Jo Paisley, President, GARP Risk Institute
When we launched the Climate Risk Podcast at the start of 2020, financial regulators were only beginning to establish formal expectations for how firms should identify and manage climate-related risks. Nature risk was a nascent topic and many of the tools and frameworks now familiar to risk professionals were still at an early stage.
Seven years and 100 episodes later, a great deal has changed. Our guests have helped us explore an increasingly broad and interconnected risk landscape, from climate tipping points, food security, and biodiversity loss to carbon pricing, financial regulation, scenario analysis, and green finance.
To mark our 100th episode, we decided to step back and ask three fundamental questions:
- What does the science really tell us about the risks?
- How effectively are governments, regulators, and markets responding?
- And what does all of this mean for finance and risk management?
Those questions form the basis of a special three-part miniseries bringing together some of the most important insights from the podcasts.
Part 1: A More Complex and Interconnected Risk Landscape
The first installment of this three-part special returns to the science, drawing on conversations with world-leading climate scientists, modelers, and experts working across nature and food systems on which our economies depend. Together, their insights highlight one of the most important lessons from the past seven years: climate risk is nonlinear.
Tipping points create the possibility that parts of the Earth system could shift abruptly into new and potentially irreversible states. Climate change interacts with oceans, nature, food systems and infrastructure, allowing shocks to travel across supply chains, economies and societies in ways that are extremely difficult to predict.
This interconnectedness presents a profound challenge for conventional risk management. Historical data may be a poor guide to a changing climate, while models can struggle to represent tipping points, cascading impacts, and the increasing intensity of real-world events.
Part 1 brings these perspectives together to examine what the science is telling us about the risks, and whether events in the real world are unfolding faster than we predicted.
[Listen to Part 1: Seven Years of Climate Risk — What Have We Learned?]
Part 2: Knowing the Risks Is not the Same as Acting on Them
The second installment turns from the science to the response. It asks two important questions: given everything we know, what are we doing about it? And what can go wrong if we don’t get this right?
The first half examines the political and policy response. Over the lifetime of the podcast, governments, regulators, and markets have produced an enormous range of climate commitments, policies, and reporting frameworks. But our guests have offered sharply different assessments of these efforts, from the COPs — the U.N.’s annual decision making — process and carbon pricing to climate disclosures and new taxonomies.
These conversations reveal a recurring gap between activity and impact. International negotiations may be indispensable, but their structure can make rapid progress difficult. Carbon pricing may be economically compelling, but it repeatedly encounters political resistance. Disclosure can improve transparency, but only when the information is decision-useful and leads to meaningful action.
The second half considers the tail risks of an inadequate response. Drawing on perspectives from history, archaeology, and systems thinking, it explores how climate pressures can interact with food and water insecurity, inequality, migration, and political instability. These stresses can cascade through societies and economies, potentially contributing to outcomes as serious as societal collapse.
Part 2 therefore asks us to consider not only whether the current response is sufficient, but what may be at stake if it is not.
[Listen to Part 2: We Know the Risks. So Why Aren’t We Moving Faster?]
Part 3: The Role and Limits of Finance
The final installment brings the discussion back to finance and the risk profession, drawing on conversations with senior practitioners and leading experts from across the financial system.
Banks, insurers, asset owners, asset managers, and regulators have all made significant progress in embedding climate considerations into their work. But their roles are different, and there are limits to what the financial system can achieve without the right economic and policy environment.
Taken together, these interviews have helped clarify both the potential and the limitations of finance. It cannot single-handedly drive the transition. It can, however, help direct capital towards viable solutions, expose misaligned incentives, price risk, improve resilience, and support emerging technologies and business models.
The financial system also has distinctive tools at its disposal. Insurers can send powerful signals through underwriting and pricing. Investors can use engagement, mandates, and capital allocation to influence behavior. Risk professionals can help new technologies become investable by assessing, managing, and transferring risks.
At the same time, many of the profession’s tools remain imperfect. Models contain assumptions and values that are not always made explicit. Scenario analysis can create a false sense of precision. And the persistent challenge around climate data is often not that data is unavailable, but that firms cannot integrate and use what already exists.
Closing the gap between the complexity of the risk landscape and the frameworks and tools used to manage it will be one of the defining challenges for the profession over the coming decade.
[Listen to Part 3: Is Finance Ready for the Risks Ahead?]
Reasons for Optimism?
So, after 100 episodes, am I more or less optimistic than when we began?
The honest answer is both.
I am more concerned about the physical risks. Tipping points appear closer, nature loss has become a much larger part of the picture, and events in the real world appear to be unfolding faster than many models anticipated. I have also been disappointed by the pace of policy and the persistence of political and institutional inertia.
But there are genuine reasons for optimism. Clean technologies have repeatedly developed and scaled faster than expected. Energy security has strengthened the economic and geopolitical case for the transition. And risk professionals are engaging with climate and nature risk in a far more sophisticated way than they were seven years ago.
Climate change and the nature loss accompanying it remain solvable problems. We have many of the technologies we need, and we increasingly have the frameworks. The question is whether we can summon the determination to use them with the urgency the science demands.
I am enormously grateful to every guest who has shared their expertise with us and to everyone who has listened, challenged us, and helped build this community.
This miniseries brings both our seven-year retrospective and the GARP Climate Risk Podcast itself to a close. Since launching at the start of 2020, our aim has been to help risk and finance professionals understand this rapidly changing landscape and think seriously about the role they can play within it. Although there will be no further episodes, I hope the 100 episodes collected in the back catalog will continue to provide useful evidence, ideas, and challenge, as well as some grounds for optimism about the work ahead.
Topics: Climate Risk Management, Green Finance & Sustainable Business, Nature Risk Management, Physical Risk, Transition Risk
