Science and education form the indispensable foundation of the resilient utilities triangle. Future- proofing critical infrastructure requires not only physical defences but the cultivation of a deep- seated culture of knowledge, innovation and preparedness. Strengthening these twin pillars requires a concerted effort to translate cutting-edge research into actionable strategies and to empower every level of society with the understanding to navigate a new climate reality. Strengthening the science pillar: from global risks to local solutions The first priority is to evolve scientific capabilities to match the complexity of modern climate threats. This begins with moving beyond traditional, isolated risk models to understand the emerging systemic risks posed by Earth system tipping points and crossing of planetary boundaries. Societies must invest in research that reveals how a cascade of hazards – for instance, a compound event of extreme heat, drought and wildfire – can cripple energy, water and transport systems simultaneously. Furthermore, science needs to downscale global climate projections to conduct impact studies at a finer, city-level or even asset-level scale. This granularity is crucial for utility planners to determine which substations are most vulnerable to flooding or which transmission lines are at greatest risk from wildfires. Finally, harnessing the power of artificial intelligence is key. AI can process vast datasets to predict equipment failure, optimize grid load during stress and model disaster scenarios. However, its outputs must be “explainable” to earn the trust of engineers and policy-makers, ensuring that AI-driven insights lead to confident, pre- emptive action.3.4 Science and education: essential foundation for resilienceevent, investors receive their full coupon. However, if a pre-defined catastrophe (such as a 1-in-50-year flood) occurs, a portion of the coupon payment is automatically diverted to a pre-established insurance and recovery fund. This innovative structure lowers the net cost of risk capital for the issuer while systematically building a financial buffer to absorb future shocks, effectively spreading risk to the broader capital markets. Public-private resilience pools To cover critical but often underinsured assets such as smaller municipal water systems, government can act as a convener to establish regional co- insurance pools. These public-private partnerships would bring together insurers, industry associations and the utilities themselves to underwrite risks collectively. The premium structure would be designed to drive behaviour, consisting of a base premium plus a “risk adjustment levy”. A member utility that completes a certified resilience upgrade – such as retrofitting its water pipes for frost protection – would earn a significant discount on its levy, creating a powerful and self-sustaining cycle of “investment for discount”. It is essential to engage the private sector. In Europe, according to a recent study, although the scale of private-sector investment in climate change adaptation is relatively small, it has grown significantly. In 2018, the annual adaptation investment of the private sector in the European Union and the United Kingdom was €15.4 billion EUR; by 2022, it had increased to €52.9 billion, representing 243% growth over five years.44 In 2023, the global blended climate finance market overcame macroeconomic challenges to achieve historic growth, with total financing reaching $18.3 billion (a 120% year-on-year increase), including a near-200% surge in private sector investment to $6 billion.45 The reliability of energy, water and other infrastructure – once a given for global commerce – has become a direct and material risk to corporate profitability, operational stability and long-term growth. Investing in resilience not only mitigates these risks but also unlocks new opportunities: it drives market expansion for emerging technologies and services, creates channels for innovative financing and enhances the competitiveness of firms that deliver climate-adaptive solutions. In short, climate resilience represents both a strategic safeguard and a new frontier for private sector growth. Private sector participation can be achieved through multiple pathways, including strategic co- investment via public private partnerships (PPPs), targeted capital allocation towards digital and resilience-enhancing technologies, and collaborative ventures with financial institutions to develop new risk-sharing and financing instruments. Together, these innovations transform finance from a simple compensatory tool into a dynamic engine that accurately prices risk, powerfully incentivizes mitigation and mobilizes private capital at scale for a more resilient future. Future- proofing critical infrastructure requires not only physical defences but the cultivation of a deep- seated culture of knowledge, innovation and preparedness. Building Climate-Resilient Utilities: Lessons from China and Future Pathways 21

Building Climate Resilient Utilities 2025