Our climate is warming, and the pace of change has accelerated in recent decades.
Global climate data suggests that 2015 to 2025 have been the eleven warmest years on record, and in 2025, average surface temperatures across the globe were around 1.44°C above the 1850-1900 average.
Recent years in the UK have also been among the warmest ever recorded. The Met Office recently suggested that UK temperatures could plausibly reach 45°C during extreme summer heat events in the coming decades.
Even with increasing global commitments to reach net zero emissions, further warming is unavoidable. Greenhouse gases released over many decades continue to affect the climate, so today's temperatures reflect both past and current emissions. Even if emissions fall rapidly, global temperatures are unlikely to stop rising immediately.
Rising temperatures and more frequent extreme weather events are already affecting infrastructure, supply chains and productivity. In the coming years, some industries are likely to face greater challenges, while others could play an increasingly important role in helping societies adapt.
So, we’re looking at three areas where demand could be supported by the growing need for climate resilience and the companies that could benefit.
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Investing in an individual company isn’t right for everyone because if that company fails, you could lose your whole investment. If you cannot afford this, investing in a single company might not be right for you. You should make sure you understand the companies you’re investing in and their specific risks. You should also make sure any shares you own are part of a diversified portfolio.
Food security and agricultural resilience
Farmers are increasingly having to contend with changing rainfall patterns, more frequent droughts, extreme weather events and shifting pest and disease pressures. Maintaining crop yields while using resources efficiently is likely to become an even bigger challenge.
Companies that help improve agricultural productivity, strengthen crop resilience and support more sustainable food production could see growing demand in the years ahead.
Croda International
Speciality chemicals company Croda has exposure to food security through its Life Sciences division, which supplies crop protection and seed enhancement products to farmers. As climate change makes growing conditions more unpredictable, products that help improve yields, protect crops and support soil health could become increasingly important.
Croda is a niche player in agricultural chemicals, and differentiates itself through innovation, including biological pesticides and fertilisers that can help farmers operate more sustainably.
Its seed enhancement work is also interesting. The company has developed a product designed to help seeds cope with higher salt levels in soil, which can occur after periods of severe drought. It’s still early days, but initial customer feedback has been encouraging.
That said, innovation does not make Croda immune to market conditions. Crop protection sales have been under pressure so far this year. But the company’s Life Sciences division is not the only revenue stream. The larger Consumer Care division is trading well, and we remain supportive of Croda’s focus on innovation, efficiency and simplification.
Analysts expect operating profit to expand by around 50% by 2029 to around £445mn, although much of that growth is weighted towards the later years. With nearer-term profit growth looking more modest, short-term upside could be limited. In the meantime, there’s a prospective dividend yield of 3.9% on offer, but remember returns are not guaranteed.
Water Management and Infrastructure
More frequent droughts, alongside periods of intense rainfall, are placing greater strain on ageing systems. As a result, there’s likely to be increased investment in areas like water storage, flood defences, drainage systems and leakage reduction.
Companies involved in maintaining and upgrading water networks, as well as those developing more efficient irrigation and water-use technologies, could see increased demand as governments and utilities respond to changing conditions.
Veolia
Veolia offers exposure to climate adaptation through its water and energy services. Mainly through water. Veolia helps customers secure and manage water supplies across the cycle, from treatment and reuse to desalination and digital network management. That can support leakage reduction, improve resilience during periods of drought or flooding, and make better use of existing resources.
The group is also active in hazardous waste, recycling and energy efficiency, giving it a broader role in helping businesses and local authorities adapt to a more resource-constrained world.
Veolia also offers some attractive defensive qualities, with demand supported by regulation, long-term contracts and the growing need for water security, waste treatment and pollution control. As climate change puts greater pressure on municipal services, we think demand will continue to grow.
Recent performance has been encouraging, and management’s GreenUp plan is focused on higher-growth environmental services like water technologies and hazardous waste.
Despite rising investor confidence, Veolia’s valuation doesn’t look too demanding.
The French group has an improving record of putting its capital to work more effectively, and demand from energy and water-intensive data centres could provide a leg up to growth. However, discipline will be required to keep driving investment returns higher.
The main watchpoints are debt, execution risk from acquisitions and the capital-intensive nature of the sector.
Building materials and insulation
As temperatures rise, buildings will need to manage heat more effectively. Not just retaining warmth in winter but limiting overheating in summer. This is increasing the focus on insulation, reflective materials and design features that improve year-round thermal efficiency.
Alongside regulatory pressure to reduce energy use, this could support ongoing investment in materials and technologies that help buildings adapt to a warmer climate.
Kingspan
Ireland’s Kingspan is well placed to benefit from the need for more energy-efficient and climate-resilient buildings. Its insulated panels, roofing, waterproofing and building envelope systems help buildings retain heat in winter, limit overheating in summer and reduce overall energy use.
As temperatures rise and regulation tightens, demand for higher-performance materials should remain well supported across both new-build and renovation markets.
The group has also broadened its reach beyond traditional insulation. Its advanced building systems business (Advnsys) serves areas like data centres, ventilation, daylighting and critical infrastructure, where demand is being supported by digitalisation and the need for more efficient cooling and energy management.
Kingspan’s had a mixed start to the year. Sales were up 3% pre-currency moves, helped by 28% growth at Advnsys, while trading in some construction end-markets remained more challenging. Nonetheless the orderbook for Insulated Building Envelopes has grown where Kingspan continues to expand its market share.
Kingspan’s valuation does not look excessive given its growth prospects.
The shares trade on around 18x forward earnings, which looks reasonable relative to more commoditised building materials companies. That leaves room for upside if the group delivers as expected. However, operating margins of around 10% leave little room for error. And any slowdown in demand, cost pressure or acquisition misstep could weigh disproportionately on the bottom line.
Reputational and financial risk are a key watchpoint following the use of Kingspan’s K15 insulation product in Grenfell Tower. While the company was not found responsible for the tragedy, the inquiry raised serious concerns around governance and culture, and ongoing investigations could still lead to penalties.
