Extreme weather events wreak havoc on a grid not designed to endure their frequency and intensity, but there are solutions to build resiliency. 1. Modernize grid infrastructure; 2. Install more microgrids; 3. Roll out more renewable energy to reduce fossil-fuel dependence
A smart transition of FEMA toward state and local disaster responsibility would encompass 1) reform to the Stafford Act to rebalance federal and state contributions, 2) a restructuring of state disaster relief funds, and 3) a shift toward regionalization of disaster response.
The muni bond market presents an opportunity to finance resiliency in a way that aligns policy-makers, community stakeholders, business interests, and investors. By strengthening local infrastructure to render assets less vulnerable to climate shocks, it can reduce disaster costs for communities.
In 2024, the U.S. experienced 24 climate disaster events where losses exceeded $1 billion. As The Epicenter team reflects on themes from 2024, five questions are top of mind. The Epicenter asked resiliency practitioners to reflect on the past year and share their thoughts on what's to come in 2025.
In 2024, at the time of this publishing, the U.S. has experienced 24 climate disaster events where losses exceeded $1 billion. Although 2024 saw four fewer disasters than 2023–which was a record-breaking year at 28 billion-dollar disasters–the resulting price tag was still $61.6 billion and over 418 deaths. Congress appropriated more than $43 billion in disaster relief funds for the 2024 fiscal year.
Five questions as we wrap up 2024
As The Epicenter team reflects on themes from 2024, five questions are top of mind.
Do population growth, migration, and asset exposure play a bigger role than climate change on disaster costs in the U.S.? While the frequency and severity of extreme weather events have increased amidst a changing climate, the far bigger drivers of disaster costs in 2024 were related to land use and building resilience. Where there was once open land, there are now people and physical assets. For example, for severe convective storms, 80% of the economic losses can be attributed to the growth of asset exposure. According to The Washington Post, “over time, migration to hazard-prone areas has increased, putting more people and property in harm’s way. Disasters are more expensive because there is more to destroy.”
As WUI homes become increasingly uninsurable and insurance companies seek to reduce their risk exposure, will we see a return to urban and suburban density as a real-estate asset class that is less risky and more insurable? As we explored in The Epicenter’s Wildfire briefing, the WUI is the fastest-growing land use type in the contiguous U.S. From 1990 to 2020, the number of homes in the WUI grew by 47%. The WUI covers only 9% of land in the U.S., but is now home to 39% of all houses in the country. As we enter 2025, there’s an opportunity to examine how a lack of affordable housing in our densely-populated cities has led to sprawl, pushing people into harm's way.
Have secondary perils become the new primary perils for insurers? Secondary perils have historically been considered the more frequent but less dangerous and less costly types of disasters for insurers. Thunderstorms cause less damage, on average, than behemoth hurricanes. But there are simply so many secondary perils now that while the per-event costs are lower, the aggregate costs are higher. It’s the slow-and-steady weekly drumbeat of severe weather storms that leads to gargantuan annual losses for insurance companies. This year alone, 17 of the 24 billion-dollar disasters in the U.S. were severe storms (a secondary peril).
Building codes can lead to more fortified assets in the path of storms, how do we capture their full ROI? Whether facing wildfires, hurricanes, severe storms, or flooding, upgraded building codes are one of the best levers to install resiliency in our physical infrastructure. In Florida, for example, current building codes, implemented in 2002, are considered to be some of the toughest in the country, and have resulted in reduced losses from hurricanes.
How can improved predictive accuracy best protect communities, when awareness still does little to protect assets in the path of a storm? The algorithms, LLMs, and tools used to track and predict storms are getting better, and they’re being harnessed to warn people days in advance of when and where a storm could hit. There was much written about how AI models predicted the location of Hurricane Milton’s landfall with “unbelievable accuracy.” It predicted landfall within 7 miles of where the hurricane actually hit, compared to other non-AI models that were off by over 100 miles. However, predictive accuracy still does little to protect the assets in harm’s way.
The resiliency ecosystem is growing, and many leaders drove the work forward in 2024. The Epicenter asked several leading resiliency practitioners to reflect on the past year and share their thoughts on what’s in store for 2025. Here’s what they had to say:
Cross-sector resiliency
In 2024, progress was made toward frameworks to measure and define adaptation and resilience, while companies started addressing risks from extreme weather events affecting their operations. Looking ahead, measuring and tracking adaptation and resilience will integrate mitigation efforts with adaptation, aligning risks and benefits across decarbonization and resilience initiatives.
REFLECTING BACK ON 2024:
What has stood out to me this year has been the increasing use of the word “resilience” in corporate communications. As an investor focused on scaling and investing in climate resilience and adaptation solutions across sectors (including insurance, energy, food, ag, health, water, supply chains, etc.) this has been especially notable with companies operating in sectors which are not typically thought of as “climate tech” (e.g., critical infrastructure-related services, supply chain technology solutions, data center energy resilience, among others). What this tells me is that building resilience to the physical impacts of climate change is increasingly a commercial value proposition against which companies are delivering solutions, which is itself an indirect signal that various types of customers (utilities, infrastructure asset owners, shippers, communities) are in need of solutions to help them manage these increasing risks which are being encountered in all sectors of the economy. (Serena Shi, The Lightsmith Group)
At Probable Futures, we are seeing that a recent adaptation trend on the rise is "unintentional" or "unconscious" adaptation—behaviors not explicitly understood as adaptation but still addressing the impacts of climate change. For example, at a systems level, the retreat of insurance from high-risk areas has forced communities to confront shifting climate risks and find ways to protect their homes against future disasters. Meanwhile, at an individual level, the growing popularity of neck fans highlights how people are unknowingly adapting to rising heat in their daily lives. (Alison Smart and Nabig Chaudhry, Probable Futures)
LOOKING AHEAD TO 2025:
I would expect to see a continuation of climate resilience as a selling value proposition for organizations offering solutions or services relevant for building resilience and adaptation, and especially in unexpected sectors. For example, we should expect to see the human health impacts from climate change be an increasingly discussed topic in 2025, as vector borne diseases like dengue fever and other diseases spread by mosquitos continue to have devastating and unprecedented impacts across the Americas and the Caribbean, driven by warmer temperatures, droughts, flooding, and storms (12.6M cases of mosquito-transmitted virus reported in the region this year, 3x last year and the highest since 1980 when record-keeping began). (Serena Shi, The Lightsmith Group)
It feels shortsighted to not be investing in solutions that are helping communities adapt from both a wealth and health standpoint. One of the things that is increasingly apparent to us as investors focused on access to care and wealth building/wealth creation is that climate change is presenting challenges from both a health standpoint (e.g. mental health or surviving extreme heat and weather events) and from a wealth creation standpoint (e.g. threatening livelihoods). (Shruti Shah, Symphonic Capital)
Public finance & Insurance
In 2024, public finance saw growth in state-led revolving funds for resilience, with "green" bond frameworks starting to include resilience investments. Insurance companies used better predictive analytics to manage risk, and homebuyers considered insurance availability and cost when choosing locations. Going forward, climate risk data will likely be integrated into municipal planning and insurance underwriting. State and local governments may fill gaps left by federal rollbacks, while the insurance sector will see more focus on risk reduction and growth in parametric insurance products.
REFLECTING BACK ON 2024:
2024 saw the rise of state-led revolving funds for resilience financing and the redefinition of "green" to include resilience in public finance.Rhode Island and Virginia have pioneered revolving funds specifically for resilience, enabling municipalities to access low-cost capital for adaptation projects. Meanwhile, Illinois redefined its "green" bond framework to explicitly include resilience investments, broadening the scope of sustainable finance. These developments represent a critical shift toward embedding resilience into financial systems, setting a precedent for scalable, long-term climate adaptation strategies. (Matt Posner, The Resiliency Company)
We’re seeing insurance companies becoming much more proactive on managing the rising costs of climate-related natural disasters. What that means is that insurance companies are acquiring better predictive analytics and more granular, individualized assessments of underlying assets to price the risk more accurately. They’re also starting to look at risk reduction approaches to lower risk across their portfolio and new products. (Emilie Mazzacurati, Tailwind)
2024 showed the beginning of many American households starting to take climate impacts into consideration in their housing location choices. A colleague and I have early research that [suggests] insurance availability and pricing influence where people choose to locate and 2024 saw several news stories on this, as well. Similarly, we are seeing growing consumer awareness in some parts of the country about safer housing, such as FORTIFIED construction. These are consumer signals that, if coupled with improved policy and regulation, particularly for helping the most vulnerable, could lead to more climate resilient and insurable communities. (Carolyn Kousky, Environmental Defense Fund and Insurance for Good)
LOOKING AHEAD TO 2025:
In 2025, the most significant resilience trend to look for will be the integration of climate risk data into municipal planning and insurance underwriting, allowing for more targeted investments in infrastructure and community adaptation. Programs like FEMA's Community Disaster Resilience Zones (CDRZ) have focused on pre-disaster mitigation by prioritizing underinvested areas for federal support, while parametric insurance and resilience bonds are gaining traction to provide faster financial recovery and incentivize proactive risk reduction. This shift reflects a growing recognition that mitigating risks before disasters strike is more cost-effective than post-disaster recovery. (Matt Posner, The Resiliency Company)
Rather than insurance being a vehicle to shift risk, and building on CSAA's leadership to invest in wildfire resilience, look for more engagement from the insurance sector to participate in risk reduction activities. There has been a lot more discussion and visibility this past year regarding the cost of property loss and property insurance and insurability due to climate risk–whether it be fires, hurricanes, or flooding. (Nick Wobbrock, Blue Forest)
I expect a quick rise in parametric insurance products, which have become widely recognized as a key instrument to manage dysregulated weather risk and flood risk. It could be hail risk for farmers or solar farms, but also community insurance for flood risk. I expect a lot of new entrants in the California market in the wake of new regulations as homeowners desperately need home insurance. This creates a tremendous opportunity for entrepreneurs who want to break through the status quo and offer tailored products in high wildfire risk areas. (Emilie Mazzacurati, Tailwind)
In 2025, we will see U.S. communities lead in building climate resilience. Climate impacts are accelerating, hurting households and communities, and necessitating greater action. As such, many states and local governments will likely step in to fill any voids created by federal rollback of climate data provision, reductions in grants for resilience, and elimination of loss-reduction requirements in federal spending that may occur with the new administration. (Carolyn Kousky, Environmental Defense Fund and Insurance for Good)
Frameworks & resilience literacy
In 2024, frameworks emerged to make adaptation and resilience more measurable, while companies began addressing the risks of extreme weather events. Looking ahead, tracking and measuring resilience will become more integrated into decarbonization and adaptation efforts.
REFLECTING BACK ON 2024:
The most significant trend was the proliferation of adaptation & resilience investment frameworks, taxonomies, and guides from a host of private, public, and nonprofit entities. I'm speaking here of initiatives like the Climate Bond Initiative's Resilience Taxonomy, the UNEP FI-backed Adaptation & Resilience Measurement Framework for Investors, Tailwind Taxonomy for Adaptation & Resilience Investments, and so on. These efforts provide the intellectual and organizational underpinning for the systematic allocation of capital to adaptation & resilience activities for years to come. (Louie Woodall, Climate Proof)
In 2024, more companies seemed to understand the significant financial risks posed by natural disasters and are beginning to recognize the interconnected benefits of decarbonization and resilience. This confluence reinforces the business case for each initiative. While integrated thinking is taking hold, practical frameworks to support private sector action remain crucial. (Joe Rozza, Ryan Companies)
LOOKING AHEAD TO 2025:
Looking ahead to 2025, look out for the operationalization of these taxonomies and frameworks by financial institutions. I expect to see early-stage funds embrace and put into effect the categorization of adaptation & resilience innovations drawn up this year, and to see the first sovereign and corporate issuers launch "adaptation bonds" and other financial instruments that reference these. (Louie Woodall, Climate Proof)
In 2025, I believe we will see development of more advanced frameworks that discretely integrate decarbonization, resilience, and adaptation from a financial cost-benefit perspective. These frameworks will yield stronger business cases that will increase corporate focus and investments in these critical issues in the near term. (Joe Rozza, Ryan Companies)
As awareness of climate impacts and the need for adaptation grows, the demand for climate literacy products and training—particularly from organizational and government leaders—is accelerating. Climate literacy is the cornerstone of effective adaptation, enabling you to understand how a changing climate intersects with what you value, whether it’s your business, a place, or even a hobby. Just as digital literacy became essential in the internet era, climate literacy is now a vital 21st-century skill, empowering informed decisions for an uncertain future. (Alison Smart and Nabig Chaudhry, Probable Futures)
Have a reflection to share with The Epicenter? Send it our way!
If you’re looking for landscape level analysis of adaptation investments…
Climate Project Explorer | The website allows interested parties to explore project documents and policies available across all the multilateral climate funds utilizing a google search like interface.
Climate Handbook| A visual history of the changing climate and how it will impact the future world from Probable Futures.
Climate Proofers| Podcast series that provides the latest news in the world of adaptation/resilience through interviews with experts in the field.
TL; DR Resiliency and Adaption| Work-in-progress podcast playlist from The Epicenter editorial team that brings together voices from the field discussing various aspects of adaptation and resilience work (feedback and suggestions welcome!)
A smart transition of FEMA toward state and local disaster responsibility would encompass 1) reform to the Stafford Act to rebalance federal and state contributions, 2) a restructuring of state disaster relief funds, and 3) a shift toward regionalization of disaster response.
The muni bond market presents an opportunity to finance resiliency in a way that aligns policy-makers, community stakeholders, business interests, and investors. By strengthening local infrastructure to render assets less vulnerable to climate shocks, it can reduce disaster costs for communities.