The economics of climate risk ignores the value of natural habitats |
When Hurricane Delta hit Mexico’s Caribbean coast in 2020, insurance payouts were released within days – not to rebuild hotels or roads, but to repair coral reefs.
In the Mexican state of Quintana Roo, reefs are insured and restoration is taken care of by a local trust. After storms, payouts fund rapid restoration so reefs can keep doing their job: breaking up waves so they don’t erode the shore, reducing flooding, protecting tourism jobs and lowering insurance losses.
Nature is treated as part of the economic infrastructure. This idea is spreading, as it directly affects costs, risks and financial stability.
Until recently, sustainable or “green” finance has focused almost entirely on carbon emissions, net zero targets and climate-related investments. But these climate-only measures miss something basic. The economy doesn’t just depend on temperature; it depends on living systems.
In my field of sustainable finance and financial stability, research shows that when ecosystems fail, the costs show up in rising food prices, insurance bills and public finances. The health of the planet affects everyday costs.
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