From Wildfire Risk to Resilience The Investment Case for Action 2026

Reactive adaptation: rebuilding to verified standards and recycling savings Post-fire recovery is where resilience becomes self-reinforcing. Rebuilding to verified standards and taking actions such as restoring watersheds prevent risk from reaccumulating. Tracking reductions in EAL shows programme effectiveness; as verified savings grow, public and bond support can taper, while private capital recycles. Traction could also come from strategically targeting pools of capital that have previously been unavailable or underutilised, and that are willing to earn future risk premiums by taking on new and diversified resilience-finance risks. Carbon markets have the potential to further incentivize investment in resilience by providing a monetization mechanism for verified avoided CO2 equivalent (CO2e) from prevention measures (e.g. fuel treatments, prescribed fire, home hardening), creating an additional cash flow to refinance the next cycle of fire loss prevention interventions. Regional capital pathways Regional capital pathways vary but share a common principle: verified risk reduction earns cheaper capital. In places with relatively broader insurance availability and more mature capital markets (e.g. parts of the US and Europe), private finance can play a larger role if mitigation is measured and rewarded. In practice, capital pathways for wildfire resilience manifest differently in mature and emerging markets: –Mature markets: Where capital markets are deeper, and there are established payers (e.g. utilities, municipalities, insurers and pooled buyers), risk reduction can be financed through repeatable structures such as revolving funds, mitigation credits and resilience bonds – which can be certified by institutions such as Climate Bonds Initiative (CBI) for adaptation impact reporting and impact.73 Large corporates may also invest in wildfire mitigation where co-benefits exist. Clear standards, like the Insurance Institute for Business & Home Safety (IBHS) Wildfire Prepared Home programme, help make risk reduction “priceable”. –Emerging and under-insured markets: Where insurance coverage and domestic capital access are more limited, development finance institutions, sovereign risk pools and philanthropy can anchor first-loss capital and guarantees. Blended structures, such as green or resilience bonds, can fund community-based prevention and ecosystem restoration. Examples include: REDD+ (Reducing Emissions from Deforestation and Forest Degradation) results-based payments model – backed by ecosystem outcomes;74 African Risk Capacity (ARC) sovereign pool for parametric event liquidity;75 and Adaptation Fund/Green Climate Fund for de-risking and performance windows.76 Measurement and reporting often extend beyond EAL to emissions, health and biodiversity metrics, unlocking concessional finance. A self-reinforcing resilience economy Evolution of resilience finance hinges on the direct and active pricing of risk. When prevention, mitigation and adaptation operate as one system, wildfire management shifts from emergency response to evidence-based investment. Technology, including generative artificial intelligence (AI), may be a pricing enabler and break down information asymmetry over time. Every intervention feeds new data into shared MRV frameworks, which inform pricing, govern capital flows and finance the next round of work. 3.2 Life cycle of capital flow To translate this system into practice, capital must follow the life cycle of resilience, evolving across prevention, mitigation and adaptation, each with distinct risks, instruments and payers. This framework maps how funds, responsibility and returns move through this continuum: from capital that designs and de-risks programmes, to blended funds financing for mitigation infrastructure, to rapid- liquidity mechanisms for response and recovery, and finally to recycled savings that refuel prevention. Since many local and sub-national institutions have limited fiscal and administrative capacity, higher-level backstops and coordinated funding are needed to ensure that responsibility is shared according to capability rather than shifted downward. These financial flows underpin a self-sustaining wildfire resilience system. From Wildfire Risk to Resilience: The Investment Case for Action 15