A recent article from The Guardian highlights a growing issue in financial markets:
The models used to assess climate risk are falling behind reality.
Many widely used economic models assume climate change will impact growth gradually. But they often fail to capture extreme weather events, systemic shocks, and tipping points, all of which are increasing in frequency and severity.
A growing gap between risk and pricing
This creates a dangerous disconnect.
As climate impacts accelerate, financial systems continue to rely on models that underestimate real-world exposure. The result is a mispricing of risk across assets, portfolios, and markets.
If risk isn’t measured correctly:
- assets may be overvalued
- insurance exposure miscalculated
- capital misallocated
From scenario to financial reality
Climate risk is no longer a long-term scenario.
It is becoming a core input into financial decision-making, asset valuation, underwriting, and investment strategy.
What comes next
The challenge is no longer access to climate data.
It’s the ability to turn complex climate signals into clear, asset-level insights and financial impact.
In this next phase, understanding climate risk isn’t optional; it’s foundational to make informed decisions in a changing world.
Read the full article here:
https://www.theguardian.com/environment/2026/feb/05/flawed-economic-models-mean-climate-crisis-could-crash-global-economy-experts-warn