Changing weather patterns are already beginning to impact on our food, water and ecosystems in many parts of the world. The IPCC projects that over the coming decades we will see growing challenges to food security, water availability and biodiversity. This can also trigger cascading risks and increase vulnerabilities to other shocks, including financial shocks and pandemics. So-called ‘acute’ risks like wildfires, droughts, typhoons and flooding already cause massive social and economic disruption and property damage and are expected to become more prominent in our warming world.
Achieving a net zero carbon economy by the 2050s will reduce the risks, but not eliminate them. Building resilience to climate and other shocks is essential and a key contributor to sustainable development globally.
The financial system can play a fundamental role in helping to build resilience and sustainability, by mobilizing the finance and investment needed for adaptation and resilience, creating the positive incentives, and providing financial protection, including through insurance or catastrophe bonds.