Climate-To-Economy Transmission Map
Trace climate shocks through commercial and financial relationships, not just physical damage.
Most climate-economic analysis sits at one of two extremes: granular natural-disaster damage tallies (200-300B USD/year of bridges and flooded mines) or smooth top-down GDP curves that lose all the turbulence. Both miss roughly 80% of the real disruption, because neither traces how a shock actually propagates through the commercial and financial relationships that link companies, households, and governments together.
The Transmission Map flips the lens. Instead of chasing a hurricane through physical infrastructure, you trace it through financial infrastructure: insurance premiums rise, inland low-income households default on mortgages, mortgage holders pressure another set of institutions, and the shock keeps reverberating. A Brazilian frost cuts coffee output 20% but global prices jump 30% in a week, because farmers walked from forward contracts, buyers scrambled to cover futures positions, and the whole pricing mechanism amplified the shock.
The framework has three moves. First, step back from the disaster site and identify the commercial and financial mechanisms that connect actors. Second, map how a shock travels along those links - who breaks a contract, whose premium rises, whose borrowing cost climbs, who becomes uninsurable. Third, watch for tipping points where the infrastructure itself stops being able to manage the risk: insurers exit, states absorb the liability, mortgages on uninsurable homes vanish.
Used well, it converts an impenetrable fog of climate uncertainty into a concrete landscape of contagion paths and resilience-building opportunities.
- Direct physical-damage estimates capture only about 20% of the true economic impact of a climate shock because they ignore lost revenue and income downstream of broken assets.
- Climate impact propagates primarily through commercial and financial relationships, so you must map contracts, insurance, credit, and futures positions, not just physical infrastructure.
- A single shock typically reverberates into a second wave - rising premiums, defaults, broken forward contracts - that is larger and broader than the originating event.
- Traditional economic tools rooted in historical data and past trends lack the imagination to anticipate non-linear climate-driven disruption and must be supplemented with simulation-based methods from complex-systems science.
- The dangerous failure mode is not steady damage but a tipping point at which the financial infrastructure itself can no longer price or absorb climate risk, turning boom-and-bust into bust-bust-broken.
Developed by climate economist Edmond Rhys Jones in response to an investor client who asked, after the 2021 Pakistan floods and European drought, whether net-zero spending was economically worth it - and found existing economic models too smooth to answer honestly.