How Adaptation Affects Equity Prices, FEMA Review Council Report, Aon Climate Risk Monitor, and More

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Physically hardening assets against extreme weather protects stock prices after hurricanes — but financially stretched firms can’t afford to, and markets know it.

A University of Zurich working paper covering over 128,000 annual reports from more than 13,500 US firms between 2003 and 2025 finds that pre-hurricane investment in physical protection offsets roughly 26% of the negative stock price reaction over 20 trading days, rising to 37% at 40 days. In contrast, companies utilizing insurance, conducting operational restructuring, or building cash reserves received no consistent market benefit.

The working paper analyzed SEC filings using an AI-powered methodology to discern whether and how various adaptation efforts produce equity price benefits. The protection premium is strongest for smaller firms and industries with large physical footprints, like manufacturers, utilities, miners, retailers. For larger firms, investors look instead at operational flexibility and the size of their cash cushions, which serve as valuable shock absorbers when physical hardening is less relevant to to the business model. Notably, the study found that when a firm has a prior track record of climate exposure, investors price a broader set of adaptation measures — suggesting investors are attuned to these companies’ vulnerabilities.

It further revealed that companies with financial constraints are far less likely to implement and report adaptation measures. Firms with tighter budgets disclose 4-14% less adaptation activity than their peers on average, with physical protection and operational adjustments falling the most. After a hurricane, constrained firms increase adaptation by about one-third less than unconstrained ones.

Markets have already priced this in. Adaptation disclosures from financially constrained firms generate no stock price benefit, because investors apparently don’t believe those firms can follow through.

WTW and Cornell University's Atkinson Center for Sustainability have launched a joint research programme to examine whether climate change is driving simultaneous correlations between cyclones, wildfires, and severe convective storms — a pattern the partners call "clustered catastrophes." The study will test whether traditional diversification assumptions in reinsurance design and reserve modeling hold true as co-occurrence risk grows. (WTW)

The Federation of European Risk Management Associations and the World Business Council for Sustainable Development have launched “Open Sesame”, a cross-sector initiative to build a standardized climate resilience financing framework. Four workstreams will address exposure modeling consistency, quantification of adaptive measure benefits, investment methodology, and sustainable finance integration. Consultancy BCG serves as secretariat; Allianz, Aon, FM Global, Howden, Marsh, PwC Italy, SCOR, and Sigma7 are among the participants. (WBCSD)

Shareholders in US-based Travelers Companies will face a second consecutive proxy vote on whether the US insurer has adequately assessed long-term climate risks to its underwriting viability, investor advocacy group As You Sow has announced. The resolution asks the board to report on how rising catastrophe exposure and climate-driven premium volatility could impair the company’s long-term business model. (As You Sow)

A White House-commissioned review panel recommended shrinking the Federal Emergency Management Agency (FEMA) and transforming the federal government’s role in disaster response, according to a final report released May 7.

The 10 recommendations it contains would overhaul the current model for responding to, and preparing for, climate-related catastrophes and transfer far more authority to states, tribes, and territories, with the federal government assuming a supporting role.

The most significant funding changes target the Public Assistance and Hazard Mitigation programs. Under the proposed Reformed and Partnered Initiative for Disasters (RAPID) model, federal payouts to states blighted by disasters would be based on parametric triggers — like population impacted, wind speed, and flood depth — and deposited in state treasuries within 30 days of a federal disaster declaration, bypassing the existing lengthy reimbursement process that has led to a backlog of over 300,000 projects and a US$54.8bn in still-to-paid funding obligations.

In addition, the existing Hazard Mitigation Grant Program — used to harden public infrastructure from disaster-related damages — would be eliminated and replaced with a two-phase structure managed predominantly by the states, with federal payments capped at 15% of a disaster allocation.

The National Flood Insurance Program (NFIP) faces structural reform as well. Under the report’s proposal, the federal-backed insurance pool would push at-risk households toward private insurance through a voluntary “take-out” program, and encourage state insurance commissioners to set up a centralized flood insurance marketplace. It also recommends overhauling the current risk rating system for determining NFIP eligibility using advanced flood maps and data analytics. Individual assistance would be consolidated into a single direct payment of up to US$150,000 for homeowners, and six months of HUD Fair Market Rate rent for renters.

The report is the product of the FEMA Review Council, a body of senior federal, state, and local officials set up by President Trump to explore reshaping the agency, which has long been the focus of the president’s ire. Former cabinet officials had even floated abolishing FEMA altogether — a leap the report backed away from.

Most of the report’s recommendations require congressional legislation to implement, and the council calls for a phased two-to-three-year transition to allow states to build fiscal and operational capacity before federal responsibilities transfer.

The Securities and Exchange Commission (SEC) has submitted a formal rulemaking to the Office of Management and Budget to rescind its 2024 climate-related financial disclosure requirements. The move would eliminate the rule — which would have required public companies to disclose material climate risks and Scope 1 and 2 greenhouse gas emissions — before it ever took effect, following the agency’s earlier attempts to use the courts to bar enforcement. (Office of Management and Budget)

Most US employers recognize extreme weather as a workforce risk but have done little about it, according to a report by the HR Certification Institute and the Health Action Alliance. Seventy-seven percent of HR professionals say climate events can affect their workforce, yet 56% say their company is unprepared and 71% have not conducted a weather risk assessment in the past year. The costs of failing to adapt are high — 63% of employers report rising insurance premiums linked to extreme weather, while a 2025 Harvard-George Washington study found roughly 29,000 additional workplace injuries from extreme heat in 2023 alone. (HRCI / Health Action Alliance)

The European Commission launched a one-month public consultation on revised European Sustainability Reporting Standards, which include climate mitigation and adaptation disclosure rules. The proposed package would cut mandatory datapoints by more than 60% and reduce per-company reporting costs by over 30%. Stakeholders have until June 3 to respond. (European Commission)

New Zealand’s Climate Change Commission has released an updated national risk assessment identifying the country’s ten most significant climate threats, with infrastructure disruption, water security, and biodiversity loss among the headline findings. The report is intended to guide the government’s forthcoming National Adaptation Plan and set investment priorities across public and private sectors. (New Zealand Ministry for the Environment)

Aon has unveiled a souped-up version of its Climate Risk Monitor platform, adding heat stress analytics, cooling demand modeling, and revised drought and water stress projections.

The heat stress module quantifies how combinations of temperature, humidity, and exposure translate into health outcomes and productivity losses — with the aim of giving insurers, reinsurers, and government clients a more detailed basis for pricing and risk-taking decisions.

The new Monitor also for the first time calculates cooling demand amidst the rising importance of heat stress to companies and the buildout of gigantic data centers for powering AI applications — which have an enormous need for cooling capabilities.

Additional technical upgrades include higher-resolution hazard data, bias-corrected climate model outputs, and historical baselines built from observed weather events.

Cambridge-based start-up Barocal has raised US$10mn in seed funding to commercialize a solid-state cooling technology that eliminates the need for refrigerant gases. The round drew contributions from the World Fund, Breakthrough Energy Discovery, Cambridge Enterprise Ventures, and IP Group. Barocal’s system uses pressure-sensitive organic materials — compressing them releases heat, releasing pressure absorbs it — and transfers that heat via water. The company is targeting large commercial HVAC and refrigeration systems first, where efficiency gains make the strongest financial case. (TechCrunch)

VGreens has raised €2mn (US$2.4mn) to scale its AI-controlled plant cultivation system, which automates environmental management in indoor growing facilities. The round positions the company to expand as demand for climate-resilient food production grows in markets where outdoor crops face increasing disruption from extreme weather. (Vertical Farm Daily)

Climate adaptation venture fund Adapt Us has announced its inaugural portfolio investment: Temperate, a UK start-up developing radiative cooling technology that uses roughly 5% of the electricity of conventional air conditioning with zero refrigerant gases. A Valuing Impact eQALY assessment confirmed significant societal returns across residential, commercial, and industrial scenarios, including in low-income markets gaining first-time access to mechanical cooling. (Darren Clifford)

Short-term climate shocks drive sector divergence (Oxford Economics)

Harnessing climate finance for public health: a global perspective (Humanities and Social Sciences Communications)

The importance of recognizing opportunities in climate change impacts (Nature Climate Change)

Global patterns of student mobility align with national climate adaptation (Communications Sustainability)

Thanks for reading!

Louie Woodall
Editor