As Doron Telem, ESG Lead at KPMG Canada, told me around the time of the report’s release: “Even if companies aren’t talking publicly about climate risk, that doesn’t mean they’re not paying huge attention when making investments or providing credit.”

This awareness isn’t limited to financial experts or markets. A new 2025 Pew Research Center survey, conducted from April 28 to May 4 among 5,085 U.S. adults, found that 74% of Americans say they experienced at least one form of extreme weather in the past year. Perhaps more tellingly, 77% support stricter building standards in high-risk areas. Strong majorities across party lines also back government assistance to help communities rebuild. Even as political gridlock persists, this broad-based public support signals a growing recognition that systemic climate risk requires systemic planning. This also signals growing public demand for investment in climate resilience, not just from governments, but from the private sector as well. The question now isn’t if governments and markets will respond, but how and when.

History is full of moments where systems failed to adapt until forced to. For the U.S. during World War II, it was Pearl Harbor, when isolationism collapsed in the face of existential threat. For global finance, it was the 2008 crash, when years of mispriced mortgage risk triggered a chain reaction that froze credit markets. More recently, it was COVID-19, which turned unthinkable lockdown policies into global consensus within weeks. These were all failures of timely response. Yet, in each case, humanity did eventually adjust and, in doing so, stave off even greater catastrophe: global fascism, deeper economic collapse, and further loss of life.

We are now in a similar moment. This new era of climate volatility will inevitably force markets and policymakers to adapt. The question is whether that adjustment happens in a chaotic, reactive way, triggered by cascading losses, infrastructure failures, and abrupt insurance withdrawals, or through foresight and planning. One path leads to unnecessary strain, disorder, and dramatic capital flight from geographies deemed too high risk. The other begins by recognizing that increasingly frequent and severe weather events are not outliers but warnings, as the canary in the coal mine.

In Kim Stanley Robinson’s 2020 novel The Ministry for the Future, the triggering event for systemic climate action is a devastating heatwave in India that kills millions, a fictional, but unfortunately all too plausible, catalyst. The aftermath sparks not only public outrage, a spate of ecoterrorism and political reform, but also a global reallocation of capital: investments begin to flow toward carbon removal, resilient infrastructure, and new financial instruments like a “carbon coin” (a speculative asset designed to reward carbon drawdown efforts). What the real-world trigger will be is uncertain. It could be a litigation win, a failed municipal bond, increased demand for electrification, energy blackouts, new regulations and mandates, or a single season that breaks too many records. But one thing is clear: capital doesn’t always wait for policy consensus but responds quickly to real-world signals.

As KPMG’s Doron Telem told me: “For companies as a whole, especially when investments are long term, I actually don’t see politics having a huge impact. If a company believes it needs to shift toward renewable energy over time, or if its clients are demanding greener products, and if that’s part of a long-term secular trend, then they’ll probably still move in that direction.”

Repricing Markets for Climate Risk

“The models will be updated,” Robin Castelli, former head of climate risk model development for Citi, tells me emphatically, referring to the financial models that guide everything from insurance pricing to infrastructure investment. “The only question is whether we do it proactively, or after the next disaster forces it into every boardroom.”

Castelli is the author of the forthcoming book Principles of Transition Finance Investing, and for him, the tipping points are already here, even if not everyone realizes yet. “A liquidity squeeze,” he explains, “is when there’s a lack of available capital or cash in a market. If insurers exit, banks won’t lend. And when lending freezes, asset values collapse. It’s already unfolding as a result of these events.”

Castelli is clear: the climate risks most likely to reallocate capital won’t come from direct impacts on physical assets alone, but from compounding effects that unfold simultaneously across systems. In his view, most financial models still underestimate “fat-tail risks” (rare, compounding events with outsized impact like insurance exists and regulatory shifts). Castelli argues these are where the real threats lie, and where transition finance must be focused. Ultimately, Climate risk doesn’t just arrive through hurricanes or wildfires. Castelli maps four transmission channels: acute events, chronic shifts, transition pressures, and litigation. Prudent investors need to account for all of them.

Castelli points to several mounting signals as examples of such risks manifesting themselves: State Farm and Farmers Insurance have both significantly reduced their exposure in California and Florida, citing wildfire and hurricane risk, rising construction costs, and volatile reinsurance markets. Citizens Property Insurance Corporation, Florida’s state-backed insurer of last resort, now covers more than 1.5 million policies, a level that signals deep strain in the private market. According to Castelli, this is only a preview of what’s to come.

To pre-empt and plan for the new normal a warmer world will bring, Castelli argues that investors must jettison their traditional models—what he jokingly calls “spherical cows in a vacuum,” a way of saying they’re too elegant, too theoretical, and too disconnected from real-world complexity. They might look good on paper, but in a world of climate volatility, they break down fast.

“If you’re still relying on back-testing models that ignore climate volatility, you’re building a strategy on a broken compass,” he warns.

Transition Finance: From Niche to Core Strategy in a High Climate Risk World

A glass-half-full kind of guy, Castelli lays out an alternative investment playbook for investors looking to navigate, and benefit from, this new era of climate risk we now find ourselves in. First, use models that don’t just assume the past will repeat, but account for rare, high-impact events that can reshape markets overnight. Second, build in real-world variables, like climate volatility, insurance exits, and legal risk, into how you price assets and allocate capital. Third, stop treating transition finance as an ESG niche which tend to focus one or two specific metrics (such as emissions reduction); start treating it as a core risk strategy. And finally, shift your mindset: systemic climate shocks aren’t hypothetical but inevitable.

“You don’t need 100% certainty to price risk,” Castelli tells me. “You need a credible direction of travel and a set of assumptions you can backtest against physical reality. That’s what we’re still failing to do.”

This might sound like a heavy lift, and it is. That’s why there’s been a surge in investment risk analysts and consultants, especially as extreme weather converges with other rising threats like geopolitical instability. But as the saying goes, never let a good crisis go to waste. Investors who incorporate factors like technology readiness, infrastructure resilience, policy landscaping and geographic exposure into their models will be well positioned. As Castelli puts it, having an acute understanding of these factors will define “winners and losers in capital markets over the next 20 years.”

Where Capital Is Moving as Climate Risk Reshapes Markets

Castelli’s book is filled with examples of high-growth opportunities linked to the climate transition. “We’re talking about $3–5 trillion in transition-linked capital per year by 2030,” he writes. These areas range from green energy deployment, particularly geothermal, hydrogen, and solar, to energy efficiency retrofits in commercial real estate, and workforce retraining across sectors like construction, critical minerals mining, logistics, energy, and agriculture. In Silicon Valley, companies like nubila are providing decentralized weather data to financial institutions that are becoming increasingly aware of the importance of capturing weather transition trends. Investing in such companies could be a valuable investment as demand for more sophisticated weather data increases. New financial instruments, such as carbon markets and climate-linked insurance, are also beginning to scale.

As Castelli notes, this isn’t a static play. Transition finance requires investors to dynamically adjust their exposure across sectors as the opportunity set evolves in real time. Some of these sectors will require enabling regulation and public investment to truly thrive. For example, long-term demand for carbon credits is likely to emerge as voluntary markets begin to merge with compliance regimes, as we’re already seeing in places like Singapore and California. Investing in certain geographies will also depend on visible public commitments to resilience. Texas’s multi-billion-dollar coastal barrier system, commonly referred to as the “Ike Dike,” aims to protect the Houston-Galveston region from increasingly destructive storm surge. The project sends a clear signal: this is a state preparing for what’s to come.

In many places, the types of opportunities Castelli writes about are no longer “experiments.” There are now real, rapidly maturing transition-focused markets, and capital is beginning to follow. Castelli’s own investment thesis matrix scores many of these sectors mid-to-high in terms of maturity and scalability, indicating they’ve already moved beyond the pilot phase and are scaling in the real world. Some of these will thrive even if the world proceeds in a disorderly or delayed transition.

Which investors are prepared to seize such opportunities is another question altogether. Today, policy cooperation remains fractured, and short-termism dominates, especially amid a resurgence of transactional, protectionist politics. Reacting to climate change hardly seems like a top policy priority right now.

But the wise investor knows: history doesn’t reward those who wait and see. It rewards those who move early, before the climate risk models catch up.