America’s manufacturing rebound has unfolded at an astounding rate. Between 2021-2023, the amount of investment (announced and finalized) totaled more than $800 billion led by the semiconductor, automotive (including EVs) and pharmaceutical sectors. Jumping on the bandwagon of the Inflation Reduction Act (IRA) and Infrastructure Bill, locations capturing both federal subsidies and corporate investment may experience a strong multiplier effect in their local economies. But clearly, corporate America – like many homeowners – has not fully factored climate risk into their investment decisions. The best evidence of this is at the top of the list: Maricopa County, Arizona. The Phoenix area is the largest destination for greenfield commitments – making it particularly ironic, and worrying, that Arizona has significantly curtailed building permitting in the Phoenix area due to its depleting groundwater supply.
For America’s industrial renaissance to be more sustainable, geographic resilience needs to be a prominent consideration alongside tax breaks and other incentives.
Geography matters immensely for the success of long-term capital commitments. At Climate Alpha, we employ the methods of spatial finance in which geographic signals have material economic impact. Our location-based analytics integrate socio-economic, market, and climate factors into comprehensive forecasts.
To help investors understand the future geography of economic growth in America, Climate Alpha has begun compiling an Industrial Renaissance Tracker (IRT). This data composite monitors and regularly updates investments according to location, sector, and value – painting a picture of locations where job and rent growth, as well as other socio-economic improvements, are most likely to occur. Figure 1 below depicts the top five industry classifiers in terms of the number of new investments underway.
3711 - Motor Vehicle and passenger car bodies (includes all EV related investment
3511 Steam, Gas, and Hydraulic Turbines, and Turbine Generator Set Units (renewable energy etc)
2833 Medicinal Chemicals and Botanical Products
3674 Semiconductors and Related Devices
3999 Manufacturing Industries, Not Elsewhere Classified
When measured in dollar value, Arizona ($134.2 billion), Texas ($114.3 billion), and Massachusetts ($93.6 billion) currently lead the race to attract the largest investments.
A broader snapshot of the geography of new investments is illustrated in Figure 2 below that captures how investment flows are generally reinforcing activity in states with an active industrial sector.
But how sustainable are these new industrial hubs? To find out, we then assess the locations receiving significant new investment according to our proprietary Resilience Index (RI) that scores their risk, vulnerability and readiness to cope with climate change and other disruptions. The Index reveals that Maricopa County currently exhibits a medium degree of climate risk relative to its history, but also has a moderate degree of vulnerability and low degree of readiness. (See Figure 3.)
Maricopa County, AZ, is the top county where the investment bonanza may collide with the harsh realities of climate change.
A breakdown of Maricopa County’s climate risk scores shows the location’s elevated risk from heat, drought, and fire. (See Figure 4.)
Maricopa also exhibits a high degree of vulnerability in light of its population density and landscape porosity. (See Figure 5.)
Maricopa’s low level of public spending and availability of renewable energy resources indicate lower overall readiness to cope with climate stress. (See Figure 6.)
Juxtaposing investment patterns and resilience indicators uncovers both geographies of risk as well as opportunity, providing a comprehensive analysis of the strengths and weaknesses of a market in sustaining economic momentum.
Both Climate Alpha’s Industrial Renaissance Tracker (IRT) and Resilience Index (RI) are embedded in our platform so that clients can evaluate and rank investment opportunities according to an integrated set of criteria spanning economic, demographic, infrastructure, climate, and many other drivers of future market performance.
For more information on how Climate Alpha can help you get ahead of the impacts from climate volatility reach out to our team.