Climate-driven losses do not occur in isolation. They cascade through financial systems in ways conventional models miss and risk triggering abrupt shifts at financial tipping points. We’ve now reached a point where the systems designed to manage the impacts of climate events through our financial and social infrastructure—insurance, reinsurance, credit, commodity hedging, municipal and sovereign debt—are struggling to keep up with a world of more frequent crises. And these crises are now impacting a broad range of sectors, from agricultural commodities to municipal bonds and sovereign credit markets. Addressing this challenge requires cooperation among businesses, insurers, and policy makers.

In response, both the public and private sectors need a new approach to climate resilience. The first generation of climate resilience strategy focused on reducing physical damage. While this work is ongoing, the next stage must build financial resilience that helps economies absorb shocks, manage losses, and keep recovery moving. It also must strengthen societal resilience, so that climate costs do not substantially impact households, local demand, and public finances. In short, new indicators are needed that cover financial and societal stresses, as well as physical.

Consider the insurance industry, where global insured losses from natural catastrophes have quadrupled since 2000. In the same timeframe, key mechanisms to syndicate those losses—reinsurance and capital markets—have decreased by nearly two-thirds relative to those losses. But addressing financial tipping points requires resilience strategies that go beyond insurance. Leaders need to identify indicators of systemic risk, strengthen the financial systems that absorb and distribute losses, and ensure that the costs of climate change do not fall most heavily on those least equipped to bear them.

There is no single template to meet this challenge. Every community and value chain faces a different mix of physical hazards, financial fragility, and social vulnerability. Strategies need to be co-developed by coalitions of governments, financial institutions, businesses, and capital markets—today, we often see actions being taken piecemeal. So, what are some of the potential actions for each dimension of resilience?