Today’s interview is with Katie MacDonald, Co-founder of the climate resilience and adaptation innovation studio, Tailwind.
Adaptation Inspiration
What Was The Inspiration That Led To The Creation Of Tailwind?
Katie MacDonald - I have been working on building the climate tech mitigation innovation ecosystem and funding and scaling climate technologies to reduce greenhouse gas emissions and weaken the impacts of climate change my whole career. During the summer of 2022, when the heat dome occurred in the American and Canadian West, infrastructure failed, and over 115 people died; I remember thinking, ‘Wow, climate change is truly already here, and we’re unprepared’. At that point, I started looking into how humanity was innovating to lessen these climate impacts. When I looked closer, I encountered a serious lack of investment, innovation, and political capital applied to this area. At that point, I realized that my mission of helping humanity avoid suffering and increase human thriving would be better served addressing the massively underserved area of climate adaptation and resilience versus continuing to focus on greenhouse gas reduction, something that (thankfully) many, many new professionals were pouring into the climate tech space to focus their energy on.
As one of the first company CEOs focused on this sector, my Co-Founder Emilie Mazzacurati is one of the foremost experts in this field. She sold her company, Four Twenty Seven, in 2019, and we ran into each other during Climate Week 2022. We realized our shared vision, and now, we’re building Tailwind, an innovation and investment firm focused on accelerating the development and deployment of climate adaptation and resilience solutions.
To further understand the urgency we face when it comes to addressing the impacts of climate change, here are some key figures we talk a lot about at Tailwind:
- The total global gap in adaptation finance will be around $380B a year this decade for the developing world alone (UNEP)
- Today, the adaptation finance gap is likely 10–18 times as great as current international adaptation finance flows (UNEP)
- Less than 5% of global climate finance goes to adaptation and resilience (CPI)
- Less than 1% of VC in the climate space goes into adaptation and resilience (Semafor)
Technology
What Are Some Of The Most Exciting Technologies That Have Come Across Your Desk Recently?
Katie MacDonald - At Tailwind, we define adaptation and resilience solutions as products or services that predict, prevent, mitigate, or enable recovery from climate impacts like floods, wildfires, and extreme weather. The universe of solutions that fall into that definition is truly massive.
We believe our organization can ensure the supply of solutions and the uptake of solutions through two major interventions:
1. Field building - Ensuring the innovation ecosystem for climate adaptation and resilience solutions has the capital, talent, policy, and customer demand to yield high-impact and scalable solutions. We’re doing work with visionary funders on clients in this category now.
2. Early-stage investing - Ensuring early-stage capital investment exists to support new adaptation and resilience companies. We are beginning to provide this resource, and we plan to launch a fund in this area soon (stay posted!).
In our work at Tailwind, we have been developing one of the first investor taxonomies for solutions in this space. This map of the space is anchored in 8 major themes and over 30 sector areas. These themes cover health, cities and settlements, water and sanitation, and more. As we’ve continued our field-building work and started investing in this space, we have seen many interesting innovators confronting the challenge of adapting to climate impacts. Here are some examples:
ISeeChange - ISeeChange is a women-led company that empowers communities to tackle climate change impacts by integrating public input into infrastructure design and response management. Its software platform engages communities, turning their observations into actionable insights using AI and sensor data.
Metalmark Innovations - Metalmark is a women-led company building self-renewing air cleaners with 10x the filter life of a typical HEPA system, capable of removing fine particle wildfire smoke from indoor air.
HighTide Intelligence - HighTide is a company that enables homeowners to make confident decisions about flood risk with its award-winning, AI-powered flood risk engine.
Funding Gaps
Where Are The Biggest Gaps In Funding, And How Is This Impacting Scaling Solutions In This Space?
Katie MacDonald - We see three major gaps between us and a vibrant and productive climate adaptation and resilience innovation ecosystem. The first gap is a capital gap. We are experiencing capital gaps across this market - on the early stage side; we see almost every capital gap we saw during climate tech 1.0 with the important caveat that much of the capital infrastructure we have deployed for climate mitigation can and is be repurposed towards this emerging space.
- R&D - While many innovations being developed could have applications in this space, there is little R&D funding going deliberately into this space. Marginal funding from the Departments of Defense and Energy exist, and there are bright spots across some state programs and universities, but on the whole, we have yet to see a ‘moonshot’ style effort to increase the incidence of solutions that can impact this space or a clear framework from government and catalytic funders of where capital must advance applied science in this space.
- Catalytic Capital—There is very little flexible capital for companies at the pre-seed and seed stages. Not many philanthropies support technology development through PRIs, MRIs, and grants. Few funders, whether angels, individuals, angel firms, etc., are out in the field calling for innovators in this area and making it known they are ready to support them.
- Venture - Out of 180+ investors placing capital into climate mitigation tech companies, only about five are publicly advertising their interest in adaptation and resilience deals. Very few investors are acutely aware of where their mitigation investments are achieving co-benefits, and investors who are interested in the space (what we call ‘resilience-curious’) are often unaware of the opportunities that exist in this space beyond common examples (think: seawalls and fire suppression tech).
- Debt and Credit - Many of the companies that exist in this space and that will be needed will necessarily sell services and products meant for public good and protection to governments. This means we need flexible capital for non-VC backable, non-unicorn companies that still have respectable and predictable returns, which will be sorely needed. Today, affordable debt and credit for these companies is scarce, and the community must come together to further develop these options.
- Project Finance - Much like in the climate mitigation space, companies must scale to create impact! This means proving offtake, technical repeatability, and returns on regular projects that institutional investors can support. Project financiers have been building adaptation and resilience projects for years, but new capital, expertise, and policy will be needed to incentivize projects around new technologies as this space scales.
We at Tailwind are working with our partner, Vibrant Data Labs (the creator of the Climate Finance Tracker), to build a map of all the early-stage capital entering this space using the sector framework our adaptation and resilience taxonomy provides. Keep an eye out for this in the coming months!
In addition to the capital gap, we see a demand gap and an ecosystem gap in this space. The demand gap centres around existing customers (companies, individuals, and governments) not yet clearly articulating their need for adaptation solutions to emerging entrepreneurs and researchers. Although we know over 20% of companies have adaptation plans and over 70 global governments have national adaptation plans, information from these potential customers is not being coalesced and shared efficiently with the innovation ecosystem. On the ecosystem gap side, well over 40 incubator and accelerator programs are focused on supporting climate tech mitigation companies. Of these programs, only about 4 are focused on helping innovators solve adaptation and resilience challenges.
We need to do better at solving these three gaps as a community and industry if we want to avoid catastrophe, protect people and assets, and innovate towards a resilient future.
Explaining Adaptation
What's The Best Way To Explain Adaptation To Skeptics?
Katie MacDonald - You don't have to read all 8,000 pages of the IPCC's sixth assessment report on Impacts, Vulnerability and Adaptation to understand that even if we operate within the most optimistic climate scenarios, we will face incredible hazards and risks from climate impacts. Last year in the United States alone, we experienced 28, billion-dollar disasters and lost 492 people. That was in a world that had warmed 1.2 - 1.5 degrees Celsius and at the current rate, we’re set to experience about 3-4 degrees Celsius warming in my lifetime.
This leaves a science-believing person with one possible conclusion: we need to invest in mitigation and adaptation to ensure humanity’s future on this planet.
For those who disagree, consider this. Every dollar we spend on adaptation today saves 7 dollars in the future. In other words, if we don’t accept the science that warming is here today and prepare for potential eventualities related to our current trajectory, we may be in need of way more funding to address the problem than we’d need to spend now to protect ourselves AND in a scenario wherein the government is choosing between responding to imminent and lethal disasters vs. funding decarbonisation tech, the obvious choice will inevitably be enabling people are saved and protected.
The news here isn’t all bad! Quite the contrary. Not only do we have an opportunity to save money and prepare society to weather the intensifying impacts of climate change, but entrepreneurs and innovators have the opportunity to save lives and do well by developing new tools for the climate adaptation and resilience toolbox that can be deployed globally. Bank of America estimates the adaptation market to be about a $2 trillion market by 2026. Their money will come to fund these efforts, and when it does, we need intrepid company builders and leaders there to capitalize and drive impact.
Advice for Founders
What Advice Would You Give Entrepreneurs And Start-Ups Aiming To Secure Investment In The Adaptation Industry?
Katie MacDonald - I do have some advice for founders! First - Know your customer. Know the problem you are solving for your customer. Do not cut corners on customer discovery! This is essential advice for any company and will be an especially important exercise in this space because the governance around climate resilience and adaptation will differ between governments and companies. Through our own customer discovery work, we’ve found that within private companies alone, as an example, a dizzying variety of managers can be responsible for adaptation and resilience outcomes, and they may not even refer to them as being adaptation and resilience related! For example, EHS professionals, risk managers, and facilities managers are all responsible for the same outcomes around extreme heat at three different entities. Leveraging networks, asking questions, and finding the right individuals to interview and learn from will be essential as companies establish product market fit in this space.
Second - Learn how to talk about climate adaptation and mitigation as YES AND subjects. This space requires the leadership of visionary funders and customers who understand climate mitigation. These individuals are (for the large part) just now learning and adjusting mindsets to pursue climate adaptation work with similar vigour. Do the work to communicate the ways in which your company supports net zero goals while also ensuring a liveable future for humanity. Make sure you make the case that adaptation and mitigation must happen in concert and that you can support that through your company’s commitment to impact.
Thirdly - Be an effective advocate for your own future. Many companies that are currently reaping the enormous benefits of federal policy that support climate mitigation companies, such as the CHIPS, IIJA, and IRA policies in the US, have been active advocates of investment and policy in this space since their inception. Like it or not, as early entrants to an embryonic market, it is incumbent upon CEOs in this space to speak up, put themselves in the public spotlight, engage policymakers, and share the impact they seek to enable capital flows and regulation that can favour their companies in the long haul. If you’re unsure how to advocate for your company or your peers, I recommend engaging Advisors and Board members who can help ensure your message is heard where it needs to be and by those who need to hear it. Bringing on experts to advise the management team is a great way to keep eyes open and ears alert for incoming and future opportunities that can position your company for success in this space.
Industry Risks
What Risks Do You Foresee For The Adaptation Industry In The Next 18 months, And How Might We Mitigate Them?
Katie MacDonald - At Tailwind we talk a lot about enablers of innovation and barriers to innovation in the adaptation and resilience space.
A key barrier that is critical to understand and discuss is maladaptation. Maladaptation (according to the IPCC) is defined by any changes in natural or human systems that inadvertently increase vulnerability to climate stimuli. These changes could be defined by increased social vulnerability, increased climate impacts on ecosystems, worsening of present or future conditions for marginalized groups, preventing systems change, and/or releasing additional GHG emissions. While, as I noted, there are many solutions that can enable adaptation and resilience in lockstep with mitigation goals and other humanitarian goals (such as the SDGs), the growing community in this space must ensure our work does not result in maladaptation and that we develop tools for entrepreneurs to prevent this as part of our mission.
A key enabler critical to ensuring solutions reach those who need them and that those solutions have their desired impact is working with communities to design and deploy products and services. We know that the degree to which communities are consulted can massively influence the success of solutions meant to deliver public good. We also know that taking specific communities into consideration where appropriate, such as women, indigenous groups, low-income individuals, and social justice leaders, can improve the success of climate solutions. The impacts of climate change affect all of us, but those closest to the problems and those experiencing them with the most intensity must be prioritized as we strive to build a climate-resilient society.
We are looking forward to speaking about these and other topics at the Adapt Unbound conference, and we’re very thankful to be featured. Thank you again to the Unbound Summits team for interviewing me and creating this space for the adaptation and resilience community to convene and grow together!
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