PART 2: This is part two in a two-part briefing on wildfires. In
Part I, we deconstructed the drivers that are putting people and assets at risk. In Part II below, we outline the levers that present opportunities for private capital to reduce the frequency, severity, and costs of wildfires.
Opportunities to reduce the impacts of wildfires
Wildfires might be inevitable and recurring, but innovative solutions are emerging to adapt our built environment and communities for fire. The opportunity levers outlined below offer examples of how private capital can be leveraged to manage the exposure and vulnerability of assets to wildfires.
In this briefing, we focus on solutions for the private-sector. This means we’re not focusing on opportunities for public funding or policy changes to the U.S. Forest Service fire-management practices or FEMA budgets. Our focus instead is concentrated on how private-sector actors can leverage capital to protect and fortify existing assets, and allocate funds into solutions and innovations that reduce the consequences of devastating fires.
We will explore four categories of opportunity levers for the private sector:
- Implementing modern building materials, zoning requirements, and land use policies
- Technologies for better decision-making, risk identification, and fire management
- New insurance models
- Private-sector financing for forest management
Lever #1: Implementing modern building materials, zoning requirements, and land use policies
Building codes, zoning requirements, and land use policies are the purview of municipal and state governments, but effective implementation of these codes offers an important opportunity for the private sector to win in the era of climate disasters and reduce the damages wrought by wildfires.
Building at and above code, with the latest building materials and land use policies, can protect new developments from the damage wrought by wildfire. A 2021 analysis from the California Building Industry Association found that only 1% of homes built after 2010 suffered damage in nine of the most destructive fires since 2017. The reason: new building codes were enacted after 2007 that required “hardening” protections (such as ember-resistant vents), as well as land-use policies like keeping flammable vegetation away from homes, and dog parks and open spaces that serve as fire-breaks.
Bringing existing buildings and neighborhoods up to code offers an opportunity for private innovation. The solutions to harden and fortify existing buildings and infrastructure are wide-reaching:
- House-specific hardening includes fire-resistant materials on siding, roofs, decks and fences, along with mesh-covered vents that prevent embers from entering a structure.
- Neighborhood-specific improvements can include open spaces that serve as fire breaks, such as noncombustible orange groves, and other management of vegetation, public infrastructure, and land use.
Private companies—both local contractors and national platforms–have a role to play in bringing buildings and neighborhoods to code. One national example is Wuuii, whose app lets property owners scan their home or business, generates a prioritized list of treatments based on their insurer's requirements, and connects customers to local contractors to complete the work. Their improvements fall into two buckets:
- Defensible space: Modifying landscaping to reduce exposure of structures to fuel, debris, and embers from nearby vegetation and to give firefighters a safe area to work.
- Hardening: Retrofitting vents, siding, decks, and other building features with materials to reduce vulnerability to heat, flames, and embers.
Another company focused on fire resiliency, Fire Aside, offers a suite of products to fire departments and other public safety agencies to digitize inspections of homes and businesses for compliance with defensible space and home hardening requirements.
Public funders can leverage incentives to motivate adoption of these resilient building materials and land use practices. States like Colorado have set up public-private financing vehicles like the Wind and Wildfire Home Protection Mitigation Program. Homeowners are eligible for grants and forgivable loans up to $30,000 to harden their homes against wildfire risk. The program is financed through Impact Development Fund, a nonprofit Community Development Financial Institution (CDFI). Public-private funds like Colorado’s could become a model for future impact investors looking to co-invest along with public-sector partners.
Lever #2: Technologies for better decision-making, risk identification, and fire management
Private-sector technologies, like vegetation management and intelligence, can enable more precise decision-making and identify risks to stop or prevent fires. Consider technology companies like Overstory and AI-Dash, two firms that use technology to conduct vegetation management and intelligence. Overstory works with utilities like PG&E to optimize resources, mitigate vegetation risk, and future-proof their operations. Meanwhile, Burnbot, a company with drones and unmanned robots, does prescribed burns at scale. The company’s mission is to reverse fire/ecological debt with prescribed fire through the use of its RX1, a robotic burn chamber that grazes fields like a lawnmower to safely conduct prescribed burns. Pano, meanwhile, focuses on actionable intelligence for wildfire management. It offers a connected, intelligent platform for fire professionals that helps them to rapidly detect threats, confirm fires, and disseminate information to responders. It uses ultra-high-definition cameras, geo satellite data, field sensors, legacy cameras, emergency alerts, and other data feeds to reduce the response times so small fires don’t become infernos.
These solutions are indicative of a wave of new research and more early-stage venture funding going into fire-tech. A 2023 report from DBL partners called Beyond the Burn explored how new technologies can grow the use of prescribed burns, creating better land outcomes and new markets. A 2022 report on the state of firetech, explores the current progress, persistent gaps, and future direction of the firetech space. Venture capital firms like Convective Capital are investing in startups fighting wildfires. The climate tech venture fund Voyager has also invested in firetech companies.
As wildfires become more common, such businesses are in a growing market with strong demand. These companies represent private-sector solutions that are complementary to fire suppression efforts by public agencies. By making firefighting efforts more efficient, pinpointed, and productive, the private sector is helping make fire suppression smarter and more streamlined.
Lever #3: New insurance models
As heightened wildfire risk strains the insurance and reinsurance markets, new insurance models are emerging to offer fresh solutions. Residents in the Wildland Urban Interface (WUI) across the country are losing insurance, and insurance companies are withdrawing from states like California where they’re over-exposed. However, insurance innovators like Kettle are emerging with new models to fill the gap. Kettle uses AI to build smarter insurance products that better protect people from the catastrophic effects of climate change. Kettle applies machine learning algorithms that use billions of lines of weather, fuel, satellite, anthropogenic, and ground truth data to develop new actuarial models for commercial insurance and parametric wildfire insurance. Another example is Delos, which offers insurance to homes in the WUI with limited insurance options by leveraging AI models to more accurately underwrite insurance coverage.
Lever #4: Private capital to improve forest management
Improving forest management is often considered the responsibility of the U.S. Forest Service, but private capital—from philanthropy to impact investing—has proven it has a role to play in improving forest management practices.
Philanthropic capital can support indigenous fire management practices. Indigenous fire management practices are garnering private philanthropic capital. As research and awareness of the deficits of legacy fire suppression strategies have grown in recent years, approaches to fire management have changed, and we are now seeing a shift toward resiliency instead of avoidance. There are lessons from indigenous fire management practices that work with fire; harnessing its power and recognizing that the very act of attempting to eliminate wildfires increases the risks of catastrophic ones.
One example is private foundation capital co-investing with state and federal funding to support the Lomakatsi Restoration Project. The Project provides a variety of programs, including the Tribal Ecological Forestry Training Program, which explores how collaboration with tribes and tribal communities through ecological restoration initiatives can embrace cultural fire and build more resilient ecosystems and communities.
Another is Fire Networks, a consortium of peer networks focused on changing our relationship to fire, including the Indigenous Peoples Burning Network. The umbrella network is funded through a partnership between The Nature Conservancy, a private NGO and funder, the U.S. Forest Service, and agencies of the Department of the Interior.
Innovative impact investing models can support forest management. There are also innovative financing practices to meet the adaptation financing gap. For example, from 2018 to 2022, a project in the Tahoe National Forest rolled out restoration treatments to 14,545 acres through a $4 million Forest Resilience Bond (FRB) issued by Blue Forest Conservation. Resilience Bonds are growing in popularity, and a report by The Nature Conservancy in 2021 identified new models for green bonds to fund forest restoration and fire resiliency projects. Environmental Impact Bonds (EIBs) are modeled after social impact bonds, and present another way for impact investors and capital allocators to fund projects that reduce the effects of wildfires.
It works like this, according to the report:
- Financial Institutions package and issue EIBs.
- Institutional Investors/funders purchase the EIBs.
- Federal land management agencies design specific management actions/treatments to restore and enhance the resiliency of forests. The bonds fund these forest management practices.
- The beneficiaries (ranging from private entities, local governments or federal agencies) who benefit from the outcomes of the forest management practices (often as an avoided cost of a wildfire) pay back the investors, along with interest.
Summary & Conclusion
The private sector levers to reduce the impacts of wildfires span deep technology innovation, local home-hardening upgrades, and financial bonds. Coupled with public-sector efforts to reduce the risks of fires, the current moment presents exciting potential to leverage growing awareness, increased capital, and promising innovation aimed at making wildfires less frequent, less dangerous, and less costly.