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New cost-of-living crisis deepens in California
New cost-of-living crisis deepens in California

Daily Mail​

time3 days ago

  • Business
  • Daily Mail​

New cost-of-living crisis deepens in California

Published: Updated: A new cost-of-living crisis is deepening across America's progressive capital. In California , soaring climate risk and mounting insurance losses are converging into a property crisis experts warn could slash the value of millions of homes. Deep Sky, a Canadian carbon removal firm, published an analysis of the state's housing insurance market, which painted a dire picture. 'The highest risk areas of California have effectively become uninsurable and will soon become unaffordable,' the study, published in mid-June, concluded. 'Without significant policy intervention, these properties will eventually become worthless.' The warning comes just six months after destructive blazes ripped through Southern California, destroying over 18,000 structures and burning more than 57,000 acres. In January, the Palisades and Eaton fires became two of the most destructive blazes in state history. The impact on the insurance market, which was already under pressure , was immediate. In the first quarter of 2025, insurers posted a $1.1 billion net underwriting loss — a sharp reversal from the $9.4 billion gain they posted the same period a year before. Those numbers have hit some of the most wildfire-prone areas, where premiums have jumped by 42 percent since 2019, and more than 150,000 homes are now uninsured altogether as residents simply cannot afford coverage. But the state has a long way to fall before reaching worthlessness. Right now, the Golden State is America's most expensive housing market. Median home values in California are currently just over $780,000, according to Zillow. That's over $400,000 more than the US average. But, without a robust fire insurance market, policymakers and researchers are warning that the state is resting on shaky grounds. In May, Ricardo Lara, the state's insurance commissioner, approved a 17 percent rate hike for State Farm General, California's largest home insurance provider, to help pay for earlier destruction. 'The market is not going to fail under my leadership,' he told Politico after the decision. 'I have to make these hard decisions, even though it makes me the most unpopular person, and maybe nobody wants this position in the future.' And California is by no means alone. Several other states that are prone to natural disasters have faced mounting home insurance issues. State Farm hiked home insurance rates in Illinois by 27.2 percent this month , adding $746 to the average bill. The insurer insists the hike is unavoidable, claiming it is paying out far more in claims than it collects in premiums in the state which is prone to hailstorms. Florida, which saw a major inflow of residents in 2020, is seeing housing shoppers flee its hurricane-vulnerable coastlines that used to draw million-dollar buyers. In April, contracts to buy homes in the Miami, West Palm Beach and Fort Lauderdale regions fell dramatically from the year prior. Homes also lingered longer on the market. Pending sales fell 23 percent year-over-year in Miami, according to Redfin, which was the largest drop among the 50 most populous metro areas across the US. Meanwhile, some cash-strapped young homebuyers are skipping insurance altogether out of fear their homes will not pass inspection.

Federal officials say forecast suggests high risk of wildfires in August
Federal officials say forecast suggests high risk of wildfires in August

CBC

time18-07-2025

  • Climate
  • CBC

Federal officials say forecast suggests high risk of wildfires in August

Federal officials say the 2025 wildfire season is one of the worst on record for Canada, with a high risk of more fires in August. More than 5.5 million hectares of land have burned so far this year, more than double the 10-year average for mid-July. There are 561 fires burning, including 69 that are considered out of control, and most of them are on the Prairies. Officials say the fire risk rises throughout August and they are predicting higher than normal temperatures for most of the country next month. August is also slated to bring below-normal rainfall levels for the Prairies, B.C. and the Maritimes. Saskatchewan has already seen one of the worst fire seasons ever in terms of area burned, and a record number of people have been forced out of their homes in that province.

The $87 To $1 Gap: Why Markets Undervalue Resilience
The $87 To $1 Gap: Why Markets Undervalue Resilience

Forbes

time14-07-2025

  • Business
  • Forbes

The $87 To $1 Gap: Why Markets Undervalue Resilience

Despite escalating climate and nature shocks, global markets still behave as if the world were stable, pouring capital into assets designed for a cooler, more predictable era. At the same time, investments in resilience remain marginal, underfunded, and misunderstood. This isn't just a policy failure, it's a market failure. Guido Schmidt-Traub, a partner at Systemiq puts it plainly, 'Most investors and finance ministries are flying blind on physical climate risk. They don't have the tools, and they don't have the data to price it in properly.' According to Systemiq's report Returns on Resilience, such shocks have displaced over 20 million people in the past two decades, erased $525 billion in value across emerging markets, and inflicted $28 billion annually in losses on the EU's agriculture sector. Yet these losses remain largely invisible in how capital is allocated, not due to a lack of data but because current financial systems can't internalize it. Capital Allocation In A Warming World Schmidt-Traub explains: 'The heart of the problem is an asymmetry in how the risks and returns of investment decisions are evaluated. Risk is often penalized, but returns on resilience are ignored.' Risk assessments embedded in bond ratings, insurance underwriting, and infrastructure planning tend to draw from historical averages, ignoring how climate change has rendered the past an unreliable predictor of the future. That gap between risk and reality has led to what Schmidt-Traub calls 'a fundamental misallocation of capital.' The research shows that for every dollar spent on climate-resilient infrastructure, $87 goes toward infrastructure with no resilience considerations at all. This isn't just inefficient, it's potentially dangerous. It locks in exposure, deepens systemic fragility, and amplifies the potential for cascading failures, from food systems and energy grids to labor productivity and real estate markets. Credit rating agencies routinely downgrade countries for climate vulnerability, but rarely credit them for resilience investments. This punishes exposure but doesn't reward preparedness. As Schmidt-Traub explains, 'Our economic models were designed decades ago, before resilience was even a concept. If a government is investing in resilience to reduce economic volatility and protect productive capital, these investments should be factored into its creditworthiness. But they are not.' The private sector shows similar distortions. Developers still build in flood-prone areas, while insurers use outdated maps and investors chase short-term yield without factoring in rising physical risks like extreme heat, water scarcity, or supply chain fragility. Why Risk Alone Isn't Moving Capital For decades, climate policy has focused on emissions reductions. More recently, attention has turned to managing risk through blended finance, insurance tools, and diversified supply chains. But the current risk-based framing has not been enough to realign financial flows at scale. Investors aren't negligent but constrained by outdated models, poor data, narrow disclosures, and misaligned incentives. Even when risks are acknowledged, they are often treated as one-off events to insure against, not as structural forces that reshape entire markets. That misunderstanding is now beginning to show up in macroeconomic indicators. Allianz's Global Boiling report warns that heatwaves alone could subtract 0.5 percentage points from Europe's GDP in 2025, with Spain facing losses as high as 1.4%. In the UK, the Office for Budget Responsibility recently revised its projections showing that long-term climate damage could be 60% worse than previously forecast. Yet financial systems still treat these disruptions as anomalies, not as a new baseline. The Data Deficit At the heart of the problem lies a persistent data gap. Only 5% of companies assess their environmental impacts, fewer than 1% understand their dependencies on nature. In the banking system, the Bank of England Prudential Regulation Authority found that no British lenders could fully quantify how climate change will affect their activities, while most do not consider the issue a material danger beyond 'reputational risk'. Nationally, four out of five finance ministries lack the capacity to evaluate physical climate risks, and more than half use no dedicated modelling tools at all. Without reliable, forward-looking risk data, capital markets cannot price climate exposure, or resilience, accurately. This absence of insight reinforces inertia and mispricing, deepening the divide between capital flows and climate reality. Resilience as a Growth Thesis The solution, Schmidt-Traub argues, isn't just better risk management. It's a fundamental reframing. He says, 'We need to shift the narrative from risk management to productive investment in resilience. Resilience is infrastructure. It's growth. It's stability. It's competitiveness.' This shift reframes resilience as a source of growth and stability. When a government builds flood defenses or when a business invests in adaptive infrastructure, those actions reduce volatility, preserve output, and enhance long-term value. Yet these benefits rarely appear in models or credit metrics and this oversight fuels overinvestment in fragile systems and underinvestment in resilience. Resilience As Core Finance To realign markets with climate reality, resilience must move from the margins of ESG reports into the center of financial decision-making. That will require systemic changes across the financial value chain. A key step is developing standardized resilience taxonomies, clear, cross-sector definitions that allow investors, regulators, and institutions to evaluate adaptation investments on a common basis. Without shared criteria, resilience remains difficult to benchmark, verify, or scale. Governments must embed climate risk in macroeconomic planning. That means incorporating physical risk into debt sustainability analyses, sovereign credit assessments, and national investment strategies. This oversight is not just incomplete, it's economically flawed. As Schmidt-Traub puts it, 'Our models were designed decades ago, before resilience was even a concept. This is simply bad economics, driven by outdated assumptions that fail to recognize resilience as a productive asset.' Even the International Monetary Fund agrees. The Bridgetown Initiative has called for treating resilience like other productive infrastructure, with growth and stability priced in. Climate and nature shocks create volatility in national economies, leading to unpredictable swings in output, prices, and public finances. Governments are compelled to spend heavily in response to floods, droughts, and storms, often while tax revenues are falling. The result: more borrowing, crisis loops and eroded development. By absorbing shocks and preserving productive capacity, resilience investments reduce the severity and duration of economic losses. For example, flood-resistant roads are less likely to be destroyed during a storm, and early-warning systems enable faster recovery. They protect assets and preserve fiscal space. These shifts are increasingly quantifiable. A recent analysis found that a 10-point improvement in a country's ND-GAIN score, which measures climate readiness and exposure, correlates with a 37.5 basis point reduction in bond spreads. That's not charity or aid, that's margin. Resilience Is Already Paying Off While systemic reform is essential, the market is already beginning to recognize the value of resilience. Several companies are demonstrating that climate adaptation can enhance performance, stability, and creditworthiness. In 2025, PG&E earned a credit upgrade for wildfire-proofing, while McCain increased potato yields by 25% in New Zealand through regenerative agriculture. In the U.S., a study found that homes built to updated wind-resilient building codes had 50% lower mortgage delinquency rates after hurricanes compared to older homes. These examples point to a larger trend. Global demand for resilience solutions is expected to reach between $500 billion and $1.3 trillion by 2030, as investors and insurers increasingly recognize the business case for future-proofing assets, operations, and supply chains. COP30: A Financial Inflection Point The upcoming COP30 summit in Brazil offers a rare window to mainstream resilience in financial reform. Schmidt-Traub and his colleagues are working with the COP30 Presidency to support what they call a 'breakthrough on resilience', embedding it not just in rhetoric, but in the core structures that govern investment. 'Embedding resilience into fiscal frameworks, credit ratings, financial disclosures, and monetary policy could unlock trillions in capital,' he says. At this year's climate meeting in Bonn, global leaders laid the foundation for this shift. What's needed now is execution: a clear policy mandate and financial innovation to build markets that reward climate preparedness rather than penalize vulnerability. From Risk Management To Growth Strategy At present, our financial system penalizes the exposed but fails to reward the prepared. That asymmetry discourages investment in the very strategies that could build long-term economic resilience and that needs to change. As climate shocks intensify and global borrowing costs rise, countries and companies will face a choice: keep betting on a past that no longer exists or invest in systems built for the future. 'Countries that invest in resilience today,' says Schmidt-Traub, 'will be the growth leaders of tomorrow.' It's time to stop treating resilience as a sunk cost and look at it as a catalyst for stability, advantage, and future returns.

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