Post date 27 Apr 2026 (original LinkedIn date)
Original LinkedIn version· 1,240 words
“Rain King“ by Counting Crows, released in 1993 on the album August and Everything After
When Hurricane Michael levelled Florida’s Tyndall Air Force Base in 2018, it caused close to $5 billion in damage and battered F-22 stealth fighters in their hangars. Today, Tyndall is being rebuilt as an “installation of the future, with buildings raised more than a foot off the ground to stay dry through 75 years of sea-level rise, roofs designed to withstand 165 mph winds, manmade oyster reefs to break up incoming waves. It is one of the most ambitious climate adaptation projects in the United States.
It is also being built largely in silence. The current US administration has called climate change a “distraction” and stripped the term from defence mission statements, yet construction proceeds. The Pentagon cannot afford to pretend the natural world isn’t changing, and neither can investors.
If hurricanes are the most photogenic face of climate risk, drought is the slower, more pervasive one. And once again this summer it will be in our midst. It may not be as dramatic as floods or storms, but I think it deserves more attention than it gets.
As wild as it seems, nearly 60% of the United States is currently in drought, following the hottest September-to-February period on record. Snowpack, the natural reservoir on which much of the American West depends, has collapsed in places, with some river basins holding just 8% of typical moisture heading into the spring melt.
Droughts are usefully understood in three layers, each more downstream than the last. 1 Meteorological drought is the absence of rainfall. 2 Agricultural drought is the resulting soil-moisture deficit that starves crops. 3 Hydrological drought is then what happens when rivers, reservoirs and aquifers run low – think of that as the deepest cut, because it touches drinking water, power generation, commercial navigation and the ecological baseline of entire regions.
The current US episode is showing all three and Europe is likely heading that way this summer. None of these systems recover quickly: aquifers can take decades to refill, soil structure takes years to rebuild, and ecosystems pushed past a threshold may not recover at all. This is not just a weather event/tragedy tho, it is also a drawdown of natural capital.
The most immediate consequence is in agriculture. Only about a third of the US winter wheat crop is currently rated good or excellent, a strong leading indicator of weaker yields. The rising probability of a ‘Super El Niño’ capable of putting other major exporters into drought simultaneously makes the global balance look precarious. This sits on top of squeezed input costs. Disruption around the Strait of Hormuz, a chokepoint for fertiliser and natural gas, is pushing nitrogen prices higher just as farmers face a parched planting season. Weaker yields plus higher costs is the textbook recipe for a food-price spike, and the channel is global: wheat, soy and maize markets do not respect borders. For natural-capital-aware investors, food security and water security are the same problem viewed from different angles. When the rain stops, both bills go up for the consumer.
Drought also rewires the wildfire equation. Every year fire seasons in the US are starting earlier and lasting longer, and 2026 is already running at more than twice the seasonal average for acres burned. Nebraska alone has lost close to a million acres this year, including the largest fire in the state’s recorded history. The financial echo is in the insurance market. According to Swiss Re, “secondary perils” (wildfires, floods and severe convective storms) accounted for 92% of the $107 billion in insured natural catastrophe losses in 2025. These are precisely the perils that drought amplifies.
Three follow-on effects deserve to be priced in. The first is liability risk for utilities whose transmission infrastructure has been linked to fire ignitions; historic settlements have been large enough to threaten balance sheets. The second is insurability itself, with premiums rising in exposed regions and coverage withdrawing in some markets, a development that quietly erodes property values, mortgage availability and municipal tax bases. The third, and most overlooked, is that natural capital is itself becoming uninsurable in places. Forests that burn repeatedly do not always return as forests and soils that bake do not always re-vegetate. The free services those ecosystems provided, from flood control thru carbon storage to water filtration, they leave the balance sheet without a replacement.
All of this lands on water systems already suffering from decades of underinvestment, with global water availability per person having fallen by almost two-thirds since 1960. On top of this already parlous state, demand is projected to exceed supply by 40% by 2030. Closing the resilience gap is estimated to require around $13 trillion of cumulative investment by 2040, roughly $500 billion per year, leaving a $7.5 trillion shortfall on current spending trajectories.
The capital required spans a recognisable set of technologies that I’ve written at length about before (but of course they are all tied together): leakage reduction and efficiency, treatment and recycling, desalination and supply augmentation, monitoring and analytics, and flood and drought management infrastructure. Listed water indices have, over the last decade, outperformed many other climate-related strategies on a risk-adjusted basis. Resilience is no longer a defensive theme; it is rather becoming an offensive one, propelled by the recognition that water sits at the intersection of food security, energy security and even AI - data centre cooling is now a meaningful incremental draw on stressed systems.
What ties military bases, wheat fields, transmission lines and water utilities together is the same underlying truth: each depends on a stock of natural capital, stable hydrological cycles, intact soils, functioning ecosystems if you will, that is being drawn down faster than it is being replenished. Drought is the symptom by which we will notice this depletion in the coming months, with wildfires the outcome. But the asset at risk is broader - it is the basic operating environment of the real economy.
In the US, the Pentagon is rebuilding Tyndall whether or not the word “climate” is allowed in the memo. Allocators have the same choice: engage with the physical reality or have their assets repriced by it.
References
Kolson Hurley, A. (2026) “The US military is quietly preparing for climate change,” Bloomberg Green Daily
Sullivan, B.K. (2026) “Wildfires Race Across US as Drought Spans Half the Nation,” Bloomberg, 9 April. Available at: https://www.bloomberg.com/news/articles/2026-04-09/wildfires-race-across-us-as-drought-spans-half-the-nation
Hessel, M. (2026) Water: The Next Structural Bottleneck, Daily Insight, Absolute Strategy Research, 14 April.
Absolute Strategy Research (2026) ASR Climate Macro - Drought, Wildfires and Insurance Loss, internal note, 16 April.
Dunne, D. and Gabbatiss, J. (2026) “How wildfires and storms drove insurance losses in 2025 – in three charts,” Carbon Brief, 31 March. Available at: https://www.carbonbrief.org/how-wildfires-and-storms-drove-insurance-losses-in-2025-in-three-charts/
Swiss Re Institute (2026) sigma 01/2026: Natural catastrophes in 2025 – the persistent rise of wildfire and storm risk, Zurich, 19 March. Available at: https://www.swissre.com/press-release/Wildfires-storms-floods-contribute-to-record-92-of-global-insured-losses-in-2025-says-Swiss-Re-Institute/7b39b1a5-b878-4a55-a5ff-bf5aa561a675
Joy, F. (2025) “Three types of drought – and why there’s no such thing as a global water crisis,” The Conversation, July. Available at: https://theconversation.com/three-types-of-drought-and-why-theres-no-such-thing-as-a-global-water-crisis-260723
Gagkas, Z., et al. (2023) Assessment of Natural Capital Asset Exposure to Current and Future Meteorological Drought, Report D21d/D23c. James Hutton Institute
US National Interagency Fire Center (2026) National Significant Wildland Fire Potential Outlook, April. Available at: https://www.nifc.gov/nicc-files/predictive/outlooks/monthly_seasonal_outlook.pdf
World Economic Forum/OECD figures on the global water investment gap (as cited in ASR, 2026).