According to science.org, the Palisades Fire in January 2025 caused about $100 billion in property losses while Hurricane Helene just six months earlier cost $78 billion. The US government recently disbanded its Climate-related Financial Risk Committee and external advisory committee on September 10, despite these growing climate-related financial threats. Both authors of the piece were members until the committees were terminated. In response, Resources for the Future and Harvard’s Salata Institute just launched the Climate-related Financial and Macroeconomic Risk Initiative (CFMRI) to fill this gap. This comes after a 2020 CFTC report warned that climate change poses major risks to US financial stability.
Sponsored content — provided for informational and promotional purposes.
Our financial infrastructure is decades behind
Here’s the thing: our entire financial risk management system was built for a 20th-century climate. The tools that investors, regulators, and central banks rely on simply weren’t designed to handle what’s happening now. We’re trying to fight 2025 fires with 1985 equipment. And the costs are staggering – that $100 billion from the Palisades Fire isn’t just property damage. It’s insurance markets collapsing, household finances getting crushed, and asset values evaporating overnight.
Transition risks are making everything worse
It’s not just the physical disasters either. The chaotic shift away from fossil fuels creates its own economic turmoil. Clean energy projects that counted on federal support are now scrambling as policies get yanked back and forth. US climate policy has been swinging wildly for twenty years – and each swing creates massive revaluation risks. Think about it: what happens to all those solar and wind investments when the political winds shift? They become stranded assets, and that ripple effect can tank entire sectors.
The private sector is stepping in where government left
So with the government basically walking away from climate risk research, universities and research institutions are creating their own solutions. The new CFMRI initiative aims to do what the disbanded committees were supposed to: figure out how climate shocks actually translate to economic damage. How do wildfires destroy bank balance sheets? Could a climate event trigger the next recession? These aren’t theoretical questions anymore – we’re living the answers.
This isn’t just a US problem
The CFMRI will work alongside international efforts like the Network for Greening the Financial System, but here’s the reality: hurricane costs and climate disasters don’t respect borders. The financial system is global, and climate risk is the ultimate systemic threat. We basically need the smartest minds from every sector working on this yesterday. Because the next financial crisis might not start on Wall Street – it could start with a hurricane in Florida or wildfires in California.
