Climate change is already imposing severe financial burdens on businesses, governments, and individuals. Since 1980, the U.S. has experienced 403 climate and weather disasters, each exceeding $1 billion in damages, with total costs surpassing $2.9 trillion.
Homeowners in high-risk areas are among the hardest hit, facing skyrocketing insurance premiums as major insurers pull out of states like California and Florida due to increasing climate risks. At the same time, extreme weather events are disrupting supply chains, damaging critical infrastructure, and exacerbating public health crises, all of which contribute to rising costs across industries.
As climate-related financial risks continue to escalate, so does the urgency of investing in climate resilience and sustainability. This month we explore the rising economic toll of climate change, from real estate devaluation to global GDP losses, and examine the role that sustainable investing can play in mitigating these risks.
The Rising Financial Toll of Climate Change in the U.S.
Climate-related disasters are becoming more frequent, severe, and costly. In 2024 alone, the U.S. experienced 27 separate billion-dollar weather and climate disasters, causing an estimated $182.7 billion in damages and at least 568 fatalities. This follows a record-breaking 28 billion-dollar disasters in 2023—part of a long-term trend of increasing financial losses tied to extreme weather.
Property Costs Are Skyrocketing: One of the drivers of these costs is the insurance crisis. A recent report found that climate-driven property losses could reach $1.47 trillion in the coming decades, as rising insurance costs and shifting consumer demand cause widespread devaluation of real estate in high-risk areas. In some states, insurance premiums are rising faster than mortgage payments, forcing many homeowners to relocate. The report predicts that by 2055, more than 55 million Americans will migrate within the U.S. to escape climate risks, with 5.2 million expected to move in 2025.
Supply Chain Disruptions Are Driving Up Prices: Extreme weather is increasingly disrupting supply chains, raising costs for businesses and consumers. Droughts and floods have damaged farmland and reduced agricultural yields, contributing to higher food prices. The Mississippi River’s 2022 drought, which decreased water levels to historic lows, disrupted 92% of U.S. agricultural exports, causing an estimated $20 billion in economic losses. Events like these make food, fuel, and other essential goods more expensive, further straining the economy.
Public Health Costs Are Rising: Climate change is driving higher rates of heat-related illnesses, respiratory diseases, and infectious outbreaks, all of which are increasing healthcare costs. According to the Natural Resources Defense Council (NRDC), air pollution and climate-related health conditions cost the U.S. $800 billion annually in medical expenses and lost productivity.
The healthcare industry itself is also struggling with climate-related disruptions. Flooding and hurricanes have damaged hospitals, pharmaceutical plants, and supply chains, leading to medication shortages and treatment delays. As healthcare shifts toward value-based care models, where providers are reimbursed based on patient outcomes rather than services rendered, the rising cost of climate-related health conditions is putting additional financial strain on the sector.
The Global Economic Threat of Climate Change
While the U.S. is already experiencing severe financial strain due to climate change, the global economy faces even greater risks. A study by the Institute and Faculty of Actuaries (IFoA) and the University of Exeter warns that without urgent climate action, global GDP could shrink by 50% between 2070 and 2090 due to climate and biodiversity loss.
This study highlights that economic stability is deeply intertwined with the health of the planet. Food shortages, water scarcity, heat stress, and the spread of infectious diseases are already disrupting markets worldwide. If left unchecked, these crises could escalate into mass displacement, economic collapse, and geopolitical conflict.
Another analysis projects that for every 1°C increase in global temperatures, global GDP will drop by 12%, with financial losses peaking within just six years of each temperature rise. The speed at which economic damage unfolds underscores the urgent need for governments, businesses, and investors to act now.
The Role of Sustainable Investing in Mitigating Climate Risks
While the financial risks of climate change are undeniable, investors have an opportunity to drive meaningful solutions while protecting their portfolios from climate-related volatility. Companies that integrate sustainability into their business models are proving to be more resilient, more innovative, and better positioned for long-term growth than their peers.
ESG investment funds allow investors to support companies that are actively working to reduce emissions, develop climate solutions, and build resilience. Studies show that ESG-focused funds often outperform traditional investments as companies prioritizing sustainability tend to have better risk management and long-term profitability.
Demand for clean energy and sustainable infrastructure is surging. The global economy is undergoing a massive shift toward cleaner technologies, with sectors like renewable energy, energy storage, and circular economy solutions seeing record investment growth. Investments in solar energy alone outpaced investments in oil production for the first time in history last year.
