El Niño Forecast Highlights Urgency for Resilience Infrastructure Investment
Federal forecasters estimate a two-in-three chance of a strong El Niño this winter, with more than one-in-three odds of it matching or exceeding the record 2015 event. This forecast underscores a growing imperative for investment in resilience infrastructure, which has emerged as a distinct but underdeveloped investment category within capital markets. Experts note that while investor interest is rising, a structural gap exists in how these investments are packaged and understood, particularly as their returns often manifest as avoided losses. The cost of inaction on resilience is projected to be significantly higher than proactive investment.
Federal forecasters indicate a roughly two-in-three probability of a strong El Niño developing this winter, with the odds of it equaling or surpassing the 2015 record event estimated at better than one in three.
This projection brings increased attention to resilience infrastructure, which has become a recognized investment category. Capital markets, however, have been slow to fully engage with this sector. The financial benefits of resilience are often understated, encompassing protection for property values, the tax base, business continuity, and credit quality.
Hoboken, New Jersey, provides a case study in proactive resilience. Following Superstorm Sandy, the city implemented projects such as ResilienCity Park, which combines green space with underground stormwater detention systems capable of holding approximately two million gallons during heavy rainfall. These efforts, part of the broader Rebuild by Design initiative, led to reduced flooding, quicker recovery, and fewer disruptions for residents and businesses. S&P Global Ratings repeatedly affirmed Hoboken’s AA+ credit rating, citing the city's investments in resilience and its approach to long-term environmental risk.
Demand for resilience-focused investment is expanding beyond what public funding alone can support. Boston Consulting Group projects that annual demand could reach $3 trillion by 2030, while the cost of failing to act could be up to 15 times higher. A survey conducted by BCG and the Rockefeller Foundation found that over four in ten institutional investors across major markets now seek exposure to adaptation and resilience themes. Rating agencies, including Moody's, are also integrating physical climate risk into their analyses.
Effective engagement with this market often requires categorizing resilience by physical sector rather than a singular 'climate adaptation' umbrella. Key sectors include flood and stormwater infrastructure, grid and energy hardening, water supply and treatment, wildfire defense and forest management, and coastal and transportation adaptation. Each sector has unique engineering, regulatory, and stakeholder profiles.
A primary challenge for capital markets lies in the nature of returns from resilience infrastructure, which largely derive from avoided losses—damage prevented, business interruptions averted, and revenues preserved. These benefits accrue across various entities, including municipal budgets, insurance balance sheets, small businesses, and private property. While investor interest is growing, the development of adequately engineered, permitted, and structured projects remains a slower process, hindering broader investment activity.
According to Fortune, these dynamics suggest an urgent need for capital markets to better adapt their structures and standards to facilitate investment in climate resilience.
