Schroders Launches Climate Adaptation Investment Framework With CalPERS

Schroders has launched its Climate Adaptation Investment Framework, a new tool developed in collaboration with the California Public Employees' Retirement System, aimed at helping investors assess the economic and investment potential of more than 100 climate adaptation activities. The framework comes as annual demand for climate adaptation and resilience solutions could reach as high as $1.3 trillion by 2030, according to BCG research cited by Schroders.

 

Why the Framework Distinguishes Economic Value From Investable Opportunity

 

Schroders specifically frames the framework's purpose around a distinction CalPERS Sustainable Investments Director Nelson Da Conceicao made directly: "not all adaptation solutions are investable on purely commercial grounds today." That framing matters because it identifies a specific gap this tool is designed to address: an adaptation activity can generate substantial economic value or avoided losses to broader society without necessarily generating a durable, capturable revenue stream for a private investor funding it, since societal benefit and investable cash flow are genuinely distinct properties an activity may or may not both possess simultaneously.

The framework is specifically "designed to distinguish between where adaptation can create significant economic value and where investors may actually be able to capture that value through durable business models and cash flows," a structural distinction addressing the practical challenge facing investors evaluating this space: identifying which of the many activities generating genuine climate resilience benefit also happen to offer a viable path to attractive, sustained financial returns, rather than treating high societal benefit alone as a sufficient signal of investment attractiveness.

 

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Why Joint Development With CalPERS Provides a Distinct Practitioner Perspective

 

The framework was "developed by Schroders in collaboration with" CalPERS, one of the largest US public pension funds, a partnership structure that brings a genuine asset owner's practical portfolio management perspective directly into the framework's design, rather than the tool being developed purely from an asset manager's research perspective independent of any specific institutional investor's actual fiduciary application needs. Da Conceicao specifically framed CalPERS's interest around practical portfolio application, stating the framework "gives asset owners and investors a practical way to assess, compare, and prioritize investments" to "strengthen portfolio and economic resilience."

That collaborative development matters because CalPERS, as a major pension fund with direct fiduciary obligations to its pensioners, would bring genuine real-world constraints and practical requirements to the framework's design that a purely academic or research-only development process might not adequately capture, including specific considerations around how climate adaptation investment fits within a large institutional portfolio's broader risk, return and fiduciary duty requirements.

 

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Why the Dual Application to New Investment and Existing Portfolio Engagement Matters

 

Schroders states the framework "can also be used to assess existing portfolios and provide a more concrete basis for engagement with companies around physical climate risk and resilience," extending its application beyond simply identifying new climate adaptation investment opportunities into also serving as an evaluative tool for companies and assets already held within an investor's existing portfolio. That dual application matters because it positions the framework as serving two genuinely distinct investor functions: prospective opportunity identification for new capital deployment, and retrospective or ongoing risk assessment and engagement for capital already committed to existing holdings.

That engagement application specifically connects to the broader pattern of investor stewardship and company engagement on climate risk examined throughout this batch's coverage of ESG investing practices, since having a structured, consistent framework for assessing a portfolio company's climate adaptation and resilience position provides investors a more concrete basis for engaging that company on specific resilience improvements, rather than relying on more general or qualitative climate risk discussions absent a structured comparative framework.

 

Why Schroders' Head of Sustainability Frames This as Reframing Climate Risk as Economic Opportunity

 

Schroders' Marina Severinovsky specifically stated "investors have traditionally viewed the physical impacts of climate change primarily as a risk to their portfolios, but there is another side to that equation," positioning this framework as addressing what she frames as an underexplored dimension of climate risk analysis: the economic and investment opportunity side of climate adaptation, distinct from the more established practice of assessing physical climate risk purely as a portfolio threat to be measured, disclosed and mitigated. That framing positions the framework's launch within a broader evolution in how institutional investors are beginning to approach physical climate risk, extending beyond risk measurement and disclosure toward actively identifying investable opportunities specifically created by the same underlying physical climate changes driving that risk exposure in the first place.

 

Source: Schroder