Climate crisis shows its teeth, but inventive companies create opportunities for investors

The climate bill is coming due.

We see it in rising insurance costs, strained housing markets, higher food prices, and ever-larger infrastructure bills.

For investors, this creates risk across industries and disciplines. But it is also drawing interest to companies with ideas that can help society adapt.

This summer’s record heat was a stark reminder that the consequences of a warmer climate are no longer just theory. Yet the clearest signs of change come not from weather forecasts but from the price tags on essential goods and services.

Climate risk is increasingly reflected in insurance premiums, mortgage defaults, transportation costs, and food prices. Extreme weather can damage property and delay production. Rising food and energy costs can also push up inflation.

Governments face ever-higher costs for climate adaptation and rebuilding. Across regions, sectors, and asset classes, the economic consequences of climate change are becoming increasingly hard to ignore.

The hunt for solutions

But for those of us who invest in companies around the world, these costs also create opportunities.

The more expensive the consequences of climate change become, the greater the need for solutions that can reduce those costs. Preserving the society we already have while building a lower-emission one will require enormous investment.

Investment is already at record levels. The energy transition alone attracted USD 2.3trn in 2025, more than double the 2020 figure.

That creates a significant and growing market for companies that can help economies withstand a warmer and more volatile climate. The investment opportunity lies in companies that are well positioned to meet the growing need for investment tied to environmental and social challenges, and whose long-term earnings potential the market has yet to fully price in.

Watch the insurance market

Insurance may be the clearest indicator of what physical climate risk actually costs.

Insurers use detailed local data and regularly adjust premia to reflect changing risk and recent losses. As physical conditions change, the cost of protecting assets can thus rise quickly.

Insured losses from natural catastrophes reached about USD 107bn globally in 2025 and are expected to climb to USD 186bn by the end of the decade, according to a report from Swiss Re.

At the same time, an estimated USD 424bn in assets is uninsured because adequate coverage has become too expensive or, in some places, is not offered at all.

Effects reach far beyond insurance

Higher premia and refusals to provide coverage shift more risk directly onto households, businesses, and governments. US mortgage data offers further evidence of these knock-on effects.

After extreme weather events, mortgage defaults rise while house price growth slows.

That can weaken household finances, reduce local tax revenue, and put further pressure on public services, all while communities have to spend more on rebuilding.

Food prices make the effect even more visible. Higher temperatures contribute to persistent price pressure, and continued warming could add about 3 percentage points a year to global food inflation by the mid-2030s.

Energy and transportation systems are also vulnerable. Extreme temperatures increase electricity demand while potentially limiting output from thermal and nuclear power plants. Heat, drought, and flooding can disrupt roads, waterways, and railways.

No one is spared

Taken together, these examples show that climate change is not merely an environmental or ESG issue. It is increasingly a financial factor for every type of company.

States and municipalities face higher costs for adaptation and rebuilding. Businesses must deal with damaged property, operational disruptions, and supply chain interruptions. Weather-driven shocks to food and energy prices can feed into inflation and, ultimately, interest rates.

Nor can investors avoid these risks simply by steering clear of investments labeled “climate.” Even a passive index portfolio is likely to carry significant exposure to physical climate risk through the companies, sectors, and regions it represents.

The question, then, is both where the risks lie and which companies stand to benefit from the need to reduce them.

Read the article in AMWatch.