By Morten Halborg, General Partner & Co-founder, Climentum Capital, Aug. 2026

Former pension fund executive

This summer's record heat and wildfires are the same signal insurers are already pricing as a threat to financial stability, not a sustainability issue. That repricing is also where the next decade's biggest investment opportunity is being built.

1. The market is already repricing. Not a 2050 problem.

In January 2026, Munich Re reported $224bn in global natural catastrophe losses for 2025, of which only $108bn was insured (Munich Re, 2026). That's $116bn, roughly 52%, landing on households, businesses, and governments with no backstop. The ECB puts a number on the knock-on effect: heatwaves alone could push food inflation up by as much as 1.8 percentage points by the 2060s, and climate and weather extremes have already cost the euro area more than €200bn in damage since 2021 (Elderson, ECB, 2026).

This has already happened, not something projected for 2050. Major U.S. carriers have stopped writing new homeowner policies across California. More than a dozen insurers have exited Florida entirely or stopped writing new policies since 2020, including Farmers Insurance (Insurify, 2026). European reinsurers are quietly repricing Mediterranean coastal and wildfire-exposed property out of reach for large categories of buyers. Australian banks are adjusting mortgage terms in flood-risk zones. This isn't an Atlantic story, and none of it required a model of 2100. It required an actuary looking at a loss curve that no longer resembles the one from a decade ago.

Insurance is the market's most honest, least ideological pricing mechanism: no stake in a political narrative, just the need to stay solvent. In hard numbers, it's telling you the risk has changed.

2. The canary isn't speaking in NGO language

Swiss Re CEO Christian Mumenthaler put it more bluntly than most economists would dare: "You cannot insure facts" (CNBC, 2025). That isn't a statement about ethics. It reflects the limits of actuarial modelling once physical reality moves faster than the pricing model can adjust.

Allianz board member Günther Thallinger has gone further, warning that "without decisive action, we risk crossing a threshold where adaptation is no longer possible, and the costs, human and financial, become unimaginable." Zurich Insurance Group has separately called the climate outlook "alarmingly bleak," pointing to a widening protection gap that shifts catastrophe losses off insurer balance sheets and onto everyone else's (Swiss Re Institute, 2026).

These aren't campaigners or a climate summit communiqué. They're the people paid to price risk correctly enough to stay in business, with every commercial incentive to downplay it rather than inflate it, since alarm shrinks their market. When they say the model is breaking, that's a stronger signal than any climate report.

3. Three risk channels, one financial system

The clearest explanation of why this matters for financial stability came in 2015, when Mark Carney, then Governor of the Bank of England, named three channels through which climate change threatens the financial system (Carney, 2015): physical risk, direct damage to property and supply chains; liability risk, legal exposure for emitters and their insurers; and transition risk, a disorderly, too-fast repricing of carbon-exposed assets that destabilizes markets faster than portfolios can adjust.

Carney's point was never that climate change is bad. His point was narrower: these three channels can compound into a systemic event, the same way isolated mortgage risk compounded into a systemic one in 2008. I watched that mechanism from the inside. I was CIO of a pension fund when subprime went from a niche concern to a balance-sheet emergency in about eighteen months, and the pattern was never really the risk itself. It was that the people best placed to see it coming had two-to-five-year horizons, while the risk built on a much longer clock the whole time. Climate risk is running the same play through three channels instead of one. Carney called this the "tragedy of the horizon."

Carney is now Prime Minister of Canada, and in May 2026 he made the same argument at the Economic Club of New York, this time as head of a G7 government, not a central banker (PM.gc.ca, 2026). He's not the only one still making it. On July 2, 2026, Frank Elderson, Vice-Chair of the ECB's Supervisory Board, told a room of economists in Lisbon that the green transition is 'no longer a climate story but an economic security story,' the same reframe this piece is built on, delivered by the person who actually supervises eurozone bank balance sheets (Elderson, ECB, 2026).

4. The evidence nobody can dispute: summer 2026

You don't need to believe a climate model to believe a thermometer. Western Europe just recorded its hottest June on record: 20.7°C average, 3.05°C above the 1991-2020 norm. Spain hit 45.1°C in Andújar; Germany broke its all-time record at 41.7°C. Wildfires burned more than 35,400 hectares in France by mid-July, four times the average, with fires also raging across Spain, Portugal, Greece, Italy, and Turkey. Heat-related excess deaths from the June heatwave alone are estimated at 10,600 to 14,000 across Europe (Inside Climate News, 2026; ABC News, 2026).

The heat didn't stop with June. Barcelona logged its hottest temperature in 112 years on July 9, and a third Iberian heatwave pushed Spain back into the low-to-mid 40s the week of July 21 (UN News, 2026). Whatever your view on emissions targets, none of that is required to read a thermometer or a non-renewal letter. The physical risk channel Carney described in 2015 isn't a projection anymore, it's the same data point driving the loss figures in section 1.

5. A competitiveness story, not a sustainability one

The mechanism is straightforward: physical losses rise, insurers reprice or withdraw, exposed assets get revalued or written off, and the cost of capital rises for anything exposed to physical, liability, or transition risk. This isn't an ESG argument so much as a standard risk-repricing cascade, the same mechanism as the credit events I witnessed with my own eyes back in 2008, just with a different trigger.

Europe, specifically, is under-invested in grid resilience, water infrastructure, and materials that don't depend on volatile supply chains. That's not a choice between a green path and a growth path. It's a choice to carry uninsured risk on the continent's balance sheet while the capital that could close the gap sits idle. European pension funds deploy just 0.01% of assets under management into venture versus roughly 10% of U.S. pension capital, and the region needed an additional $75bn to reach 80% local funding for growth rounds above $15 million, as I've written before (Halborg, 2025; Invest Europe, 2023; State of European Tech, 2024). Draghi's 2024 competitiveness report made the same point at EU level: trillions in European capital sit in low-yield allocations while energy, supply chains, and deep tech remain structurally underfunded (Draghi, 2024). Climate risk just gives that mismatch a price tag. The hard tech solving physical and transition risk at the infrastructure level isn't a values statement, it's underwriting the next decade's balance sheets, and it sits inside the same conversation Europe's LPs are already having about defence, security, and industrial sovereignty.

6. The other half of the trade: the opportunity of the decade

Everything above is the risk case. The opportunity case is just as concrete. For most of the last decade, climate investing has meant mitigation. That's still necessary, but no longer sufficient. Seven of the nine planetary boundaries that keep Earth's systems stable have now been breached, with ocean acidification the newest to cross the line (Rockström et al., 2025). More than three-quarters of the systems the global economy depends on are now operating outside their safe zone.

That means the opportunity is no longer just decarbonization. It's adaptation: the infrastructure, materials, and industrial systems that let economies keep functioning as physical risk rises, regardless of how fast mitigation proceeds. Grid resilience, water security, and supply chain redundancy aren't a hedge against a bad outcome. They're the build-out the next decade requires under any scenario, and one of the more durable capital allocation theses available today. Treating it as a values-driven side bet rather than a core allocation is itself a risk decision, and an increasingly expensive one.

7. What pricing it in early actually looks like

First, treat mandatory climate risk disclosure not as a compliance cost but as price discovery. A 2026 report from the Sustainable Markets Initiative, backed by asset owners and insurers overseeing more than $20tn, found physical climate risk already denting corporate performance, an estimated $1.3tn in exposure for listed companies, without markets pricing it in (Sustainable Markets Initiative, 2026).

Second, treat hard tech addressing physical and transition risk as risk-mitigation infrastructure, not thematic exposure. Grid hardening, materials substitution, and supply chain redundancy are the commercial answer to Munich Re's loss curve.

Third, treat transition risk as a portfolio construction problem, not an ESG checkbox. Carney estimated in 2015 that about a third of global fixed income and equity exposure sat in fossil-fuel-dependent sectors, and there's little evidence that's unwound. CalSTRS, one of the largest U.S. pension funds, cut traditional energy's weight in its equity book from 4.7% to about 3% between 2022 and 2025 (IEEFA, 2025), a duration decision, not a values one.

8. The tragedy of the horizon doesn't wait for consensus

Carney's original warning was that by the time climate-driven instability is undeniable to a risk committee, the exposure is already unhedged and the repricing turns violent instead of orderly, the same lag I watched play out once already, in 2008. Summer 2026 suggests we're further along that horizon than most balance sheets have acknowledged. The insurers have already moved. For everyone else, the question isn't whether this repricing happens, Munich Re's loss curve says it already has. It's whether you're positioned before it lands on your books, or after.

Sources: Munich Re (2026); Carney, "Breaking the Tragedy of the Horizon" (Bank of England, 2015); Elderson, "The Green Transition – Benefits and Barriers" (ECB, 2026); Swiss Re Institute sigma research (2026); CNBC (2025); Insurify (2026); PM.gc.ca (2026); Inside Climate News (2026); ABC News (2026); UN News (2026); Sustainable Markets Initiative (2026); IEEFA (2025); Rockström et al., Stockholm Resilience Centre Planetary Health Check (2025); Halborg, "Unlocking pension capital for Europe's strategic autonomy" (2025); Draghi, "The Future of European Competitiveness" (2024); Invest Europe (2023); State of European Tech (2024).