MSCI CEO: why markets must catch up with physical climate risk

Henry Fernandez is Chairman and CEO of MSCI.

All across the world, all across different kinds of extreme weather, the records keep falling.This summer alone, we saw the hottest July ever recorded in North America, Africa and Asia; the hottest June–July ever recorded in Western Europe; the hottest global average sea surface temperature ever recorded; the lowest water levels ever recorded in some of Europe’s biggest rivers; and record-breaking rainfall everywhere from China, Japan, South Korea, Pakistan and Canada to Hawaii, Missouri, Indiana, West Virginia, New York and beyond.In the months ahead, a “very strong” El Niño event may lead to even more records falling, based on forecasts from the World Meteorological Organization.And yet, even as the deadly and destructive impacts of extreme weather accumulate, and even as researchers warn that the economic costs of climate change could be far worse than previously thought, physical risk remains significantly undervalued in global financial markets. Fixing this problem would go a long way toward accelerating the world’s adoption of real climate solutions.The economic and financial impacts of climate changeTo understand the urgency of the problem, consider just a few numbers. Between 2020 and 2024, the world witnessed 99 extreme-heat events, compared with only 14 in all of the 1980s, according to a recent Allianz report. Over roughly that same period (1980 through 2023), the annual global costs of weather-related hazards spiked from about $23 billion to nearly........

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