BCG-WEF Project: Global Business Adaptation Alliance

Why Adaptation Through Water—and Private-Sector Partnership—Is the Answer to Managing Southeast Asia’s Climate Change Impacts

Southeast Asia is particularly vulnerable to climate change. The incidence and magnitude of catastrophic floods, drought, wildfire, and heat waves are worsening. The region’s geography, topography, and large population make the costs of these impacts prohibitive. Each year, flooding and extreme weather together cause $400 billion to $650 billion in infrastructure damage, and harm everything from crop yields and fisheries production to hydroelectric power. The impacts on human health, safety, and livelihoods and on the region’s resources and economies are inordinately high.

These climate-induced effects are overwhelmingly water-related. Water, of course, underpins virtually every human and natural system. As both a catalyst to the healthy functioning of these systems and an agent of harm through its excess, scarcity, and pollution, water is naturally suited to be at the center of climate change adaptation efforts in the region.

Adaptation Through Water Is a Natural

Water adaptation and resilience efforts—or Adaptation through Water (AtW)—involve promoting solutions that influence the natural or engineered water cycle to minimize the negative impacts of climate change. These solutions include harnessing nature’s power, expanding water infrastructure, using water more efficiently and productively, and improving water governance. AtW actions span every major use of water: agriculture, municipal systems, energy, industry, and the environment.

Significant investments will be needed for adaptation. According to research by the World Economic Forum and BCG, fortifying the region’s adaptation and resilience to the various types of flooding will take an investment of roughly $13 billion by 2030. Funding these efforts, and in a timely way, is far beyond government’s capacity.

AtW calls for private-sector partnership. Businesses (and their suppliers) that depend on water have a stake in safeguarding its supply and ensuring business continuity when crisis strikes. Investors and solution developers can reap opportunity by creating water adaptation products and strategies, including funding mechanisms.

The World Economic Forum and BCG highlight five projects that embody this approach in managing water challenges. A nature-based strategy for flood resilience, for example, shows how restoring entire river basins, wetlands, and forests upstream can prevent extreme flood events downstream. This project is being funded through institutional capital—patient capital that allows for long-term, scalable investment. Among the other approaches highlighted in the report are technologies and methods for wastewater reuse, including circularity and waste-to-energy solutions; and the use of cloud-based AI and satellite data to enhance national drought policy development.

Beyond the opportunities for product developers, AtW creates opportunities for banks and investors to innovate financing mechanisms, such as nature-based flood resilience bonds, nature-as-a-service contracts (which help businesses reduce their risk exposure), blended financing vehicles, and carbon credits.

Four Opportunities for Private-Sector Action

A simple, sector-agnostic framework pinpoints four solution areas through which business can act to achieve efficiencies, mitigate risks, safeguard supply chains, and seize economic opportunity.

• Flood damage reduction
• Water optimization and circularity
• Financing AtW
• Water and nature innovation

This framework can be used as a model to drive public-private collaboration on AtW. Potential opportunity becomes a powerful lever for sparking innovation and implementing solutions that can effectively accelerate and scale climate change adaptation throughout Southeast Asia.