Perspective on Risk - June 23, 2025 (Climate)

From record heat to policy rollback: pricing a planet on fast-forward.

Jun 23, 2025

As it’s possible w will see our first 100 degree day, how about a Climate Change Update.

The earliest in-season 100°F observation ever logged at the Central Park, NY climate station (records begin 1869) occurred on June 26, 1952, when the official high temperature reached exactly 100°F. No May or early-June day has ever hit the century mark in the park; the next-earliest triple-digit readings were on June 27 (1966, 101°F) and June 29 (1934, 101°F).

I’ve been including a discussion of climate risk in these Perspectives since Feb. 2022. Over 32 months the posts transition from “Here is why climate should be on your risk dashboard” to “Here is how accelerating feedbacks are rewriting both the physical world and the financial playbook—plan for overshoot, cascading failures, and capital-structure repricing now.” A list of past Perspectives on Climate Risk are in the footnotes.1

The Planet Speaks

Numbers at a glance

2024 was the warmest year in the 175‑year instrumental record: +1.47 °C above the 1850‑1900 baseline.2
Ocean heat keeps climbing: the upper‑2 000 m heat content added another ~16 ZJ in 2024, a fourth straight record.3
Sea‑ice collapse continues: Antarctic extent hit its second‑lowest February minimum, 26 % below the 1981‑2010 mean.4
May 2025 seas remained near last year’s record‑high SST of 20.79 °C.5

These metrics confirm the step‑change regime that emerged in 2023–24: the climate system is now operating on a higher energy plateau, raising the floor for every weather event that follows.

Continued Temperature Acceleration

Things aren’t just getting worse. They’re getting worse faster …We’re actively moving in the wrong direction in a critical period of time that we would need to meet our most ambitious climate goals. Some reports, there’s a silver lining. I don’t think there really is one in this one. — Zeke Hausfather

There are further indications that global warming has accelerated.

Update IGCC Analysis

Indicators of Global Climate Change

The indicators show that human activities are increasing the Earth's energy imbalance and driving faster sea-level rise compared to the [2024] AR6 assessment.

Related Press

Scientists warn that greenhouse gas accumulation is accelerating and more extreme weather will come (AP)

Global Mean Sea Surface Temperature Is Increasing

Quantifying the acceleration of multidecadal global sea surface warming driven by Earth's energy imbalance (IOP Science)

Global mean sea surface temperature (GMSST) is a fundamental diagnostic of ongoing climate change, yet there is incomplete understanding of multi-decadal changes in warming rate and year-to-year variability. Exploiting satellite observations since 1985 and a statistical model incorporating drivers of variability and change, we identify an increasing rate of rise in GMSST. This accelerating ocean surface warming is physically linked to an upward trend in Earth's energy imbalance (EEI).
Applying indicative future scenarios of EEI based on recent trends, GMSST increases are likely to be faster than would be expected from linear extrapolation of the past four decades. Our results provide observational evidence that the GMSST increase inferred over the past 40 years will likely be exceeded within the next 20 years.

Also: Accelerated Ocean thermal expansion and its contribution to Global Sea-level rise

I think that we have to increase the probability of a greater than 2°C increase in the GMST before 2050 (maybe to ~70%).

Risk Managers Understand 2nd Derivatives

Some Possible Effects

AMOC Collapse - Conflicting Studies

In a previous Perspective last year I reported a probability of a collapse of the Atlantic Meridian Overturning Current (AMOC) by 2100 was estimated to be 20%. This is one of the critical, and catastrophic, “tipping points.” We Bayesians like to incorporate new evidence and update our probability estimates. The Hansen paper would raise the probability, while the Nature Geosciences paper would lower the probability. The Nature paper includes more new evidence, so I would slightly lower our probability estimate.

Global Warming Has Accelerated: Are the United Nations and the Public Well-Informed? (Hansen, et. al.)

Global temperature leaped more than 0.4°C (0.7°F) during the past two years, the 12-month average peaking in August 2024 at +1.6°C relative to the temperature at the beginning of last century (the 1880-1920 average). … the magnitude of the global warming, which was twice as large as expected for the weak 2023-2024 El Niño.
We find that polar ice melt and freshwater injection onto the North Atlantic Ocean exceed prior estimates and, because of accelerated global warming, the melt will increase. As a result, shutdown of the Atlantic Meridional Overturning Circulation (AMOC) is likely within the next 20-30 years, unless actions are taken to reduce global warming – in contradiction to conclusions of IPCC. If AMOC is allowed to shut down, it will lock in major problems including sea level rise of several meters – thus, we describe AMOC shutdown as the “point of no return.”

Has Global Warming Accelerated – a short response to Hansen et al
Whether we align with the more conservative forecasts of the IPCC or the more challenging warnings of Jim Hansen, the policy implications are strikingly similar. We are rapidly blasting through the 1.5°C commitment, and even staying “well below 2°C” now demands global emission cuts of around 7% annually,☨ starting this year—a rate nearly 2 percentage points higher than we saw during the most stringent COVID lockdowns, and that was for just one year.
We are not sleepwalking into the apocalypse—we’re charging toward it with full awareness of what’s at stake.

Observational constraints imply limited future Atlantic meridional overturning circulation weakening (Nature Geosciences)

By incorporating observational constraints, we conclude that the AMOC will experience limited weakening of about 3–6 Sv (about 18–43%) by the end of this century, regardless of emissions scenario. These results indicate that the uncertainty in twenty-first-century AMOC weakening and the propensity to predict substantial AMOC weakening can be attributed primarily to climate model biases in accurately simulating the present-day ocean stratification.

Heat, Not Drought, Drives Western Wildfires

Anthropogenic warming has ushered in an era of temperature-dominated droughts in the western United States

Historically, meteorological drought in the western United States (WUS) has been driven primarily by precipitation deficits. However, our observational analysis shows that, since around 2000, rising surface temperature and the resulting high evaporative demand have contributed more to drought severity (62%) and coverage (66%) over the WUS than precipitation deficit.

New attribution studies: Increasing effects of global warming on fire dynamics and public health (Potsdam Institute For Climate Impact Research)

Study: heat, not lack of precipitation, is driving western U.S. droughts (NOAA)

Higher temperatures caused by anthropogenic climate change made an ordinary drought into an exceptional drought that parched the American West from 2020-2022, according to a new study by UCLA, NOAA and CIRES scientists.
The scientists found that evaporative demand, or the thirst of the atmosphere, has played a bigger role than reduced precipitation in droughts since 2000. During the 2020-2022 drought, evaporation accounted for 61% of the drought’s severity, while reduced precipitation only accounted for only 39%.

Coral Reefs Pass Tipping Point

Considerations for determining warm-water coral reef tipping points (European Geoscience)

New research shows that the tipping point thresholds for warm-water coral reefs (upon which hundreds of millions of people rely) have already been breached!

Warm-water coral reefs are facing unprecedented human-driven threats to their continued existence as biodiverse functional ecosystems upon which hundreds of millions of people rely. These impacts may drive coral ecosystems past critical thresholds, beyond which the system reorganises, often abruptly and potentially irreversibly; this is what the Intergovernmental Panel on Climate Change (IPCC, 2022) define as a tipping point. … These tipping point thresholds have already been exceeded, and therefore these systems are in an overshoot state and are reliant on policy actions to bring stressor levels back within tipping point limits.

It’s Probably Too Late To Stop Glacial Melt & Sea-Level Rise

Warming of +1.5 °C is too high for polar ice sheets

Mass loss from ice sheets in Greenland and Antarctica has quadrupled since the 1990s and now represents the dominant source of global mean sea-level rise from the cryosphere. … Here we synthesise multiple lines of evidence to show that +1.5 °C is too high and that even current climate forcing (+1.2 °C), if sustained, is likely to generate several metres of sea-level rise over the coming centuries, causing extensive loss and damage to coastal populations and challenging the implementation of adaptation measures. To avoid this requires a global mean temperature that is cooler than present and which we hypothesise to be closer to +1 °C above pre-industrial, possibly even lower, but further work is urgently required to more precisely determine a ‘safe limit’ for ice sheets.

Seas Are Rising

NASA Analysis Shows Unexpected Amount of Sea Level Rise in 2024 (NASA)

Global sea level rose faster than expected in 2024, mostly because of ocean water expanding as it warms, or thermal expansion. According to a NASA-led analysis, last year’s rate of rise was 0.23 inches (0.59 centimeters) per year, compared to the expected rate of 0.17 inches (0.43 centimeters) per year.

Things Are Getting Critical

Flavour of gin and tonic could be impacted by climate change, study finds(Guardian)

Scientists from Heriot-Watt University’s International Centre for Brewing and Distilling (ICBD) have found that changing weather patterns may be altering the flavour compounds in the [juniper] berries.
Matthew Pauley, an assistant professor at the ICBD, said: “A wet harvest year can reduce the total volatile compounds in juniper by about 12% compared to a dry year.

Policy Retreats, Market Pricing Increases

US Government Policy

“Climate change is the tragedy of the horizon. It’s catastrophic impacts will be felt beyond the traditional horizons of most actors - imposing a cost on future generations that the current generation has no direct incentive to fix. That means beyond the business cycle, the political cycle and potentially the horizons of technocratic authorities, like central banks, which are bound by their mandates.” — Mark Carney

Trump seeks to end climate research at premier U.S. climate agency (Science)

President Donald Trump’s administration is seeking to end nearly all of the climate research conducted by the U.S. National Oceanic and Atmospheric Agency (NOAA), one of the country’s premier climate science agencies, according to an internal budget document seen by Science. The document indicates the White House is ready to ask Congress to eliminate NOAA’s climate research centers and cut hundreds of federal and academic climate scientists who track and study human-driven global warming.

SEC Votes to End Defense of Climate Disclosure Rules (SEC)

The Securities and Exchange Commission today voted to end its defense of the rules requiring disclosure of climate-related risks and greenhouse gas emissions. … The rules, adopted by the Commission on March 6, 2024, create a detailed and extensive special disclosure regime about climate risks for issuing and reporting companies.

Markets

Those banks and insurance companies are pulling out of areas, coastal areas and areas where there are a lot of fires. So what thats going to mean is if you fast forward 10 or15 years there are going to be regions of the country where you can’t get a mortgage. — Fed Chair Jerome Powell

Citizens wants to hike insurance rates 14%. They would have to double them to be competitive (WUSF)

Our rates remain, for the most part, actuarial unsound and highly competitive around the state — Citizens CEO Tim Cerio

Citizens Property Insurance policies continue to be significantly underpriced compared to private carriers, according to a company presentation to state regulators earlier this month. It estimates the average homeowner's insurance premium would need to be increased by 96.8% to better match competitors.

US property cat reinsurance rates to stabilise at mid-year renewals: Moody’s (Reinsurance News)

After an overall mixed pricing picture at the January 1st, 2025, reinsurance renewals, the impacts of Hurricanes Helen and Milton and the costly California wildfires, analysts at Moody’s expect property cat reinsurance pricing to stabilise at the upcoming US-focused mid-year renewal rounds.

“The upcoming midyear 2025 reinsurance renewals, which focus on the US, will be influenced by large US catastrophe loss events over the past year, particularly Hurricanes Helene and Milton and the Los Angeles wildfires, which are likely to provide support to reinsurance pricing for US exposures,” says Moody’s.
Adding, “Because many renewing US accounts have experienced losses from Hurricanes Helene and Milton and the recent wildfires in California, we think it is likely that US property catastrophe reinsurance pricing will stabilize, supported by the potential for significant price increases for accounts that have had sizeable losses over the past year.”

Risk Management Of Climate Risk

The Risks of Climate Change to the United States in the 21st Century (Congressional Budget Office)

The Congressional Budget Office estimates that by 2100, there is a 5 percent chance that average global temperatures will be more than 4 degrees Celsius (4°C) warmer than they were in the latter half of the 19th century and an equal chance that they will have risen by less than 2°C. In the United States, sea levels have a 5 percent chance of rising by about 4 feet or more by 2100 and an equal chance of rising by about 2 feet or less. Damage from natural disasters is also expected to increase.

Effect on GDP. In CBO’s estimation, there is a 5 percent chance that GDP will be at least 21 percent lower in 2100 than it would have been if temperatures remained stable after 2024 and an equal chance that GDP will be at least 6 percent higher. In CBO’s central estimate, GDP would be 4 percent lower than if temperatures remained unchanged.
Effects on Real Estate Markets. CBO estimates that with roughly 4 feet of sea-level rise, recurring flooding would cause the loss of residential property currently worth $930 billion—roughly 2 percent of the total value. A rise of about 2 feet would cause losses of $250 billion. Those losses would mostly be borne by property owners, mortgage lenders, insurance companies, and the federal government.
Other Consequences. Climate change will raise mortality rates and rates of illness, especially if increases in temperature are large, though adaptations will mitigate those effects. It will also harm ecosystems that provide food, clean air and water, medicines, and other useful products. Some effects of climate change will increase immigration to the United States and raise defense costs. Hotter temperatures and more intense natural disasters will disproportionately affect low-income households, minority communities, and residents of the Southeast.

Pretty good summary; amazed it’s still online.

NGFS Short‑Term Scenarios

The Netwrok for the Greening of the Financial System (NGFS) has published four different scenarios to assess the economic and financial impacts of physical and transition shocks. Based on the NGFS conceptual note on short-term scenarios (Oct. 2023), these scenarios were developed in collaboration with experts from leading academic institutions. The results underwent a series of quality checks to ensure their robustness. They are available for free download here. The four scenarios are:

Disasters & Policy Stagnation (physical-risk only)
1. Compound weather shocks (drought + heatwave → wildfire in 2026, followed by flood + storm in 2027) with no policy step-up
Highway to Paris (orderly transition)
1. Early, gradual but ambitious policies aligned with a 1.5 °C path; no extreme weather shock
Sudden Wake-Up Call (late, abrupt transition)
1. Policymakers delay action three years, then impose steep carbon price and regulation in 2027
Diverging Realities
1. Severe regional weather disasters (drought-heat-wildfire in 2026, flood-storm in 2027) strike Asia, South America and Africa, triggering cross-border spill-overs via trade and finance.

I’d probably use a combination of scenarios 3 & 4 as a baseline stress, but none of the scenarios envision the US abandoning its goals and the rest of the world’s reaction.

UK Actuaries Develop A Framework

A group of UK actuaries apply actuarial thinking to climate change - it’s not good (the findings, not the paper). They apply the framework familiar to many of us: Risk Identification, Monitoring, Measurement, and Control.

Planetary Solvency–finding our balance with nature (Institute and Faculty of Actuaries)

Actuaries seek to understand risks and avoid financial insolvency, or the risk of ruin. We consider scenarios that might cause insolvency in a process we call reverse stress testing, which helps to inform choices to reduce risk.

They take information, like many of the papers I have cited, summarize it, and make it accessible.

… widely discussed carbon budgets only give a 50% (heads or tails) or less chance of limiting global warming to 1.5°C and assume no surprises such as tipping points, which is unrealistic. This probability of failure is very high when compared to, for example, society’s appetite for insurance company failure, which is set at 0.5%, a one in 200 year chance.

Tipping Points & Interconnectedness

At today’s levels of warming, tipping points associated with coral reefs are likely and tipping points associated with the Greenland and west Antarctic ice sheets, North Atlantic Sub Polar Gyre and permafrost abrupt thaw cannot be ruled out. Further tipping thresholds are likely to be crossed as 1.5°C is passed, including boreal forest, mangroves and seagrass meadows.

Early warning signals suggest that we are heading towards tipping points for the Greenland ice sheet, Amazon rainforest and Atlantic Meridional Overturning Circulation (AMOC).