“It seems paradoxical that Trump intends to make America great again by signing executive orders that worsen climate change and the bottom lines of banks and insurers.” This analysis concludes with these words from Ana Barreira, director of the International Institute of Law and the Environment and Master of International Legal Studies at New York University. How can we address the fight against climate change in the new Trump era?
[Article originally published in Agenda Pública]
When President Donald Trump took office, he rushed to sign dozens of executive orders that would negatively impact the fight against climate change. This occurred at a time when it was revealed that 2024 was the first calendar year to exceed 1.5°C above pre-industrial levels. These orders included withdrawing the United States from the Paris Agreement, authorizing certain oil drilling operations, suspending offshore wind energy concessions, and revoking policies promoting electric vehicles, affecting the entire U.S. energy industry, among other measures.
As a climate change denier, Trump believes these measures will positively impact the U.S. economy and make America great again (MAGA). However, he ignores the force of nature and the systemic character of everything that happens on Earth. This lack of understanding is also reflected in the decisions of some U.S. banks—JPMorgan, Citigroup, and Goldman Sachs—which withdrew from the Net Zero Banking Alliance. Meanwhile, some European banks threatened to do the same. In Davos, António Guterres told these bankers: “you are short-sighted and on the wrong side of history.”
Back in 2006, the Stern Review on the economics of climate change warned that without action, the global costs of climate change would amount to a loss of at least 5% of annual GDP indefinitely.
Politicians should remember that the Planetary Boundaries Framework consistently warns that humanity is approaching the limits of a safe operating space. We have already exceeded six of the nine boundaries: climate change, freshwater balance, land-use change, biosphere integrity, nitrogen and phosphorus flows, and novel entities such as microplastics, endocrine disruptors, and organic pollutants.
In its Sixth Assessment Report (6AR), the Intergovernmental Panel on Climate Change (IPCC) emphasized that fossil fuel use is the main driver of global warming. It highlighted that climate change is already causing extreme weather events with adverse impacts, losses, and damages to ecosystems and human societies. Recent years have provided compelling examples: the catastrophic floods in Pakistan in 2022 and 2023, severe flooding in Europe in 2024, including the DANA event in Valencia, Spain, and widespread droughts affecting both developed and developing countries, with significant economic consequences. Just days before Trump’s 2025 inauguration, Los Angeles experienced large-scale forest fires, and a study determined that such events are increasingly likely due to climate change.
The impacts of climate change and ecosystem degradation severely affect the insurance sector and financial investments due to physical and transition risks. Physical risks derive from direct damage to assets and infrastructure caused by extreme weather events, leading to increased insurance claims and asset devaluation. Transition risks arise from the shift toward a low-carbon economy, including policy changes, technological advances, and changes in market perceptions. It is crucial to recognize that physical risks will persist regardless of policy changes derived from executive orders or alliance withdrawals.
Over the past five years, the insurance sector has faced growing losses due to extreme weather events and forest fires, a trend exacerbated by climate change. In 2023, natural catastrophes caused economic losses of $280 billion, with insured losses of $108 billion (40%), exceeding the previous ten-year average of $89 billion. In the first half of 2024, insured losses reached $62 billion, approximately 70% above the ten-year average, driven by extreme forest fires, droughts, and floods.
In the United States, insurers are withdrawing coverage from homeowners, especially in fire-prone areas like Los Angeles, leaving victims uninsured while companies and regulators struggle to manage the unpredictable costs of climate disasters. Ironically, many of these homeowners and insurance companies likely supported and funded Donald Trump’s campaign.
According to the European Environment Agency, extreme weather and climate events caused estimated economic losses of 738 billion euros between 1980 and 2023 in the European Union, with over 162 billion (22%) occurring between 2021 and 2023. Statistical analyses reveal that economic losses have increased over time and that the last three years are among the five highest annual losses recorded. Similarly, the National Oceanic and Atmospheric Administration (NOAA) reported that in 2024, the United States experienced twenty-seven climate and weather disasters with losses exceeding $1 billion each. These events included one drought, one flood, seventeen extreme storms, five tropical cyclones, one wildfire, and two winter storms. Together, these events caused 568 deaths and had a significant economic impact on affected areas. And this doesn’t include the Los Angeles fires in 2024, which alone caused estimated damages between $250-275 billion.
Climate change also impacts banks through direct and indirect effects on their activities and asset values. For example, properties damaged by extreme weather events can lose value, reducing collateral for loans. Mortgage-backed securities and real estate investments in high-risk areas may also experience devaluations. In 2024, the Federal Reserve’s climate scenario analysis suggested that the largest U.S. banks could face increased loan defaults due to climate change and the transition to a decarbonized economy.
At the UN World Summit on Sustainable Development in 2002, it was recognized that ecosystem integrity provides essential resources and services not only for human well-being but also for economic activities.
It seems paradoxical that Trump intends to make America great again by signing executive orders that worsen climate change and nature degradation. A stable climate and healthy ecosystems are essential for the vitality of economic and social systems. Trump’s lack of systemic perspective undermines his goal, since the forces of nature recognize neither political nor mental borders. The European Union should also take note, especially now that the European Commission has published A Competitive Compass, where competitiveness appears to be the objective rather than a principle, as it plans to simplify measures necessary to protect the climate system.
