A Climate of Uncertainty: 2025 Financial Planning for a Warming World
In 2024, O-Six Impact Partners published Financial Planning in the Age of Climate Change to help wealth managers understand the financial hardships many households face as a direct result of global warming. The paper identified numerous climate-related factors that are financially destabilizing families across the country, including increasing property damage, rising insurance premiums, falling real estate values, inflationary pressures, and escalating systemic risk across investable asset classes.
Because the severity of these issues depends on geography, public policy, financial markets, and even physics, O-Six is revisiting the financial implications of climate change in 2025 to assess the evolving risks for households and investors.
Every Wallet for Itself
As presented in our first paper, American households are facing higher costs on a number of fronts as a direct result of climate change.1 Strangely, the response to these stressors has been to exacerbate the problem by promoting more carbon emissions, ignoring the imperative to adapt and harden our infrastructure, and weakening the disaster response programs so desperately needed in the wake of catastrophes.2 Society has already experienced significant disruptions as a result of 1.3˚C of warming, and the latest reports show us on a path to 3.1˚C by the end of the century.3
Put simply, climate-related financial challenges are becoming ever more severe, with the burden increasingly shifting from institutions to individuals. Therefore, financial planners may find their services needed more than ever as people confront financial predicaments with no clear blueprint for solving these problems.
Taking Action
Helping clients navigate these challenges doesn’t have to devolve into a political conversation. Over the past year, we’ve found that many financial planners shy away from discussing these topics for fear of stepping on a political landmine. That’s understandable.
But it’s still possible—and necessary—to talk with clients about rising insurance premiums, inflation expectations, and long-term risk without debating the causes of climate change. At the same time, it’s critical for clients to understand that these challenges are not temporary, and that a prudent financial plan should reflect the fact that climate-driven risks are now part of our shared future.
O-Six is here to help financial planners engage clients on these topics—even if the word “climate” never comes up. Ask us about our no-cost and no-commitment resources and services for financial planners.
High Risk or Haven?
The climate is a global system—meaning everyone is ultimately vulnerable to the risks of its destabilization. Those who believe extreme weather is only a concern for people living in “hurricane alley” or the arid, fire-prone West are quickly realizing they must confront their own climate risks.
For example, residents of Oklahoma, Iowa, and other Midwestern states are seeing a rise in convective storms that repeatedly damage homes with severe hail. Oklahoma City now ranks fourth nationally in insurance costs as a share of monthly mortgage payments—trailing only coastal cities in Florida and Louisiana.4
In sum, geographic location—or even relocation—is proving to be an ineffective shield against climate risk. We all need to prepare and adapt, regardless of our zip code.
Taking Action
After reading Financial Planning in the Age of Climate Change, many planners offered feedback akin to, “Wow, I need to speak to my clients in Florida or California about these issues!”
That’s an understandable reflex—but we need to shift our thinking. While some geographies do carry higher risk than others, no location is totally immune. We recommend evaluating the unique climate-related risks relevant to every financial plan.
We’re Going Bare… and Not in a Fun Way
The global insurance industry continues to sound alarm bells as their balance sheets strain under the weight of climate-induced disasters. Since the release of Financial Planning in the Age of Climate Change, the U.S. has endured some of the most devastating weather-related events in its history.5 Hurricane Helene caused $79 billion in damages, largely in Asheville, NC—a city once proudly labeled a “climate haven.”6 Hurricane Milton then brought similar devastation to Florida, and just months later, California faced one of the most terrifying wildfires in state history when the Palisades Fire ravaged parts of Los Angeles. As of summer 2025, many swaths of the country—including Texas, New Mexico, North Carolina, Illinois and New York—are experiencing devastating floods as a result of record concentrations of moisture in the atmosphere.7
Given the trajectory of such events, and despite the reality that home insurance premiums have increased by 24% between 2021 and 2024, insurance executives maintain that rates still do not fully reflect the true scope of the risk.8 Of course, that hasn’t stopped the insurance crisis from inflicting real pain on American families. Since property insurance is quickly becoming prohibitively expensive in many markets, an ever increasing percentage of homeowners are foregoing coverage altogether, otherwise known as “going bare.” As of 2024, 12% of homeowners are choosing this option, up from just 5% in 2019.9 This obviously comes with significant risks, and many homeowners will need the help of a financial planner to determine if this is a reasonable strategy.
Taking Action
Clients will need guidance navigating today’s uncertain insurance landscape. This is the moment to ask whether they’re experiencing steep rate hikes—or worse, have been dropped by their insurance carrier entirely. In our experience, many affected clients assume these are isolated incidents, rather than symptoms of a broader, systemic crisis. Helping them understand that premiums are likely to continue rising in the years ahead can lead to better financial decisions. It’s critical they grasp the potential consequences of losing coverage. While going bare or self-insuring may be viable for some, for others it could be a financial disaster in the making.
A Window to De-Risk
As we noted in Financial Planning in the Age of Climate Change, the gap between scientific and economic assessments of climate risk remains wide. Yet increasingly, respected investors are expressing concern about systemic financial risks. Most notably, Warren Buffett wrote in his annual letter to shareholders that “Someday, any day, a truly staggering insurance loss will occur—and there is no guarantee that there will be only one per annum.”10
David Burt—renowned for his early warnings about the 2008 housing bubble—predicts that rising insurance premiums could cause 5–7% of U.S. homes to lose half their value, potentially triggering another credit crisis.11 Supporting this view, First Street recently identified 57 banks with $627 billion in loan exposure to climate-vulnerable real estate12 “If you lost, after insurance, 14 or 15% of your residential real estate portfolio or commercial real estate portfolio, there’s no way you have the reserves to withstand that, so you’re talking about potential bank failure,” according to Matthew Eby, First Street’s CEO.13
Despite these warnings, many asset classes still fail to accurately reflect climate risk. For example, the municipal bond market is living in denial according to Tom Doe, CEO of Municipal Market Analytics.14 Many bonds are backed by property taxes or infrastructure, yet show no risk premium for climate-exposed assets or shrinking tax bases. How long can this persist? Perhaps not long. “Portfolio managers are now armed with data like First Street is providing, and they are now able to review their portfolios and assess which have the highest degree of climate risk,” says Doe. “Concern is rising.”14
This lack of market adjustment extends beyond muni bonds. As Professor Riccardo Rebonato of EDHEC-Risk Climate Impact Institute explains:
“Current valuations are most consistent with two market beliefs: either that very strong and effective abatement action will be undertaken, and climate change will therefore be brought under control; or that climate change, even if poorly abated, will have a negligible effect on economic output and consumption. Since neither assumption should be considered a very likely scenario, we have argued that there is ample potential for equity revaluation.”15
Conversely, some investors are recognizing that the physics of climate change are inescapable—and that adapting to a warmer world may be an underappreciated investment theme for decades to come. According to Bloomberg, the U.S. spent nearly $1 trillion on disaster recovery and other climate-related efforts in the past year. They also found that a basket of companies offering adaptation solutions significantly outperformed the S&P 500 in each of the last three years.16
Meanwhile, Bain & Company and GIC recently published a report acknowledging that no viable solution exists to fully reverse climate change in the near term. As a result, they “expect adaptation revenues in 2050 to exceed projections based on historical trends by 61%.”17
Taking Action
As many recall from the 2008 financial crisis, hedging systemic market risk is very difficult. However, the present moment offers an opportunity for prudent investors to evaluate their portfolios for climate-related exposures—and to shift allocations toward less vulnerable securities, potentially without paying a premium to reduce risk. Consider which companies or loans are highly dependent on physical assets—a revenue bond backed by a hospital in a floodplain in Louisiana, for example. Is there a comparable investment offering similar yield in a less risky location? Are the asset managers you work with aware of these risks and actively working to mitigate them? Does it make sense to gain exposure to companies focused on climate adaptation and resilience? These are the questions worth asking—before the rest of the market starts asking them too.
References
1 U.S. Department of the Treasury. 2023. The Impact of Climate Change on American Household Finances. September. https://home.treasury.gov/news/press-releases/jy1775
2 Hersher, Rebecca. 2025. “The Trump Administration Says It Wants to Eliminate FEMA. Here’s What We Know.” NPR, June 26. https://www.npr.org/2025/06/26/nx-s1-5430469/faq-fema-elimination
3 Dickie, Gloria. 2024. “Climate Change: UN Report Says Planet to Warm by 3.1 C Without Greater Action.” Reuters, October 24. https://www.reuters.com/business/environment/climate-set-warm-by-31-c-without-greater-action-un-report-warns-2024-10-24/
4 Gillers, Heather. 2025. “In America’s Insurance Crisis, Hail Hits Harder Than Hurricanes and Fires.” The Wall Street Journal, March 16. https://www.wsj.com/finance/home-insurance-costs-oklahoma-hail-88f93dc5?gaa_at=eafs&gaa_n=ASWzDAgvlkP9sMXtCtY_EftrzNDDkwXn0pzcdlcTkDJJ6XB6JO1GQadXhYGP&gaa_ts=688416b6&gaa_sig=Kfix_dL-zOSUYZOmV6Slb1QpOw-7M5Q3UbCmGw1J7de2-cubhjSk2K9N_4VMg1X0VqroZgrcc51cZuLmHWquUg%3D%3D
5 Alpert, Bill. 2025. “A Record Cost for Natural Disasters in the U.S.” Barron’s, July 17. https://www.barrons.com/articles/natural-disasters-us-insurance-1c19a8de
6 Erdman, Jonathan. 2025. “Most Shocking Things from Hurricane Helene’s Final Report.” The Weather Channel, July 8. https://weather.com/storms/hurricane/news/2025-03-19-hurricane-helene-final-report-nhc-deaths-damage-flooding
7 Freedman, Andrew. 2025. “This is the Summer of Flooding Across the US, and Scientists Know Why.” CNN, July 20. https://www.cnn.com/2025/07/20/climate/summer-of-flooding
8 Sharga, Rick. 2025. “Rising Insurance Rates are Eroding Affordability for Buyers – and Straining Homeowners’ Budgets.” Bankrate, April 28. https://www.bankrate.com/real-estate/rising-homeowners-insurance-cost/
9 Schulz, Bailey and Jessica Guynn. 2024. “Soaring Insurance Costs are Making More Homeowners Go Without It.” USA Today, July 4. https://www.usatoday.com/story/money/2024/06/23/americans-not-buying-homeowners-insurance/74144566007/
10 Norton, Leslie. 2025. “Truly Staggering Weather Disaster Will Occur Someday, Any Day, Buffett Says.” Morningstar, February 28. https://www.morningstar.com/sustainable-investing/truly-staggering-weather-disaster-will-occur-someday-any-day-buffett-says
11 Faris, James. 2024. “Property Values to Crater Up to 60% Due to Climate Change: Burt.” Business Insider, August 9. https://www.businessinsider.com/real-estate-housing-market-climate-change-outlook-prediction-floods-burt-2024-8
12 First Street. 2024. The 11th National Risk Assessment: Portfolio Pressures. September 23. https://firststreet.org/research-library/portfolio-pressures
13 Ivanova, Irina. 2024. “The Next Banking Crisis Could Come from Climate Change.” Fortune, September 23. https://fortune.com/2024/09/23/climate-change-bank-portfolio-risk-financial-crisis-weather-disasters/
14 Doe, Tom, CEO, Municipal Market Analytics. 2025. The Future of Municipal Bonds: Climate Change and Market Implications. FinTechTV, June 16. https://fintech.tv/the-future-of-municipal-bonds-climate-change-and-market-implications/
15 Wadsworth, Gill. 2024. “Aggressive Climate Policies Needed to Preserve Global Equity Values: EDHEC-Risk Climate Institution.” Institutional Asset Manager, July 24. https://institutionalassetmanager.co.uk/aggressive-climate-policies-needed-to-preserve-global-equity-values-edhec-risk-climate-institution/
16 Roston, Eric. 2025. “US Spending on Climate Damage Nears $1 Trillion Per Year.” Bloomberg, June 17. https://www.bloomberg.com/news/articles/2025-06-17/us-spending-on-climate-damage-nears-1-trillion-per-year
17 GIC. 2025. Sizing the Inevitable Investment Opportunity: Climate Adaptation. April. https://www.gic.com.sg/uploads/2025/05/Sizing-The-Climate-Adaptation-Opportunity_GIC_Final.pdf
Disclosures
The opinions expressed herein are those of O-Six Impact Partners, LLC and are subject to change without notice. The information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities product, service, or investment strategy. Investments involve risk, and past performance is not indicative of future results. Therefore, it should not be assumed that any specific investment or investment strategy made reference to directly or indirectly by O-Six Impact Partners, LLC will be profitable. Be sure to first consult with a qualified financial adviser, tax professional, or attorney before implementing any strategy or recommendation discussed herein.
O-Six Impact Partners, LLC specializes in providing outsourced sales and marketing services to investment managers and related financial entities. These services may include lead generation, client outreach, relationship management, and promotional activities aimed at enhancing the visibility and market presence of investment products. O-Six Impact Partners’ services are strictly limited to sales and marketing efforts. Under no circumstances should any communication, content, or action taken by O-Six Impact Partners be construed as investment advice or recommendations.
The Bloomberg Prepare and Repair Index is an unmanaged index that tracks the performance of companies involved in climate adaptation and infrastructure resilience. It is provided for informational purposes only and does not represent an actual investment product. Indices are not investable instruments, and past performance is not indicative of future results. The information presented does not constitute investment advice or a recommendation to buy or sell any security. All data and performance figures are subject to change and may not reflect real-time market conditions.
