'Climate change will ruin your wealth' - say what now?
The link between climate change and individual wealth - your wealth - isn't obvious to many folks right now. Time to change that...
So far you’ve read my claim that climate change will decimate your wealth and me introducing myself.
As a financial educator and consumer, I’ve been going down the rabbit hole on the ways climate change will touch your money since November 2024.
I won’t say I’ve done my own research because I don’t have formal research qualifications. I’m a dab hand with stats and maths, but that’s about it as far as research goes.
Instead, I can say I’ve read, watched, listened, absorbed, tested. My information gathering has included content from firms like BlackRock, the world’s biggest asset manager, and Allianz, one of our big insurers.
These bastions of capitalism are sounding the alarm bells, even if they’re not publicising it (much). We need to act quickly to have a chance at preserving our wealth.
To improve our chances of remaining future rich, as I like to call it.
After all that information digesting and more than a little freaking out, I reiterate the following conclusion which I will repeat many times on this blog:
Climate change will fk up your money if you don’t do something about it soon.
Before you freak out too, I promise:
There are feasible solutions which need not cost you anything but time.
I am by nature an optimistic person, occasionally an opportunistic one, but I’m not a dreamer.
You have pragmatic options. I will go into them in detail. I’m not going to leave you in despair. So please, stick with me on this. You’ll feel better by the end of the series.
So, what are we looking at?
The premise
I look at wealth as having two main growth mechanisms:
Scarcity – the less there is of something people want, the more expensive it gets. That’s property. As Mark Twain said: Buy land, they’re not making it anymore.
Adding value – using raw materials, including brainpower and time, to create products and services people buy. That’s business, which we can own directly or get a piece of via shares.
Both are looking likely to take big hits.
What’s in store for property?
The first headline that twigged me to this problem was in The Guardian on 3 April 2025:
The direct quotes from Allianz SE board member Günther Thallinger stood out.
Like, if ever anyone had an obligation not to cause panic about insurance, it’s that guy.
Seriously, he’d be committing career hari-kiri if he said this and turned out to be wrong. He’s still on the board as of November 2025, which is long enough to oust a negligent board member. Read into that what you will.
As Thallinger articulates, insurance is the first domino to fall when climate change gets worse. Insurers just can’t keep offering insurance for properties that are more and more likely to be wiped out.
The math doesn’t math.
This is not a tomorrow problem. It’s already started.
Insurance has already begun to topple in some areas of Australia like Gippsland, Lismore and Shepparton.
You can’t get insurance on some homes in those areas at any price, never mind the $20-40k a year premiums offered to the lucky ones.
This means potential buyers can’t get a mortgage, as you have to have insurance for the bank to lend to you. In turn, this limits the potential buyer pool for uninsurable properties to cash buyers only.
Property prices of those affected inevitably suffer when the only buyers available have to pay in cash.
The odds could be as bad as 1 in 10 – as in, one in ten properties are predicted to be uninsurable within a decade in Australia.
It also means if you end up with one of those properties, you will have to self-insure. As in, set aside massive amounts of liquid capital against the day disaster strikes and you have to temporarily house yourself while you rebuild, or take your luck and just hope it never happens.
Neither sounds like a recipe for sound sleep.
Australia has a national reinsurance pool for terrorism and cyclones to supplement retail insurance, but we can’t keep making these pools indefinitely.
There’s simply too much likely to go wrong thanks to the disaster acceleration from climate change.
Some bright spots though. As Thallinger says in the article (bolding mine):
“The good news is we already have the technologies to switch from fossil combustion to zero-emission energy. The only thing missing is speed and scale. This is about saving the conditions under which markets, finance, and civilisation itself can continue to operate.”
From the insurance industry’s mouth, folks.
Once people realise this threat to property, researchers postulate mass migration into shares and retirement funds for financial security.
Not so fast.
They’re in trouble too:
What’s in store for shares?
Mortgage books - the sum of all the mortgages a bank holds - matter to the stock market.
The flow-on effect of uninsurable property will eventually hit banks. They’ll have mortgages they can’t fully recoup fully due to lower property prices.
Those riskier loans constrain lending capacity.
Bad news for the bank’s share price.
In Australia, five of our 10 biggest listed companies are banks. Most Aussies have at least some connection to their share price through their superannuation (our compulsory retirement accounts).
While this is all fascinating, it’s window dressing on the big story:
Global gross domestic product (GDP).
BlackRock, the world’s biggest asset manager with US$11.6 trillion under management, quietly released an investment stewardship paper in January 2025. That’s after they exited the green asset managers alliance.
In it, they state: 55% of global GDP – that’s US$58 trillion – is moderately or heavily dependent on nature.
When nature suffers, we can’t produce as much.
Guess what climate change does to nature?
Yep, it’s not good.
Now, y’all will know the economy isn’t the share market. But the threat to the companies we own via direct shares or index funds is still huge. Stranded assets, failures to meet production - these will eventually show up in share prices.
Now, brace yourself, darlink:
Predictions range up to 50% contraction in global GDP by 2070.
For a more comprehensive range of the studies completed, I liked this report from The Institute and Faculty of Actuaries and University of Exeter, which offered a range as follows:
You remember how *fun* the early COVID days were, when GDP contracted 3.2%?
Even a 10% contraction would suck. Like, majorly. For your quality of life as well as your wealth. That’s looking likely by 2040 - a mere 15 years away.
There’s not much of a case for nice-to-haves in a 10% contraction scenario. Not much research into cures for cancer, not many deliveries of (non-essential) toiletries to your door.
Human efforts will be concentrated on basic needs, with food at the top of the list.
This is going to hit your shares.
By virtue of most retirement funds owning shares, it’ll hit them too.
‘Can’t I just throw it all in cash, gold or crypto?’
Anecdotally, I’m aware plenty of cagey (usually rich) folks have started converting large amounts of wealth from property and shares into stores of value like cash, gold and cryptocurrency.
Divesting, as they say.
The problem moving from investments to a store of value is the potential GDP contraction.
Stores of value like cash, gold and cryptocurrency (crypto) are only useful for how much goods or services you can exchange them for.
If we all dive into these stores of value and food production drops, it just means we’ll all be paying 0.5 ETH for a carrot. Last I checked, you still can’t eat or drink gold.
(ETH = Ethereum, for un-crypto-initiated.)
Now, you might think: if you have enough ETH, it’ll be okay.
What do you think society will be like when this happens?
Here’s a reminder of what happened during COVID, when Aussies started fighting over toilet paper. In this case, so violently police stepped in and both were charged:
Fear makes people behave differently from their normal. It tests the boundaries of civilisation.
I don’t care how good your bunker is.
We will not have as nice a world as the one we inhabit now if GDP shrinks too far. Fighting is just a symptom. Imagine what life’s like when you have to focus much more time and energy on getting necessities, and have fewer opportunities for downtime.
Of course, you could be okay with that also long as you have enough ETH for your needs.
You could try to gobble up a bigger piece of a smaller pie by throwing your money into the essential resources climate change will make more scarce.
Buying water rights, for example.
Which is what I imagine BlackRock might do with their three focus areas - water access, deforestation and biodiversity loss. Could be a winner in Iran.
If that’s your answer, we are not friends. Adios, non-amigo, kindly unsubscribe on your way out.
Still with me? Excellent.
But before we get into solutions…
…I’ve got a few more points I want to cover off in the following posts:
Getting more specific on how it can affect property, and what that means for your home and investing.
Getting more specific on how it can affect shares, and what that means for your portfolio in and outside retirement funds.
The elephant in the room: why aren’t we hearing about this elsewhere? Why is it just little ol’ me beating this drum in the personal financial education space right now?
Then we’ll get into the solutions including what can you do about it, including nitty-gritty, step-by-step guides.
If you’ve read enough to start moving towards actions, you can jump to the ‘what to do’ section now.
Up next:
Checking that I understand correctly but water rights is very different to water infrastructure/ treatments etc as a utility I assume? As an investor (purely from the growth perspective), I have looked at utilities due to the reliance. If those businesses are ethical & sustainable, then all good?