Trend analysis: Flood, drought & wildfire resilience — where the value pools are (and who captures them)

The January 2025 Los Angeles wildfires—the costliest in U.S. history at over $60 billion in damages—crystallized a reality that McKinsey now quantifies at $1 trillion: the climate resilience technology market has reached an inflection point. Yet despite 27 billion-dollar climate disasters striking the United States in 2024 alone, less than $8 billion has been raised across fewer than 120 dedicated climate resilience funds, compared to over $650 billion mobilized for decarbonization from more than 1,300 funds (McKinsey, 2025). This asymmetry between escalating physical risk and deployed capital represents both a systemic vulnerability and an unprecedented value creation opportunity. With the climate adaptation market projected to reach $104.9 billion by 2032 at a 16.74% CAGR (Fortune Business Insights), understanding where value pools concentrate—and who captures them—has become essential for founders, investors, and policymakers navigating this rapidly evolving landscape.

Why It Matters

The business case for flood, drought, and wildfire resilience has shifted from theoretical to urgent. CoreLogic identified 2.6 million homes in the western United States facing moderate-to-high wildfire risk, representing $1.2 trillion in reconstruction costs. Meanwhile, the OECD estimates that every dollar invested in climate adaptation yields $2 to $10 in economic returns, yet communities that cut resilience investments risk losing 30 times that amount in economic activity over the next decade (OECD, 2024).

Three structural forces are accelerating investment into this space. First, the insurance industry's retreat from high-risk markets—over 350,000 California homeowner policies were non-renewed between 2023 and 2024 due to outdated risk models—has created both a coverage crisis and a demand signal for better risk analytics. Second, regulatory pressure is mounting: FEMA's Building Resilient Infrastructure and Communities (BRIC) program, the Inflation Reduction Act's climate provisions, and state-level initiatives like California's Proposition 4 wildfire resilience bond are channeling billions into adaptation infrastructure. Third, the private sector is recognizing that physical climate risk translates directly to asset value impairment, supply chain disruption, and liability exposure.

The stakes extend beyond property damage. The World Bank's Global Facility for Disaster Reduction and Recovery (GFDRR) informed 38 projects totaling $5.12 billion in fiscal year 2024, while developing countries face an annual adaptation financing gap of $215 billion (OECD). Urban climate finance for adaptation reached only $10 billion against a total urban climate finance flow of $831 billion in 2021-2022—underscoring how dramatically underweighted resilience remains relative to mitigation.

Key Concepts

Understanding value capture in climate resilience requires distinguishing between three interconnected market layers:

Risk Intelligence and Analytics: This layer encompasses the data infrastructure that enables pricing, underwriting, and investment decisions. Companies operating here convert satellite imagery, weather data, vegetation monitoring, and hydrological models into actionable risk scores. The shift from zip-code-level to property-level resolution—now reaching 300-square-foot precision in wildfire modeling—represents a quantum leap in underwriting accuracy.

Physical Infrastructure and Hardening: This includes nature-based solutions (wetland restoration, urban forest canopy expansion), engineered systems (flood barriers, fire-resistant building materials), and hybrid approaches. Value pools here are substantial but fragmented, often requiring public-private coordination and long payback horizons.

Financial Products and Risk Transfer: Parametric insurance, catastrophe bonds, and resilience-linked lending represent mechanisms for monetizing risk reduction. Descartes Underwriting's Fire-in-a-Circle and Burnt Area products exemplify how parametric structures can deliver payouts within days rather than months, fundamentally changing the economics of post-disaster recovery.

Sector-Specific KPI Benchmarks

Metric	Baseline Range	Leading Performance	Measurement Frequency
Risk model resolution	Zip-code level	300 sq ft property-level	Continuous
Early warning lead time	6-12 hours	24-72 hours	Event-based
Detection-to-dispatch time	30+ minutes	<10 minutes	Per incident
Adaptation ROI	2:1	10:1	Annual
Insurance coverage gap	60-70% uninsured	<30% uninsured	Annual
Nature-based solution coverage	<5% of spend	15-20% of spend	Project-level

What's Working and What Isn't

What's Working

AI-powered early detection systems are demonstrating measurable impact. Pano AI's network of ultra-HD cameras detected over 100 fires during the 2024 season, with their Wellington Fire alert arriving 21 minutes before official dispatch—a margin that can mean the difference between a contained incident and a catastrophic blaze. The company now operates across 16 U.S. states plus Australia and Canada, indicating rapid market validation.

Utility-sector vegetation management has emerged as a high-leverage intervention point. Rhizome's gridFIRM platform, now deployed by National Grid across New York, Massachusetts, and the United Kingdom, provides site-specific recommendations with cost-benefit analysis for pole replacement, vegetation clearing, and equipment upgrades. Given that utility equipment ignites a significant percentage of catastrophic wildfires, this represents a leverage point where relatively modest investments prevent outsized losses.

Parametric insurance products are gaining traction for their speed and transparency. Unlike traditional indemnity insurance, which requires lengthy claims adjudication, parametric products trigger automatically when predefined conditions are met (e.g., satellite-confirmed burn area exceeding a threshold). Descartes Underwriting reports that their wildfire products delivered payouts within days following 2024 events, against an industry backdrop of $6 billion in global wildfire losses with only $3 billion insured.

State-level policy innovation is unlocking substantial capital. California's Proposition 4 authorized significant funding for safe drinking water, wildfire prevention, and drought preparedness. Hawaii implemented a $100 million annual "green tourism tax" dedicated to resilience, while Massachusetts allocated $31 million through its Municipal Vulnerability Preparedness program for 2025.

What Isn't Working

Equity in resilience funding distribution remains a critical failure mode. Research from The Pew Charitable Trusts found that 76% of FEMA BRIC grants went to high-capacity communities, while 46% of very-low-capacity communities face high flood risk and 38% face high wildfire risk. Compounding this, 19% of these vulnerable communities face both high flood and wildfire exposure. Without deliberate intervention, market-driven resilience investment risks exacerbating existing inequalities.

Legacy risk models continue to drive market distortions. Insurance industry reliance on decade-old catastrophe models—which failed to anticipate the acceleration of wildfire intensity in the wildland-urban interface—contributed to both massive underpricing of risk in the 2010s and overcorrection through blanket policy non-renewals in 2023-2024. The result is a protection gap that leaves millions of properties effectively uninsurable under traditional frameworks.

Nature-based solutions remain chronically underfunded relative to grey infrastructure. Despite strong evidence for the cost-effectiveness of wetland restoration, urban tree canopy expansion, and watershed protection, these approaches struggle to attract private capital due to long payback periods, measurement challenges, and fragmented governance structures. Urban adaptation received only $10 billion of $831 billion in total urban climate finance in 2021-2022.

Coordination failures between detection and response persist. While AI-powered detection systems have dramatically compressed the time from ignition to alert, the interface between private technology providers, public emergency services, and utility operators often introduces friction that negates time savings. Institutional interoperability remains an underappreciated bottleneck.

Key Players

Established Leaders

CoreLogic provides the industry-standard risk scoring platform used by major insurers nationwide, with their identification of $1.2 trillion in at-risk reconstruction value shaping underwriting decisions across the property insurance sector. Verisk Analytics offers comprehensive disaster reconstruction modeling and regional risk scoring that informs both pricing and reserve adequacy calculations. Jacobs Solutions and Fluor Corporation dominate the engineering and infrastructure segment, executing large-scale flood control, drought mitigation, and fire-hardening projects for government and utility clients. IBM and Accenture operate enterprise-grade climate risk analytics practices serving Fortune 500 sustainability and risk management functions.

Emerging Startups

Terrafuse AI (acquired by FutureProof Technologies in November 2024) developed patented machine learning models delivering 300-square-foot resolution wildfire burn probability with 50+ daily-updated variables. Delos Insurance Solutions combines NASA Earth-observation imagery with hundreds of climate science parameters to offer direct wildfire coverage to California homeowners that legacy carriers have abandoned. One Concern applies AI and machine learning to predict natural disaster impacts for community resilience planning. Pano AI has scaled its camera-and-satellite detection network across three countries in under three years. Overstory processes high-definition satellite imagery to predict tree-fall risk and detect dry brush conditions for utility vegetation management.

Key Investors

Breakthrough Energy Ventures, backed by Bill Gates, has deployed $3.5 billion across 110+ companies since 2016, with climate resilience representing a growing allocation. Lowercarbon Capital, co-founded by Chris Sacca, has backed resilience-adjacent companies including Loam Bio's $70 million Series B. Convective Capital operates as a dedicated wildfire-focused venture fund. Lightsmith Group closed a $186 million growth equity fund targeting climate adaptation and resilience. TPG Rise Climate made its first dedicated resilience investment in 2025 with the SICIT acquisition. Energy Impact Partners has deployed over $500 million to 100+ clean energy and resilience companies across the U.S. and Europe.

Examples

1. FutureProof Technologies launched in August 2024 and has already written over $1 billion in insurable value, focusing on catastrophe-exposed markets that legacy carriers abandoned. Their November 2024 acquisition of Terrafuse AI positions them to underwrite West Coast wildfire risk with granularity that legacy competitors cannot match. This vertical integration of risk analytics and insurance capacity represents a template for capturing value across the risk-to-coverage chain.

2. Green Shield Risk Solutions partnered with Technosylva in December 2024 to become the first insurance company deploying wildfire propagation modeling developed over 30 years of collaboration with fire agencies. Their Property Guardian suite enables virtual mitigation inspections that can condition coverage on homeowner action, shifting the value proposition from pure risk transfer to risk reduction.

3. BlueConduit exemplifies infrastructure resilience in the water sector, using data analytics to identify and prioritize lead pipe replacement in municipal water systems. Their approach—converting fragmented legacy records and predictive modeling into actionable replacement schedules—demonstrates how software can accelerate physical infrastructure upgrades that would otherwise take decades.

Action Checklist

• Audit your portfolio or operations for unpriced physical climate risk exposure, particularly in the wildland-urban interface, 100-year floodplains, and drought-vulnerable watersheds.
• Evaluate next-generation risk analytics providers (Terrafuse, One Concern, Delos) against legacy platforms to understand resolution and update frequency gaps.
• Map state and federal resilience funding programs (BRIC, IRA, state bonds) to identify non-dilutive capital that can de-risk early project phases.
• Assess parametric insurance products as complements to traditional coverage, particularly for business interruption and supply chain exposure.
• Engage utility partners on vegetation management and grid hardening initiatives that create mutual value through reduced ignition risk.
• Conduct scenario analysis for 1.5°C, 2°C, and 3°C warming pathways to stress-test asset and supply chain resilience across time horizons.

FAQ

Q: Why hasn't more capital flowed into climate resilience given the clear market signals? A: Several structural barriers explain the gap. Resilience projects often generate diffuse, long-term benefits that are difficult to monetize through traditional financial instruments. The beneficiaries of avoided losses (homeowners, municipalities, insurers) are fragmented, complicating willingness-to-pay aggregation. Additionally, many investors remain anchored to decarbonization narratives and lack the expertise to underwrite physical climate risk. The emergence of dedicated resilience funds (Lightsmith, Convective) and the maturation of parametric products are beginning to address these frictions.

Q: Which subsegments offer the highest near-term value capture potential? A: Risk intelligence platforms—particularly those achieving property-level resolution with daily updates—represent the highest-margin opportunity given their leverage across the insurance value chain. Early detection systems like Pano AI are scaling rapidly due to clear ROI for fire agencies and insurers. Utility vegetation management occupies a sweet spot of large addressable market, quantifiable loss prevention, and regulatory tailwinds following landmark liability cases.

Q: How should founders think about the build-vs-partner decision in this space? A: The resilience market rewards platform strategies that aggregate data from multiple sources (satellite, IoT, weather, historical claims) and distribute insights across multiple customer segments (insurers, utilities, municipalities, asset managers). Pure-play detection or modeling companies face acquisition risk, as FutureProof's Terrafuse acquisition illustrates. Founders should evaluate whether their technology is most valuable as a standalone product, an embedded capability within existing platforms, or an enabler of new financial products.

Q: What role do nature-based solutions play in the value pool? A: Despite strong evidence for cost-effectiveness—wetland restoration can provide flood protection at a fraction of grey infrastructure cost—nature-based solutions capture a disproportionately small share of resilience investment due to measurement challenges, fragmented governance, and long payback periods. Emerging MRV (measurement, reporting, verification) technologies and blended finance structures are beginning to unlock this segment, but it remains earlier-stage than technology-driven approaches.

Q: How is regulation shaping competitive dynamics? A: Regulatory pressure is creating both demand pull and compliance burden. FEMA's updated flood maps, California's new building codes for fire-prone areas, and mandatory climate risk disclosure requirements (SEC, ISSB) are expanding the addressable market while raising the bar for data quality. Companies that can demonstrate regulatory compliance as a byproduct of their core offering—rather than a separate workstream—will enjoy structural advantages.

Sources

• McKinsey & Company. "Climate resilience technology: An inflection point for new investment." McKinsey Sustainability Practice, 2025. Accessed January 2026.
• Fortune Business Insights. "Climate Adaptation Market Size, Share & Growth Report 2032." 2024. Market sizing and CAGR projections.
• CoreLogic. "Western U.S. Wildfire Risk Report." 2024. Property exposure and reconstruction cost estimates.
• OECD. "Getting the Framework Right: Scaling Up Investment in Climate Adaptation." October 2024. Adaptation financing gaps and ROI analysis.
• The Pew Charitable Trusts. "Small Communities Can Leverage Big Resources for Disaster Resilience." March 2025. BRIC grant distribution analysis.
• PwC. "State of Climate Tech 2024." Global climate tech investment trends and adaptation sector analysis.
• GFDRR (Global Facility for Disaster Reduction and Recovery). "Annual Report 2024." World Bank climate project portfolio data.
• Risk & Insurance. "How AI Fire Tech & Insurers Are Reinventing Wildfire Detection in 2025." Pano AI case study and detection metrics.