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In this article, Matthew Kahn, economics professor at USC, explores the near- and long-term impacts of climate change on businesses, the insurance industry, and global markets.
For businesses, governments, and countries, the risks associated with climate change are now a fundamental concern. Systemic or compounded risk is the new norm, from the effects of rising sea levels on storm surge to that of drought on wildfires. And the business interruption caused by these catastrophic events has become a standard boardroom concern. Many elements of the COVID-19 pandemic have parallels with the threat from climate change, both having extraordinary systemic impacts.
Let me boil it down to a bumper sticker: When the insurance industry incentivizes resilience investments, Mother Nature’s punches will lead to fewer defaults on loans and that leads to a more stable financial system.
Matthew Kahn Environmental Economist and Author