The New Economics Of Insurability

Published: Monday, June 23, 2025 at 1:38 pm

Climate Risk Reshaping Investment Landscape, Insurers Take the Lead

Recent reports highlight a significant shift in how climate risk is perceived and managed, impacting investment strategies and market dynamics. Despite some public skepticism and ESG backlash, companies are increasingly integrating climate considerations into their core business strategies, moving beyond mere compliance to focus on long-term competitiveness.

A key finding is the growing influence of insurers. With climate impacts intensifying, insurers are redrawing the boundaries of investability, making insurability a crucial factor in capital allocation. This means that the ability to secure insurance is becoming a prerequisite for accessing financing. Sectors like infrastructure, agriculture, and real estate are particularly affected.

The reports emphasize that climate risk is now considered business risk. The world is on track to breach the 1.5°C warming threshold within a few years, making climate resilience a present financial reality. This is driving a redesign in how markets address risk.

The transition to a net-zero economy is proving challenging, with traditional business models struggling to adapt. Misalignment between technological readiness and existing systems is evident across sectors, such as in the development of electric vehicle infrastructure.

The reports also reveal a disconnect between policy, business, and finance. While global investment in clean energy reached a record $2 trillion, investment in capital-intensive decarbonization solutions like hydrogen and carbon capture has declined. This is due to factors like regulatory uncertainty and a lack of long-term market demand.

The reports suggest that clear and consistent policy is essential to unlock climate investment. However, a credibility gap exists, with many companies expressing a lack of trust in governments to deliver. This is reshaping capital flows, with Asia and Europe increasingly viewed as more attractive for investment than the United States.

BNN's Perspective: The findings paint a picture of a rapidly evolving financial landscape where climate risk is no longer a future concern but a present reality. The shift towards embedding climate considerations into core business strategies and the increasing influence of insurers highlight the urgency of the situation. Governments must step up and provide clear, consistent policies to enable markets and unlock climate investment. Failure to do so will likely result in continued capital bottlenecks and a widening gap between climate ambitions and actual progress.

Keywords: climate risk, insurability, investability, ESG, net-zero, climate change, business risk, decarbonization, policy, finance, investment, sustainability, resilience, markets, infrastructure, agriculture, real estate, COP30

Full Story