Private investments in climate change adaptation are increasing in Europe, although sectoral differences remain.

Abstract

Climate-induced hazards are becoming more frequent and severe, causing escalating economic losses worldwide. Consequently, climate change adaptation is increasingly necessary to protect people, nature and the economy. However, little is known about who is adapting and how much they spend on adaptation measures, especially in the private sector. This article focuses on firms-the backbone of economic development, yet understudied in climate adaptation research. Here we present insights from a unique panel dataset detailing businesses' adaptation investments across 28 European countries (2018-2022), 5 hazard types, and 19 economic sectors. Our descriptive analysis reveals low but increasing adaptation investments across Europe (0.15-0.92% of national gross domestic product, annually increasing by 30.6-37.4%). Moreover, we highlight considerable differences in adaptation intensity across sectors, including low adaptation intensity in manufacturing and retail trade. Additionally, our econometric analysis indicates that public adaptation spending crowds in private investments in adaptation, highlighting opportunities to facilitate autonomous adaptation.