I'm not sure climate tech really is a sector. It's just a common theme amongst a bunch of different sectors. That's probably true of adaptation and resilience, too. But to the extent that we're going to group it as an investment category, of those themes, where do you see most of the investment dollars going so far? That's a great question. So I'm having to talk a little bit more about the different demand factors that we're seeing, because one of the reasons we started tailwind is we were like, wow, there is so much latent demand from governments and corporates. Why is that signal not super clear to investors and start? up. So talk a little bit about what we're seeing there and then I can get further into kind of why that

demand should exist and does exist. But yeah, in terms of what we're seeing, I mean, this is not going to be particularly shocking to you, you know, having been in the space, we see a lot of individual investment ecosystems that have popped up over the years to tackle innovation within ag, within health, within water, within infrastructure. Like, each of those communities has its own sort of freshly minted investor crew and posse and ecosystem that comes with it. And what we're seeing is that some of those communities like the health tech community are getting what we call resilience curious. So they're starting to look at new vector-borne illnesses or they're starting to look at heat as a serious new disease, chronic disease. And they're extending the work they've done around regular

health tech into those spaces. And as I'm implying, the same can be said for ag in a lot of respects. What we're not seeing is we're not seeing actually most of the climate investors that are already in the space meaningfully pivot into these different themes. So, for instance, we looked at 150 different portfolios within the climate tech VC space. So you could say that's like the large majority of the investors out there. And we found that 19 of those 150 climate tech investors were totally resilience, curious. Like they had the word resilience or adaptation like all over the. their websites. But in terms of actual evidence of companies they'd invested in, we couldn't really find anything. And today, like, when we look at, okay, who is absolutely overtly crushing it

from a climate tech space perspective, there are only about eight different firms that are, like, meaningfully leaning in on some of these themes. And so what that's led us to believe is, okay, if you are a subject matter expert as an investor in one of the thematic areas I'm mentioning, you probably have a significant grasp about like what's the writing on the wall and where should we be headed for the next generation of water tech or whatnot. But if you're a pure play climate investor, you have yet to realize that you have resilience in your portfolio and you probably don't yet have a strategy to address the emerging opportunity. Yeah, I would say speaking personally, right? I'm a, I'm a predominantly mitigation-focused investor,

as we mentioned. And I've periodically looked at my own portfolio and said, hey, I'm kind of a resilience and adaptation investor. Like, I've got stuff in there. Totally. Transera. Transera form. You know, there's a bunch of stuff that like fits the bucket. But it wasn't a deliberate thing because my job is to invest in mitigation for the most part. And so it's, I've sort of, I've become an accidental adaptation and resilience investor to some extent. My suspicion is that's true of a lot of funds. And I know some are starting to think a little bit more about it. But to some extent, it's sort of what you said, like people haven't

really put in enough deliberate thought to figure out what it really means and what it should entail. And some of the categories, as you said, are ones that are not really covered in traditional climate tech. Health, you know, personal health tech is a perfect example where it's a high barrier to entry, I think, for climate tech investors, because we know what we're smart in, or at least some of us do, and we know what we're not. And I, for example, am not smart in health tech. It's not an area that I've spent a lot of time in. There are a lot of smart investors focused on it, and so I'm careful not to get out over my skis in new sectors. So it's interesting to think about that overlap where, like, actually, it turns out it might be easier in some of

these cases for your generalist fund or your health-focused fund to become a climate adaptation investor, at least in that category, than it is for your climate tech investor to become your climate adaptation investor in that category. Totally. Totally agree with you. so funny because it's like in the health space. Let's just take that as an example. You've got like your drivers of chronic and acute disease, whether that's like respiratory illness or cardiovascular. And it's, there's just like, or vectorborne illness or waterborne illness, all of which are going to spike due to climate change. And there's no question that the climate tech community is totally not best place to take advantage of solutions that will address those. However, then you've got like

these enormous physical risks that hospital systems and medical facilities face. And it's one you look at these wrists, you're like, okay, so let me get this straight. You need to harden your physical environment. You need to upgrade your H-FACs, so it's capturing small particulates that are not going to make people more sick. You need to, like, island this facility from an energy standpoint. These are all things that climate tech investors are totally expert in. So it's like, you know, we got to weed out where we can meaningfully contribute based on adjacent possible versus where we need to step away and let other folks move in. Virtual power plants are becoming a reliable way for utilities to manage capacity, but enrolling devices is just the start.

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by policy, by capital, and by the institutions that connect them. I'm Alfred Johnson, CEO of Crux, the capital platform for the clean economy. Join me for my brand new show, Critical Capital Capital, as I talk with people deploying capital, shaping policy and building projects. Together, we unpack how risk is priced, how incentives are structured, and how progress is actually made. Listen to Critical Capital Capital on Spotify, Apple, or wherever you get your podcasts. Are you tired of overpaying for big-name PR firms, but not really knowing what they're delivering? Is your comms team wasting time reviewing lengthy messaging briefs and decks instead of engaging journalists or producing content? Are you wondering why your competitors are getting press and you aren't?

Fish Tank PR is an award-winning climate and energy tech, renewables, and sustainability-focused PR firm dedicated to elevating the work of both early stage and established companies. Whether you need to position yourself as a thought leader in between project announcements or translate complex ideas and technologies into tangible, compelling stories that resonate with the media, F-Tankpr.com. Check out fish tankpr.com. That's F-I-S-C-H-Fish-Tankpr.com. Can I ask you a broader question, which is not so much to the question of like, is this an investment category, but more is it a good investment category, which is I think the fundamental change. challenge as I think about it with adaptation investing is the time horizon. We know we know climate change is coming and getting worse, but it's coming over a fairly extended time frame. And what you want is to invest in things that are going to return capital on a venture capital time horizon. And there's like there's always been this bit of a mismatch. I think about it, particularly

in sectors like climate risk analytics, right, which has been this little subsector. And there has been some adoption, I think, of those technologies and those products. But it's not a huge market yet. And I think one of the reasons for that is like, you know, even catastrophe modeling and stuff like that, we're working on one to five year time horizons typically. But climate change, really the big effects are felt over a longer time period. And I think that applies fairly broadly as well. So how do you think about the, in general, finding investable categories where you can, imagine the inflection point for a product or a technology taking place faster, perhaps, than the

inflection point of climate change. Such a great question. So I'll say where this is concerned, I think there are kind of two major buckets. There's like the sort of bleeding edge side of things, which is where is stuff being adopted like right now and where are their venture size returns right now? And as you pointed out, that's totally in the climate risk and intelligence and analytics space. And that's been in part driven by the massive crisis the insurance space has been in. You know, we've just seen absolutely insane losses. We had $100 billion worth of insured losses in 2022 in this country alone. And we know that insurers are exiting markets. They're increasing premiums. They're lowering coverage. Like, it's a total five alarm fire right now. And so both those

insurance firms, as well as the most highly exposed industries, utilities being a critical example, they need these insights into like how do we leverage the best geospatial data and other data platforms to determine like where are our assets at the highest risk and how can we determine our own internal risk thresholds based on that high quality climate data. So we see companies like Jupiter and Climate X and First Street like really taking advantage of that like house on fire demand. Then in terms of like reaching the inflection point across some of these other themes, at least even in the last like 12 months, Shale, what we've seen is that the demand signals from corporations and government are starting to, I would say,

they're approaching like a rolling boil. They're not at house on fire levels yet, but they're indicating to us, okay, these entities are about to become adopters of hard tech and intelligence that they have a vested interest in scaling ASAP. And just to give you a sense of some of that demand kind of broadly speaking, of course, across like corporations and financial institutions, we have like SB 261, which is California's climate risk reporting rule, which is like the equivalent of what the SEC has essentially threatened to pass, which will come into effect in 2026. So what that means is we've got all these different corporations and financial institutions scrambling to understand their risk and not only understand it, but to figure out how are we going to

plug the hole, how are we actually going to acquire hard tech? that's going to enable us to lower or mitigate these risks. And so we're seeing a lot of writing on the wall that leads us to believe that corporations are going to be really in the hot seat as buyers in the coming years. How do you think about staying on this sort of climate intelligence and climate risk category for a moment? I know one of the challenges in that the emergence of that sector has been like you don't, you have really long time horizon feedback loops.

So knowing whether a given model or risk framework, is correct, is kind of difficult. And there's even been some reporting recently that, like, you know, a couple of the major models differ from each other substantially on key questions of like, how high is the risk for wildfire in location X or whatever it might be?

And again, for me, this time horizon thing, I feel like it's a fundamental challenge for the adaptation world. There are cases where there are exceptions there, right? So if you're in Texas and, you know, the solution you're considering adopting is a microgrid or backup power or something like that, like clearly that's immediate for you.

You've had recent outages and, you know, freezes and hurricanes and all that. But in the things that really we're talking about, this is going to play out over 10, 20 years, one, I worry that the planning horizon of a lot of actors, a lot of corporates, investors, et cetera, just isn't that long. and two, that we won't know whether it worked until much, much later in the future, and thus trust in those products and markets and services and analytics is tough to achieve. Definitely, yeah. I mean, like, one study that I think captures kind of the reality here, which totally validates what you're saying, Shale, in a lot of ways,

is, like, S&P Global did this, like, risky business report on the state of corporate action in the space. they looked at well over 6,000 corporates. And out of those 6,000 corporates or so, only 21% even had adaptation plans. And within those plans, only 50% we're going to, like, do anything before 10 years from now. So I think you're right on one side and that people are hedging.

They're like, how long can we wait to afford to, how long can we afford to do nothing on this, essentially? And human nature dictates that people will wait. But on the other hand, you've got highly exposed industries, like utilities, which I'll come back to, transportation, mining, construction, real estate. And, you know, much like this situation with insurance, these issues are today's issues. Like real estate, for instance, across the country, their insurance rates have risen 108% over five years.

Like, this is a space where, you know, commercial real estate owners and operators are seeing their assets, like, absolutely trashed by climate change. So they have, you know, a reason to act. Utilities, if you look at PG&E, they increase their wildfire budget by $4.9 billion between 2021 and 2023. So house on fire problem, right? You look at transportation. I don't know if you remember when that like huge ship was stuck in the Suez Canal and we lost like $60 billion worth of global trade. Like that's what's happening in the Panama Canal due to drought. So you can see the places where it's like if there isn't a solution now, tens of billions of dollars are going to be lost. So we do see these corporate leaders stepping forward and taking action. Can we talk for a minute about water tech?

You mentioned water a couple times. I've been meaning at some point to both do an episode on it and just generally get smarter about it myself because it's this adjacency to what I've spent my whole life focusing on, but I've never really dug into it. It seems like it's, correct me if I'm wrong, you think of it as a core category within the adaptation and resilience world? Totally. Yes, we do. We think of it is sort of like water and sanitation, but I can get into them more. Interesting. Okay, water and sanitation. Yeah, I mean, like, what's the state of that market from a, from a tech and investment standpoint? Yeah, so I will say we're really fortunate to have a few of the investors that have been very loud and proud on adaptation and resilience,

be water investors. We've had like burnt island ventures and Mazarin ventures, step forward and talk about, like, what are some of the ways in which the world is changing that is going to have to result in all sorts of innovation on water? I think that from a demand standpoint, when I went back in my clean tech open days, I remember trying to drive the conversation forward on water. And someone came up to me from one of the large EPC firms and was like, if you want to change water, you're going to have to rely on resignations and funerals, I think, he said, just because it's such an entrenched, intense, incumbent space. So obviously, you know, the most movement we've been seeing in this space has probably been on the supply side. there's been a lot of work to try to conserve the water that exists in systems, whether it's on the public side or agriculture, and that's where a lot of software and IoT has been used.

One cool, like emerging trend is we've been seeing a lot of companies look at airwater capture. Aquaria and source are good examples of that. And then we've also been seeing some bright spots around like reducing the energy intensity of desalination. But yeah, once again, until we see some really strong signals from by, buyers that they're willing to fund some of these more advanced systems that move beyond IoT and software and really get into large kind of economies of scale type water solutions. You know, I think it's going to be one of the more expensive spaces within adaptation and resilience to scale, even though we have seen probably more action on water than most of

the other thematic areas I mentioned. Yeah, I wonder a little bit whether, you know, the buyer side of most water tech ends up being government because the government provides water. It's supposed to be universally provided. There are exceptions to that, obviously. There will be corporates who need to purchase their own water, and there's, like, desal plants in Chile that are there to serve mining companies and stuff like that. But I wonder whether, you know, one of the things that's happened in the past few years in venture world is that defense tech has become a super hot category with lots of evidence that there are venture grade returns to be had there. And obviously, the defense department is its own

thing, and it's not totally the same. But it has created a really clear example of a like market wherein the government is the end customer, exclusively the end customer in that case, where there are venture grade returns to be had. And I wonder whether there's something to be learned from that in other categories, which, you know, you mentioned infrastructure and cities, like also a similar kind of thing. You've got like a really heavy government presence on the buyer's side there. So maybe we can learn something from how defense tech is, been built to figure out how to break through some of the walls that have made these categories, water being included there, considered to be uninvestable historically.

Absolutely. No, I think that that's a really, really good point. It was so funny because I found myself last summer show at the DoD's Climate Resilience Forum, which if anyone is curious about that, please, please holler at me. But basically, you know, it's like a 3,000 person conference that happens every year, and it's all the folks that run the military basis and installations across the country coming together talking about how the hell do we make sure that these assets are hardened and we have mission preparedness across the military. And to your point, the Defense Department has done an outstanding job of prioritizing this work of investing directly in solutions that can make sure that those facilities are protected. And that's in part because we've seen some military

bases in the country, like wiped off the map because of major storms like Tyndall Air Force Base during Hurricane Michael in 2018. But I think it is an absolutely great example of a place where the public sector is leading on climate adaptation and resilience and through acquiring all sorts of stuff from like, you know, novel personal protective equipment that enables folks to train in the military during extreme heat, all the way to like distributed energy resources for, you know, installations overseas, like, this is a part of the public sector that's going to rapidly lower the cost of stuff that, like, regular civilians need. And that could extend to stuff like, you know, detection of vector-borne illnesses or other illnesses or biometric sensors that detect,

like, what, bulb temperature, you know, in preemies in the hospital. Like, you know, it could be any number of things, just like we've seen them, you know, produce other services like the internet and MRIs that have impacted the whole population. I'm curious how you think about measurement and like what defines success in adaptation world. Obviously in mitigation in principle, it's pretty straightforward, right? I always say this. Like, if you can measure it in tons of CO2 equivalent, then it's definitely climate tech. But I don't know exactly what that would look like in adaptation resilience. Like, is there a way, presumably you can, at the macro level, you can like compare to some counterfactual and say, what was the impact on GDP or human health of

having a bunch more of X product out there. But, you know, presumably you're thinking about measurement of success here and probably have to define it to LPs and so on. Are there metrics that you think we can use? It's a great question. So I will say that generally speaking, you could think about measuring, or at least this is how we think about it right now. You can think about measuring adaptation, first of all, as a very spicy meatball, to your point, like, No, just to be clear, no answer exists. No one has kind of a monopoly on this space yet. And I think it's a really important place that we need to come together on as an ecosystem. You could think about it in two different areas. One is value at risk. And where that's concerned in terms of like quantifying, like what happens to this data center, you know, what happens to this community space, what happens to this group of people if the worst occurs. Like that is something that to varying degrees is difficult to quantify, but you can quantify, especially when it comes to economic assets. And there are a lot of different engineering firms like RWDI and Arup and others that are stepping in to like provide some of those calculations that I think the broader

investment space will probably end up using and that selling will do more work on. And then you have like this squishier idea of how do you ensure adaptive capacity. So there's sort of like a little continuum. This is what UNEP says about measuring adaptation that you could have like absorptive capacity, which is basically the lowest bar, like, are you coping with this stuff at all? Like, are you making incremental adjustments? Then you can have adaptive capacity, which is, like, are you actually adjusting in earnest to the things happening in the environment? And then, like, on the really ambitious side of the spectrum, you have transformative capacity, which is, like, are we making structural changes that inherently increase our ability to be resilient on an ongoing basis?

And we have done a very bad job to date as a community defining what does that continuum look like from a measurement standpoint. And this is where I think that, just to get on my soapbox, I think what we need to do here and we're committed to pushing on this a tailwind is like we need like a project drawdown for resilience or we need like we need like a speed and scale for resilience. That's what we need honestly because we need like the objectives and the key results here that are laid out in a way that reflects like. all the nuance and complexity of the space and allows us to kind of properly answer your question, if that makes sense. I agree, and I think it draws back to the first question of like,

what counts as adaptation? Because I think there's something here, right? And I think it's really interesting to draw across these seemingly disparate categories and look at what happens when a hurricane hits a military base over here and what happens when, you know, workers who are working outside are experiencing increasing heat over here,

like different things, but all of a kind and that they're impacted by climate change. So there's value in that, but I agree that, like, it needs to be well-defined or it's going to just kind of float out into the ether and never become its own thing, particularly if we think that

if the thesis, and presumably this is your thesis, is that with proper definition, this is a really attractive investment category, then it really needs to be well-defined and the opportunity set needs, to be clear. And then people can go after it and money can be deployed toward it and allocated from whomever is interested in it.

Exactly. Like just to drill into that point you're making further, Turner Construction, which has really been on the leading edge of looking at how does adaptation of resilience need to impact our operations. They have had a variety of different construction projects and like really hot parts of the United States. And because of that, they conducted this really forward-thinking study last year in Kansas city where they had 33 construction workers on one of their sites swallow these little,

basically biometric pills that were collecting their internal body temperature over the course of 24 hours. And they were able to determine, like, what percent ended up being like 43 percent of workers on the site had internal body temperatures that were like well above 100 degrees and could lead to like sustained health impacts. That is like so tangible now to them. Like having done that measurement work. They understand who's at risk. They understand what they can do to address that risk, like super cut and dry, despite the fact that, of course, it will require investment in action. Meanwhile, on the other end of things, it's like California's trying to ensure wild lands and ecosystems to try to, like, obtain resilience benefits. You know, how easy is it to measure

the presence of a resilience benefit or, like, a reduced storm surge if you invest in, like, a few miles of, like, grassy swale, question mark. You know what I mean? It's like, these things are completely different. Right. All right. This was a great intro to ANR, you call it? Adaptation Resilience. Okay, we're going to popularize that term. So great, great A&R 101 here. I think we should do it again at some point and really dive down into some of these categories a little bit more, particularly some of the ones that don't obviously overlap with climate tech world because that's what the folks like me have the most to learn about. But in the meantime, appreciate the walkthrough and we'll do it again. again. That sounds great. Thank you, Shale. Katie McDonald is the co-founder and managing partner of Tailwind Climate. This show is a production of Latitude Media. You can head over to Latitude Media.com for links to today's topics. Latitude is supported by Prelude Ventures.

Prilitude Backs Visionaries, accelerating climate innovation that will reshape the global economy for the betterment of people and planet. Learn more at Preludeventures.com. This episode was produced by Daniel Waldorf. Mixing by Roy Campanella and Sean Marquan, theme song by Sean Markwan. I'm Shell Khan, and this is Catalyst.