What Is Climate Depression?
Climate depression refers to a sustained economic downturn driven by climate-related disruptions. It combines the effects of extreme weather, resource scarcity, and policy shifts that reduce productivity and investment returns.
How Climate Change Affects Financial Markets
Physical risks from storms, floods, and droughts damage infrastructure and supply chains. Transition risks emerge as governments tighten regulations and shift subsidies away from fossil fuels. Together, these factors can lower corporate profits, increase insurance costs, and raise borrowing expenses.
Economic Sectors Most Affected
Agriculture, energy, insurance, and real estate face the greatest exposure. Crop failures, water shortages, and coastal flooding threaten yields and property values. Industries reliant on stable climates may see reduced output and higher operational costs.
How Investors and Businesses Can Respond
Firms can diversify supply chains, invest in climate-resilient assets, and adopt forward-looking risk assessments. Investors may use climate scenario analysis to stress-test portfolios. More guidance on economic resilience is available at the World Bank Climate Change portal.
