- As decision-makers from around the globe gather at UN General Assembly and Climate Week NYC 2026 to take stock of progress and chart the next phase of climate action, Allianz Research is launching a new annual flagship, the Allianz Climate Economics Report (ACE).
- Climate change is showing up in macroeconomic data. The costs are not just from destroyed assets, but run through productivity, inflation, consumption, public finances and ultimately growth. That makes climate risk an economic and financial risk that businesses and policymakers need to incorporate into their decisions systematically.
- Climate risk is an economic and financial risk
- Translating a full year of accumulated climate events into their impact on GDP and inflation is not a straightforward exercise. Behind ACE is ClimRad (Climate Data Radar), a proprietary platform developed with Earthian AI that combines climate indicators with natural-catastrophe analysis and macroeconomic scenario modelling. A version of the platform is available to leaders, researchers, journalists and concerned citizens alike.
- For 2025, extreme weather caused 184 billion euros ($210 billion) in economic losses, down 32% from 2024 but 20% above the 2000–2019 average. Northern and Eastern Europe recorded some of the largest temperature anomalies, led by Norway at +3.74°C versus +1.38°C globally. The economic burden worldwide was uneven: the US recorded the largest absolute losses at 104 billion euros ($118.5 billion), but that was just 0.4% of GDP, while Jamaica’s losses reached 39.4% of GDP. Thailand lost 2.9% of GDP and Portugal 0.8%, or four times its historical average.
- Europe’s heat wave
- In 2026, Europe's heat waves alone cost an estimated 113 billion euros ($128 billion) in lost output. But Europe wasn’t the only region hit hard. Serious flooding struck Madagascar, Malawi and Mozambique along with Tunisia and Morocco. Brazil experienced storms, floods, a wildfire and a landslide, while Peru declared emergencies for floods in February and ahead of El Niño-driven rainfall in July. Indonesia faced an active wildfire season and Nepal and China absorbed a shared border flood with reconstruction needs estimated at 3.5-4.4 billion euros ($4-5 billion).
- El Niño poses the threat of the next costly stress test in 2027
- In a scenario based on the temperature effects of the strong 2023/2024 El Niño, economists at Allianz Research have calculated the impact on 144 economies, taking into account the temperature-related effects of El Niño, but excluding additional damages caused by droughts, floods, or wildfires.
- Considering potential temperature change between 2026 and 2027, El Niño could cost the economies analyzed approximately 395 billion euros ($451 billion) in economic output by 2027, without counting additional externalities from droughts, floods, and hurricanes, which are expected to intensify in 2027 under the very strong El Niño. China, the U.S. and India would collectively bear nearly 60% of the gross losses.
- Europe would not escape unscathed: the 27 EU member states face a potential net loss in economic output of around 21 billion euros ($24 billion); 0.09% of GDP. Across the EU, the estimated effects are +0.31 pp for overall inflation and +0.5 pp for food prices.
- Prevention Beats Repair
- The experiences of 2025 and 2026 showed that countries with established prevention systems, pre-arranged financing and clear response mechanisms were better positioned to limit disruption than those relying mainly on post-disaster relief.
- Australia, Chile and Canada drew on established wildfire programs combining monitoring, community preparedness and investment before the fire season. Morocco benefited from earlier investment in warning systems and risk mapping worth 357 million euros ($408 million) since 2016, supported by a World Bank-backed resilience program. Texas, by contrast, only strengthened warnings and protective infrastructure only after severe flooding.
- We need to change the economics of climate policy from paying for damage to paying for resilience. It is cheaper to invest in adaptation, resilient infrastructure, early-warning systems and forward-looking financing up front, than to keep paying to repair the damage afterwards.