How Does Climate Change Create Financial Risk? Ask Insurance Companies

Much of the current debate about ESG initiatives and how companies consider the impact of climate change on their operations appears to operate in a vacuum, untethered to the real world, where pundits and politicians opine on how climate change might theoretically influence economic activity or a company's decision-making. But, as reflected in today's headlines, the impact of climate change is significant and affecting corporate decisions--and the lives of ordinary citizens--now.

As reported by the New York Times, "the largest homeowner insurance company in California . . . announced that it would stop selling coverage to homeowners." And why has this company gotten out of the home insurance market in California? Because "of 'rapidly growing catastrophe exposure' . . . after wildfires became more devastating than anyone had anticipated . . . [due to] the effects of climate change." And California is not the only market for home insurance so impacted--in