Mott MacDonald’s Denise Bower and Coalition for Climate Resilient Investment director Carlos Sanchez outline the case for unlocking resilient infrastructure investment.

This summer saw the hottest temperature on record in the UK as mercury hit 40.2C. 

The scorching heat throughout much of Europe served as a timely reminder to anyone who had forgotten: the climate emergency is very much here, and much of our infrastructure is not ready. 

In the UK, the extreme temperatures buckled train tracks and melted tarmac. Across Europe, gas pipelines were affected with reduced flows, while extremely low levels on the River Rhine threatened the delivery of fuel to power plants. 

These events came in the same week as a report commissioned by the German economy and environment ministries estimated that the financial impact of drought, floods and extreme heat in Germany between 2020 and 2021 was nearly 145bn euros. 

The challenges aren’t limited to Europe, of course. Around the world, changes to weather systems are threatening the performance of our infrastructure and the communities that rely on it. 

With at least 3.3 billion people living in situations that are highly vulnerable to climate change, according to the IPCC, designing infrastructure to ensure that it remains resilient in the face of climate change is becoming increasingly urgent. From water to waste and transport to energy, our infrastructure must be resilient. 

With 75% of the global infrastructure needed by 2050 still to be built, much of it in emerging economies, there is a real opportunity to embed climate resilience as new infrastructure is created. In more mature markets, the existing asset base must be retrofitted with resilience and adaptation in mind. 

This is an enormous undertaking and the funding requirements run into the trillions of dollars. The question is, how do we unlock this? 

Part of the answer, we think, lies in the Physical Climate Risk Assessment Methodology (PCRAM). 

Mott MacDonald and the Coalition for Climate Resilient Investment have been working together to plug the most immediate gap – providing infrastructure owners and operators with the right data and tools to make investment decisions, which up until now haven’t been available. 

We know that climate resilience and adaptation is complex and requires specialist inputs from climate scientists, asset operators and managers, engineers and financiers. 

For the first time, PCRAM brings together these four specific domains to give those investing in infrastructure greater certainty in the physical risks to their asset, mitigation and adaptation measures, and the impact of these measures on performance over the asset’s lifetime. 

PCRAM then shows how investment into these resilience measures impacts the internal rate of return (IRR) of the asset over time. 

In the real-world scenarios we have tested it on, PCRAM reveals significant upside in resilience investment: less downtime, less maintenance, and improved asset performance all resulting in improved IRR. 

Until now, the private sector has not had the right tools to make decisions that optimise costs throughout an asset life while incorporating climate risk mitigation. 

The cost-benefit analysis of implementing resilience measures for these assets clearly demonstrates the significant medium- to long-term benefits from investing in resilience compared to the cost of not implementing such measures. 

Put simply, PCRAM presents a compelling business case for resilient investment, unlocking the finance needed to protect vulnerable communities from the impacts of climate change.

PCRAM’s guidance documents have been published online and are freely available to download. Our hope is that the availability of this new methodology will unlock the capital we need to deliver a resilient world. 

Denise Bower is executive director at Mott MacDonald, and Carlos Sanchez is executive director at the Coalition for Climate Resilient Investment.