Geostrategic Signals: Financing Resilience

The geostrategic context will continue to reshape the business environment, and the pace and complexity of events will only accelerate; for business leaders, that is now the norm.

A hot, dry summer, in which the intersection and amplification of climate and geopolitical risks served as a sharp reminder to governments and business of the need to better understand single points of failure and invest in resilience.

Yet this presents governments with a stark choice: which sectors should they control, which sectors can be secured through allied coalitions and which can be left to market forces. That is at the heart of economic statecraft.

In this geostrategic new-normal, resilience - whether in security, energy, resources, food or water - has a cost. The question is no longer whether resilience matters, but how it is funded and at what price.

The five things we will be watching:

1. As climate amplifies geopolitical shocks, will investors reward resilience?
   After a summer of heat and water stress demonstrated that physical climate risk now strikes many of the same chokepoints as conflicts, will investors reward resilience?
2. Is food security now a geostrategic risk?
   Weaponised grain corridors and a fertiliser shock have collided with climate stress, squeezing supply at both ends, with El Niño adding to the strain. Is food becoming the next tool of statecraft?
3. In the new industrial order is supply-chain sovereignty deliverable and affordable?
   Can the US and its allies loosen China’s grip on processing? And will a widening trust deficit between the US and its allies push governments towards sovereign - but more expensive - solutions?
4. In an era of economic security, what are the implications for capital flows?
   From securing the physical inputs for an AI-led industrial build-out, from oil through Hormuz to critical minerals. How will this reshape capital flows?
5. Are governments willing to make the hard trade-offs to deliver resilience?
   How will governments navigate the trade-offs between sovereignty and resilience?

Mark Sedwill, Chair of Geostrategic Advisory, Rothschild & Co

Read on for more from Anne Imbach, IISS, Simon Thompson, George Karamanos and Nicola King here

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