In recent weeks, when I haven’t been talking to Claude about building a climate adaptation portfolio, I’ve been fielding questions from investors about the implications of the Iran war.

As I have said before, the purpose of this research site is not to add to the cacophony of voices dissecting the likely next steps in the Iran war or opining on its legality or morality. However, a deeper question emerged in a conversation with an investor this week:

“What does the proliferation of geopolitical conflict mean for climate investing?”

This touches on Iran, certainly, but also speaks to the broader implications of this more volatile geopolitical world for climate investing — the point at which the changing political and physical world, the whole focus of The Resilient Investor, come crashing into one another.

In this week’s An Investor Asks, I build a picture of how this volatile environment affects both traditional climate transition investing and the emergent adaptation and resilience investment opportunity.

TLDR: The new geopolitical paradigm puts energy security front and centre. This is structurally positive for transition investing but creates short term headwinds in the form of distracted governments, economic pressures, and fiscal budget reallocation. For adaptation and resilience, physical climate risk is accelerating regardless of who is fighting whom but the resulting pullback in development aid and focus on domestic resilience tilts the investment opportunity more towards developed markets.

What Geopolitical Volatility Means for the Climate Investing Environment

Source: BlackRock (as of March 2026)

Investors have had to contend with a volatile decade of political risk, both at home and abroad. The past few years alone have seen conflict ignite with Russia’s invasion of Ukraine, the Israel-Gaza war, and most recently the US-Israeli military action in Iran.

This is a dramatic shift in tensions and political incentives. None of these events came completely out of the blue — longstanding pressures existed — but the how, when, and impact of tensions boiling over into conflict has taken investors into a new macropolitical world.

To understand what geopolitical conflict means for climate investing, it is worth first considering what it does to the political decision-making environment:

1. Attention is drawn to the immediate risk. Decision-making becomes short-term, focused on managing the conflict and its fallout.
2. The domestic agenda becomes about protection. Whatever time remains for domestic matters is consumed by managing near-term effects on voters and building resilience to geopolitical threat.

Add to this the fact that the current conflicts carry profound energy market implications. Iran and Russia’s control of key energy resources and transport pathways, combined with the regional exposure of Middle Eastern energy assets to conflict, means this geopolitical tension has a strong energy security component.

The pre-existing domestic context is also important. The current US administration entered office with an aggressively anti-ESG, pro-“drill baby drill” agenda that had damaged confidence in the climate investing outlook before this conflict began.

Finally, the inflationary and growth effects of geopolitical conflict are important macro conditioning factors because of their impact on central bank policy and on consumers’ and corporates’ ability and willingness to invest and spend.

Energy Security: The Cornerstone for the Next Phase of Transition Investing

This confluence of factors creates a fundamental tension when assessing the impact of current geopolitical unrest on transition investing. The reality is that effects will vary by region and area of the transition, with a high degree of uncertainty given the volatility at hand.

The clearest positive effect on the transition investment opportunity is the impact these wars have on renewables demand. The centrality of energy to these conflicts puts domestic energy security front and centre for countries both involved in and on the sidelines of the fighting.

This transforms the energy transition from a long-term “nice to have” into a crucial short-term priority for ensuring domestic sovereignty. Voter sensitivity to energy prices further reinforces political incentives to reduce reliance on oil and gas.

This is especially true for states and regions that import significant volumes of fossil fuels and where openness to renewable energy already exists.

A clear example can be found in the EU’s response to Russia’s invasion of Ukraine in 2022. The bloc assembled the REPowerEU plan, described by the European Commission as follows:

Source: European Commission, 2026

The language here is striking and, I believe, fundamental to the next phase of transition investing. It is the language of political and economic necessity rather than a green agenda driven by morality or planetary concern.

That shift matters because it creates a structural investment opportunity — one not driven by fleeting political or investor sentiment. Renewables provide a crucial form of energy sovereignty. You do not have to believe all energy will come from renewables to accept that they can be a useful cornerstone of modern energy sovereignty.

But Headwinds Remain

The case I have made above is very much a medium-term one. I see the current geopolitical environment as a structural shift, and as such I expect the benefits to renewables to play out over the medium term. In the short term, however, there are significant headwinds to bear in mind.

The sharpest clash between domestic and foreign incentives near term is in the United States.

Under the previous Biden administration, energy security was used as an explicit driver of the climate policy-packed Inflation Reduction Act. The Trump administration has since set about dismantling significant components of it — running directly counter to the case for renewables being bolstered by energy security needs.

This reflects the true complexity of America’s polarised political environment, the reality that it possesses its own fossil fuel capacity, and the uncertainty that comes with any given president’s next move.

Beyond the US, there are several ways in which these wars — and conflict more broadly — can significantly hamper the energy transition and, by extension, the opportunity for investors:

1. Distracted politicians focused on conflict abroad have less time and energy for long-term policy and regulatory work.
2. If central banks tighten policy in response to the inflationary effects of these wars, the interest rate passthrough poses risks to leveraged renewables firms.
3. Decision-making paralysis during conflict can delay investment in both the public and private sectors. Appetite for risk-taking is understandably dulled as people await clarity about the future.

The result is a dynamic of medium-term structural demand for renewables combined with short-term challenges for individual firms in certain geographies.

Adaptation and Resilience Investing at War

For adaptation and resilience, the picture is also nuanced.

Adaptation and resilience were already underfunded and underrepresented in the international political agenda before these wars broke out — particularly for developing countries, where physical risks are most severe but capacity to adapt is weakest.

Source: UN (as of October 2025)

As developed countries pivot toward defence in both multilateral and budgetary discussions, the risk to these exposed developing countries grows. Physical risk will continue to accelerate regardless of conflict, but development aid — their primary source of adaptation finance — is squeezed.

The adaptation and resilience investment opportunity is therefore likely to be most clearly supported by policy and by consumer demand in countries where populations can afford to rebuild. This is not to say emerging markets hold no adaptation investment opportunities, but they face greater headwinds in the face of these wars than they did before.

In developed markets, war is less significant for the adaptation and resilience investment outlook.

While distracted politicians, budgetary pressures, inflation and economic weakness have implications for individual solutions firms, the thematic investment opportunity is significantly less dependent on political incentives that transition investing is because it is about preserving what is rather than imagining what could be.

Voters and politicians tend to have a bias for preservation over innovation. Physical risk response is a necessity in this regard and extreme weather is happening regardless of war.

Indeed, adaptation and resilience may actually be a beneficiary of the incentive to build domestic resilience in this more geopolitically unstable world.

Further, if the case for renewables I outlined above does not hold up against the headwinds these wars are bringing, the case for adaptation and resilience investing is only reinforced as climate change escalates.

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.