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KAPTIALKOMPASS #47: climate finance crisis
- service4100
- Aug 11
- 4 min read
Dear readers,
While many are dealing with heat waves or storms, an uncomfortable truth is coming into focus in the financial world: Climate change is no longer an abstract future scenario—it has long since become a real threat to the global financial system.
What was previously considered a marginal topic for sustainability reports is now developing into a systemic risk. The German financial supervisory authority BaFin is now issuing warnings with unusual clarity: physical climate risks could be the cause of the next financial crisis. In this special edition, we show why this topic is highly relevant for investors – and what needs to be considered now.
From transitional
risks to real damage
Until now, many banks and investors have focused on so-called “transition risks,” such as the loss of value of fossil fuel assets due to political regulations. But this perspective falls short. Reality has long since overtaken theory. The new concerns are floods, droughts, fires, and storms—and their financial consequences are measurable:
In California, climate-related damage recently amounted to up to $150 billion.
In Spain, flooding resulted in high insurance payouts and property value losses.
Insurers are coming under pressure as many risks no longer appear acceptable. Banks, in turn, are threatened with the default of entire mortgage portfolios – especially in regions where natural hazards render real estate uninhabitable or uninsurable.
The USA as a harbinger
of global development
The situation in the United States shows what Europe could still face:
Large insurers are withdrawing from markets such as California and Florida.
In regions such as West Palm Beach, insurance premiums are now higher than mortgage rates.
As a result, real estate is rapidly losing market value, becoming unsellable—and thus no longer financeable.
This is a chain reaction that calls into question the basic principle of the credit system. Although government reinsurance programs (such as FAIR) are in place, their capacities are limited.
Germany:
Still stable – but not secure
Even though there are no widespread insurance gaps in this country yet, the warning signs are increasing:
Construction continues on flood-prone land in the Ahr Valley.
BaFin is calling for more prevention instead of mere claims settlement.
Reconstruction after climate damage ties up funds – including public funds.
The real estate markets are still robust, but without targeted measures, regional “climate risk zones” could also emerge in Germany in the medium term.
The real danger:
The creeping crash
Unlike the financial crisis of 2008, this time there is no threat of a sudden collapse, but rather a slow but irreversible decline in value:
Insurance companies can recalculate annually.
Banks, on the other hand, often hold decades-long loan agreements.
When real estate becomes uninhabitable, there is a risk of a credit crunch due to a lack of collateral.
At the same time, pressure on governments is growing – but unlike the bank bailouts of 2008, physical damage cannot be compensated for with taxpayer money.
Greenpeace:
Focusing on damage instead of solutions?
Criticism is not only coming from the financial sector: environmental organizations such as Greenpeace warn that the current discourse implies that the fight against climate change has already been abandoned. If the focus is solely on damage mitigation, the actual cause—CO₂ emissions—will be lost sight of.
A financial system at a tipping point
The structural consequences are far-reaching:
Loss of value across entire real estate markets
Loss of mortgages and investments
Stagnation in the construction sector and infrastructure projects
Such a domino effect could fundamentally destabilize today's financial system – and thus also jeopardize the assets of countless private investors.
Conclusion: Strategically pricing climate risks
As HOLON Family Office, we recommend integrating physical climate risks more strongly into your asset strategy:
When investing in real estate, look for climate-stable locations and insurability.
Give preference to asset classes that are less dependent on regional natural hazards.
Incorporate sustainability not only as an ethical issue, but also as a risk and resilience factor.
Those who want to secure their assets in the long term must act now – not wait until the markets react to the climate finance crisis.
Best regards and successful investing,
Your service team
Disclaimer
Important legal notice: The information contained in this newsletter is for general informational purposes only and does not constitute investment advice or other professional advice. The data and analyses provided here are based on sources that we consider reliable, but we do not guarantee their timeliness, accuracy, completeness, or quality.
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Source:
Torsten Leißner