If you spend any time reading climate scientists’ prognostications for the future of the planet — not recommended for the faint of heart — it is clear the risks of climate change are real and will impact infrastructure and communities in a variety of ways. Stronger storms, rising sea levels and more intense heat already pose challenges to infrastructure built decades ago and underwritten without a full recognition of how changing climate might challenge its performance and affect the communities it serves.
Investors allocating long-term capital to infrastructure investments have to understand how these assets will withstand a more intense and varied climate over their lifecycles. What good is a toll road if it is flooded, or an electrical grid that fails in the midst of heat waves, or water systems that rely on reservoirs whose levels fall below outtake pipelines, rendering them useless?
Another decision investors have to conside