The Defining Challenge of the Decade: The Age of Existential Risk

Follow the discussion on LinkedIn | Follow the discussion on X.com

The climate conversation has permanently changed. We’re no longer just talking about the energy transition, carbon emissions, or regulatory compliance. Today, the conversation centers on preventing catastrophic economic and physical loss—because the stakes are now existential.

Over the last two decades, we’ve witnessed distinct phases in the evolution of climate investment.

1️. CleanTech 1.0 (2005–2015): Focused on powering the energy transition through renewable energy investments.

2️. ClimateTech 2.0 (2015–2025): Focused on emissions reduction, sustainability, and regulatory compliance.

3. ClimateRisk 3.0 (Now): Focused on risk and security—protecting companies, individuals and infrastructure from climate-induced catastrophic economic and physical loss.

This progression has seen climate technology evolve from a cost center into a source of competitive advantage, and now, into a crucial component of enterprise survival. Companies that ignore these worsening risks face the very real possibility of eroded enterprise value and long-term sustainability.

Beyond Hurricanes & Wildfires Lies A Full-Blown Financial Crisis

Preventing catastrophic loss is beyond physical impacts from hurricanes and wildfires—it’s addressing a financial emergency. We’re talking about billions of dollars in lost revenue, asset devaluation, and unmanageable liabilities that could cripple companies for years to come.

Energy Instability: Blackouts and grid failures have become systemic risks, driven by climate stress and aging infrastructure. Weather-related outages now account for 80% of major U.S. power failures. Over the past five years, billion-dollar weather disasters have cost $603B, averaging $120B+ annually—more than double the long-term average. On top of this, significant price spikes are leading to energy costs crushing margins for customers.

Infrastructure Vulnerability: Climate disruptions are already triggering a cascade of impacts that ripple far beyond the immediate damage. In the near term, first-order effects are evident: physical asset damage to real estate and critical infrastructure result in urgent repair costs and operational downtime, while disruptions in logistics and supply chains cause immediate production halts. These direct impacts drive up insurance premiums and erode the value of assets, with estimates suggesting US home values could fall by $1.5T over the next 30 years on account of climate change.

However, the challenge deepens as these initial shocks give rise to second-order effects. Companies face growing investor skepticism and an increased cost of capital as persistent disruptions force them to reconfigure their business models. Supply chain reorganization, along with stricter regulatory and compliance measures, adds to operational strain. Analyses from OECD, World Bank, and UN Environment indicate that annual investments must reach $6.9T by 2030 to ensure infrastructure spending aligns with sustainable development goals, underscoring how these indirect pressures compound the immediate losses.

Enterprise Value at Risk: Over the longer term, third-order effects may reshape entire markets. Prolonged vulnerability could spur industry consolidation and force firms with outdated models to exit the market, while macro-economic shifts might emerge from sustained realignment. Additionally, evolving labor and skill demands, along with the risk of stranded assets, threaten to upend traditional valuations. In the supply chain alone, climate-disruption has been estimated to cause up to $25T of net losses by mid-century. This reflects not just temporary loss, but a fundamental reordering of enterprise value.

The Insurance Fallout: As climate risks increase, entire industries and communities are being deemed "uninsurable," with insurers like State Farm and Allstate pulling out of high-risk areas such as California. In turn, the most at-risk states like California and Florida have trended toward offering subsidized insurance via last-resort public carriers, which have exploded in size in recent years – the FAIR Plan policies increased by 41% in the 12m ending Sept 2024 alone, and total exposures tripled since 2020. The global climate and weather related direct loss from natural perils in 2024 is estimated >$400B, with a growing coverage gap of >60% that was not covered by insurance.

Equal’s Climate Risk Strategy

At Equal Ventures, we have long believed that climate risk was both one of the greatest challenges and opportunities of our lifetime. Our strategy rests on two core pillars that not only address current challenges but also fortify businesses against future uncertainties:

Strategic Investments in Climate: Years ago, we saw the volatility in energy markets and made early investments in companies now building the resilience that businesses need to navigate today’s unpredictable world. That's why we back innovators reducing energy risk and creating stability and security in turbulent markets. Odyssey Energy finances distributed energy solutions to mitigate global energy and supply chain risk, enabling customers to rely on mini-grids and DERs rather than the volatility of energy markets. David Energy delivers redundant, resilient renewable energy to protect businesses from price volatility. Shadow Power turns distributed energy into a financial asset class that capital markets can invest in, while empowering a future of a grid powered by batteries. Texture has become the leading data cloud for energy, enabling energy stakeholders to better manage the uncertainty and volatility of today’s energy markets.

Strategic Investments in Insurance: With property insurers increasingly under strain and with non-renewals rapidly increasing in the highest risk markets, we’ve become deeply focused on the intersection of climate risk and financial protection. We believe the massive challenge of stabilizing industry losses and maintaining availability of coverage requires fundamentally “bending the risk curve,” or aligning incentives across insurers and homeowners to reduce claims. Based on this thesis, Equal made a pre-product investment into Stand, a climate-resilient insurer that uses AI and physics-based modeling along with high-value mitigations to make properties insurable. As CNBC highlighted, “the key piece [for property owners] is recognizing they must make changes” to improve resiliency, maintain insurability, and lower costs. We believe this active approach to risk mitigation is necessary not just in wildfire but across the many emerging and worsening perils that are introducing systemic risks. Insurers and property owners must urgently adopt superior underwriting and mitigation. Hundreds of billions in P&C premiums are in play for forward-thinking innovators who can implement a more sustainable paradigm in risk transfer.

The Path Forward

The devastating impact of the LA fires, the soaring energy and insurance costs, and the broader climate crisis are clear signs that the future we’ve been preparing for has already arrived. The possibility of systemic risks and huge market dislocations is no longer a distant threat—it’s happening now, and every business, investor, and policymaker will be forced to confront these stark realities. Our vision for the next decade is to double down on investments that directly address these challenges and help stakeholders adapt to this new era:

1. We need to mitigate climate-driven operational risks by deploying advanced risk assessment tools and distributed energy solutions to shield businesses from immediate disruptions.

2. We need to create financial resiliency in volatile markets by developing investment and insurance frameworks that protect companies from market volatility and energy instability.

3. We need to redefine enterprise security by building comprehensive, data-driven strategies that secure both physical and digital assets in an era of unprecedented uncertainty.

This is the defining challenge of the next decade, and Equal Ventures is committed to leading the charge. Now is the time to act, and we are fully focused on empowering stakeholders with the ability to manage this existential climate risk and driving the change that will ensure a resilient, sustainable future.

If you’re building in the space, please reach out to: grace@equal.vc and adam@equal.vc