On Tuesday, US Treasury Secretary Janet Yellen explained that weather disasters are depleting the economy both nationally and globally. Dangerous extreme weather costs countries billions of dollars in damages and affects supply chains, food systems, inflation, and production capacity.

"State and local governments may increasingly be forced to devote scarce resources to disaster mitigation, potentially at the expense of investments in areas like education and worker training," said Yellen. "And the bulk of the evidence suggests that these disasters have long-lasting negative effects on economic growth -- with many economies failing to fully recover.”

Why This Matters

Governments are scrambling to manage the financial effects of climate change as extreme weather continues to worsen. Last year, the US had to pay $145 billion in damages from floods, fires, and other disasters. These disasters are increasingly common. Droughts and floods are 200% more likely, while highly active Atlantic hurricane seasons are twice as likely as in 1980. As the world warms, hurricanes are spreading north, are more destructive, and are rapidly intensifying, threatening communities that do not have the infrastructure to manage them.

If climate change worsens, these weather disasters could get even more destructive -- and expensive. A report from consulting firm Deloitte found that climate inaction will cost the global economy $178 trillion. To keep shareholders aware of these financial risks, the SEC approved a rule requiring publicly traded companies to disclose how climate change affects their business.  Implementing policies like the SEC rule and the Inflation Reduction Act can tackle climate change and its economic effects.

Hurricane Ian Could “Break the Bank”

Yellen’s remarks are particularly timely as Hurricane Ian raged through the Gulf and then Florida, putting island and coastal communities in the wake of financial peril. Before moving north, the storm left 11 million people in Cuba without power on Tuesday.

Ian made landfall in Florida on Wednesday around 3 pm EDT as a Category 4 hurricane with sustained winds of up to 150 mph, just shy of Category 5. In Florida, where more than 2 million people were ordered to evacuate, life-threatening storm surges hit shoreside cities, even moving inland. The Weather Service predicted a rare "high risk" for flash flooding across much of the state.

Hurricane Ian is projected to be among the costliest storms in US history. Even before landfall, Ian had caused catastrophic damage to Florida. Continued development in flood-prone areas of Tampa means many buildings and homes are built on vulnerable ground and susceptible to damage. Meanwhile, a number of private property insurers have gone bankrupt, leaving homeowners in the lurch.

“It is possible that this could break the bank,” Kathy Baughman McLeod, director of the Atlantic Council’s Adrienne Arsht-Rockefeller Foundation Resilience Center, said of the hurricane.