Post date 16 Mar 2026 (original LinkedIn date)
Original LinkedIn version· 1,113 words
“Shelter From the Storm” from the album Blood on the Tracks by Bob Dylan
Today I want to make the case that sea level rise is not just a climate variable, but actually a repricing variable (one of many) that has relevance to investment portfolios. And nature is its hedge.
That matters because investors still tend to treat protection as a drag on returns, something that lowers volatility but costs performance. Mark Spitznagel’s argument points in the opposite direction. Protection only really counts if it improves long-run compounding. In other words, the question is not whether a hedge feels safe in the moment. It is whether it helps preserve and grow wealth across a full cycle.
That lens becomes especially powerful when applied to sea-level rise, coastal exposure and physical climate resilience.
For years, resilience has often been framed as a defensive cost. Something governments have to fund, insurers have to worry about, and investors can mostly ignore until losses crystallise. But I believe that framing is beginning to break down. Challenged to ponder the lessons of Spitznagel’s book by boss, Rob, as I read the article in Nature, it is clear that sea-level risk is no longer a side issue that just warrants ‘disclosure’. It is becoming a driver of asset repricing, infrastructure stress, insurance availability, community strain and supply-chain vulnerability. Worse still, the baseline may be more fragile than many investors assume.
Recent research suggests that a great deal of the coastal risk literature has understated exposure by using poor assumptions about local sea level and land elevation. If the physical hazard has been systematically under-measured, then a large set of coastal assets, infrastructure networks and credit exposures may also be systematically mispriced. That changes the investment question, in that protection is no longer merely about reducing downside after the event. It becomes a way of identifying where markets have not yet fully absorbed the scale, speed and geography of future impairment. I suspect this is broadly true of all portfolio nature exposure. This is where resilience stops looking like a moral category and starts looking like an investment one.
If climate risk is increasingly physical, then protection has two forms of value. The first is explicit insurance. That includes the more recognisable hedging toolkit, structures that can pay off during extreme events or benefit from rising demand for catastrophe protection. This is closest to the classic tail-risk framing. But even here, reflexivity matters. If markets begin to realise that physical risks are arriving faster, or are more severe than assumed, then the pricing of existing protection instruments can itself shift sharply.
The second form is more interesting. We could ter it ‘productive protection’. For me it means owning or financing the systems, assets and services whose economic value rises as the value of protection rises. Flood management, catchment restoration, coastal resilience, water storage, urban drainage, grid hardening, wastewater resilience, and various other forms of green environmental engineering. Real assets and service contracts that do not merely survive a more volatile world but become more necessary inside it. That is why water is such a powerful entry point.
Water is where climate risk becomes legible. Too much water means floods; too little means drought; and too dirty means regulatory, operational and health stress. This is becoming a common mantra – ‘too much, too little, too dirty’. It is measurable, local, investible, and increasingly impossible to ignore. Water connects physical hazard to service continuity, property values, public finances, food production, insurance costs and political pressure. It is also the domain in which nature restoration can most clearly be turned into contractual value. And this, I believe, is the crucial shift.
Nature restoration should not be seen as a soft impact overlay attached to a portfolio after the real allocation decisions have been made. In the right places, it is infrastructure, it protects communities, underpins economic activity, reduces loss severity and supports system resilience. If that protection can be translated into long-duration payments from beneficiaries, utilities, corporates, public agencies, insurers and others, then resilience ceases to be an unpriced externality and starts to look like an investible cash flow stream. That feels a much more useful way to think about rising sea level and resilience than the old impact-versus-return framing.
The real issue is not whether protection lowers volatility. The real issue is whether it preserves the base from which compounding occurs. Once you think that way, the value of resilience becomes clearer. Protection is not there to make a portfolio look neat in normal times. It is there to stop non-linear impairment from destroying long-term returns. And this is where reflexivity enters.
As physical risks intensify, markets start to notice, insurance costs rise, and lending standards tighten. The cost of capital increases for exposed assets and locations. Fiscal burdens mount on already-stretched local authorities and utilities. Delayed adaptation then makes realised losses worse, which validates the repricing. Perception changes fundamentals, and fundamentals reinforce perception. But the same reflexive loop can work in the other direction too.
When investors back assets and business models that provide real protection, they can help lower the cost of resilience, accelerate deployment and improve the economics of adaptation. In that sense, the value of protection is not only defensive. It can be productive. It can help create the conditions under which both communities and portfolios remain investible. That, for me, is the deeper lesson from thinking about the implications of ‘Safe haven’.
Sea-level resilience is not just about avoiding loss. It is about owning, financing and scaling the forms of protection that a more unstable world will increasingly pay for. In portfolio terms, that means moving beyond the idea of safe havens as passive stores of value. The more interesting safe haven may be exposure to assets whose cash flows strengthen as the need for resilience becomes impossible to ignore. It’s an active allocation to natural capital, to nature as infrastructure, to nature as the answer to business resilience.
In that world, nature has to be understood properly. Not as scenery, not as philanthropy, not as an offset to the real economy, but rather as critical infrastructure, as protection, and, increasingly, as an asset class. Before the storm hits, we need to start building our safe haven now.
References
Absolute Strategy Research, Uncharted Territory (13 September 2024).
Absolute Strategy Research, Natural Capital Tipping Points (5 December 2024).
Absolute Strategy Research, The Climate Resilience Opportunity (23 May 2025).
Seeger, K., & Minderhoud, P.S.J. 2026. ‘Sea level much higher than assumed in most coastal hazard assessments’. Nature https://doi.org/10.1038/s41586-026-10196-1
Spitznagel, M. 2021. ‘Safe haven: Investing for financial storms’. (N. N. Taleb, Foreword). John Wiley & Sons.