As headlines arrive thick and fast in the opening weeks of 2026, it is tempting to respond by writing about each unfolding geopolitical event in turn. Yet beneath the daily news cycle sit longer-term dynamics that matter for portfolio risk and return opportunities that investors often miss.

Recent events provide a useful illustration. No sooner had the US intervention in Venezuela occurred than politicians on both sides of the Atlantic began exchanging increasingly tense statements about the United States’ interest in Greenland — an Arctic territory that has long held strategic significance because of its location.

The debate over potential US action in Greenland, however, points to something deeper than a sequence of isolated geopolitical flashpoints. It illustrates how physical climate change is increasingly influencing political strategy, and by extension macroeconomic and market outcomes.

2026 is bringing physical climate risk into focus

Beyond straining relations among NATO allies, Greenland offers a clear example of climate change as a present-day force rather than a distant abstraction. Melting ice caps are altering physical security considerations by opening new maritime routes around the island, while simultaneously unlocking access to previously inaccessible rare earth mineral deposits.

At the same time, an excellent working paper published this week by researchers at the University of Zurich provides new evidence on the financial impacts of extreme weather events — the more acute manifestation of physical climate change — at the company level.

My Key Takeaways from the Paper:

1️⃣ Extreme weather has had significant and varied financial impacts.
Traditional macro-level impact studies obscure how extreme weather events affect companies. This research provides much-needed firm-level detail, showing wide variation in financial impacts by sector and geography.

2️⃣ Impacts are not uniformly negative.
For some energy firms, winter storms affected pricing dynamics in ways that produced positive abnormal returns. This highlights the opportunity set in adaptation and resilience investing for investors who know where to look (more on this later).

3️⃣ This is relevant now.
The model is grounded in historical data, not hypothetical future scenarios — an important reminder for those who still view climate risk as a distant rather than present-day portfolio management issue.

Source: Schimanski, Tobias and Gostlow, Glen and Toetzke, Malte and Leippold, Markus, What Firms Actually Lose (and Gain) from Extreme Weather Event Impacts (January 06, 2026). Available at SSRN: https://ssrn.com/abstract=6035794 or http://dx.doi.org/10.2139/ssrn.6035794

Adapting and Building Resilience to a Changing Climate is Every Investor’s Problem

A number of those I have spoken to over the past few weeks have highlighted that physical climate risk has risen up their agenda for portfolio analysis in 2026. This is at the same time encouraging and overdue.

But those individuals are mostly in responsible investing teams. This highlights a structural issue: physical risk analysis remains largely siloed within responsible investment teams, rather than fully embedded in risk management and portfolio construction.

This is understandable. Those who work in RI or sustainable teams tend to be knowledgeable and passionate about climate change. But when a topic is delegated entirely to a sustainability team, there can be a tendency for fund management teams to consider the issue optional or non-core to market fundamentals.

Compounding the problem, many responsible investment teams lack the technical resources to translate climate data into clear, return-focused insights for investment teams. This is not universally true, but it remains a persistent weakness across much of the industry.

Climate has also gotten caught up in the backlash against ESG. As one investor put it to me recently: why not talk about “weather” rather than “climate”? Analysts appear to engage more readily with weather as an operational variable, while climate has become entangled with advocacy in ways that can inhibit objective analysis.

This is precisely why research such as the Zurich paper is so valuable. It is granular, technical, and returns-focused. It is analysis, not advocacy — and we need far more of it.

Lets get technical

Clearly we need to reframe the issue as a technical portfolio risk and investment opportunity, rather than as a values-driven or “sustainability” issue.

To do this, we first need to equip mainstream investors with the terms and sources to understand physical climate change. Climate and RI professionals can tend to use complex scientific terms with little explanation, exacerbating the gap between RI and investment team collaboration.

Here is a quick glossary of relevant terms:

• Physical Climate Risk – The acute (extreme weather events) and chronic (long term temperature and precipitation change, sea rise) effects of climate change on people, businesses and the economy.
• Climate Adaptation – Changes in behaviour and activity to adapt to acute and chronic climate change.
• Climate Resilience – The capacity to withstand the effects of acute and/or chronic climate change impacts.

(As an aside: it may be helpful to think of adaptation as the flow of solutions that support the stock of resilience capacity for a business.)

NGOs like the UN are a crucial source of information on key climate adaptation and resilience data, like the adaptation funding gap. Yet few mainstream investors are regular consumers of these reports.

This is understandable. These kinds of reports are not the first to flash up on Bloomberg and they often adopt a philanthropic tone, emphasising the moral and human costs of physical climate change. Investors may respond to this on a human level but fail to see the significance for their portfolios unless they are in an impact investing role.

This is a mistake. These reports contain material information for investors with global exposures — both asset owners and asset managers. When confronted with an adaptation funding gap, investors should not read it as a call for philanthropy, but as a warning signal of potential portfolio risk, particularly in emerging markets.

The challenge is to translate the relevance to broader portfolios. The chart below shows the adaptation funding need for developing countries, based off of modelling for the next ten year period. An investor who reads this should not anchor on the call for funding as much as the estimated cost that businesses will bear ($310bn a year for the next decade) and identify their exposure to developing countries either directly or – crucially – through supply chains.

Source: UN (as of 2026) https://wedocs.unep.org/items/b547996e-14ee-4f1c-a6d4-b811dd373ae9

Turning from challenge to opportunity

Where market blind spots exist, opportunity often follows. And physical climate risk remains a blind spot in many portfolios.

While the research I’ve shared above is mostly focused on the downside risk management side of physical climate change, which is very important, I firmly believe that investors are missing the silver lining: adaptation and resilience is a profound, multi-sectoral, return-generative investment theme.

The thesis is somewhat simple: The climate is warming, which affects both chronic long term temperatures and the frequency and severity of acute weather events, which in turn changes the way that people and companies can behave.

It is hard to get to work in a tropical storm. It is impossible to make widgets if a tornado tears through your factory. And a few degrees on the thermostat can fundamentally shift consumer demand patterns for heating, cooling and building materials.

Companies that thrive in this challenged environment present a compelling opportunity.

So how can we translate that into an investment theme? Firstly, it is useful to articulate which companies win in this environment.

In my view, these are:

1. Adaptation Investments – Companies providing solutions that enable households, firms, and infrastructure to adapt to changing physical conditions.
2. Resilience Investments – Companies that are better positioned than their peers to withstand climate-related disruptions, whether due to deliberate adaptation strategies or structurally lower exposure.

Next up, consider how this fits in a global portfolio. As I laid out before, climate mitigation strategies (e.g. energy transition funds) have tended to exhibit a strong growth bias, reflecting the sectors and technologies involved. This can create challenges during market phases where the growth factor is less in vogue.

Physical climate change, by contrast, is an economy-wide phenomenon. Its effects vary by geography and sector, but they play out across the entire market. This means adaptation and resilience investment opportunities can be found in every sector of the economy.

This matters for portfolio construction. By spanning both value and growth, this investment theme offers investors flexibility throughout market cycles and has the potential to reduce tracking error compared to more sector constrained thematic funds.

Over the coming months, I will be exploring opportunities by sector and geography, providing investor frameworks and tools for accessing this emergent investment theme. If you’d like access to these insights, please subscribe using the button below.

This material is provided for informational and educational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any securities.