In a groundbreaking report titled “Navigating the New Climate Era: Building Intuition for Strategic Decision-Making,” J.P. Morgan’s Global Head of Climate Advisory, Dr. Sarah Kapnick, delivers a sobering assessment of our current climate reality and what it means for infrastructure owners, operators, and investors. This extensive analysis provides critical insights for organizations seeking to navigate the complex intersection of climate change, economic impacts, and strategic decision-making.
We Have Entered a New Climate Reality
The data is unequivocal: 2024 marked the first year global temperatures exceeded 1.5°C above pre-industrial levels in most major temperature datasets. With global carbon dioxide emissions reaching an all-time high of 41.6 billion tons, we are tracking toward warming scenarios well above the Paris Agreement’s target of “well below 2°C.”
This isn’t a distant future problem. Dr. Kapnick notes in the report, “We are in a new climate era” where “everything optimized for historic climate of the 20th century faces increasingly different conditions.”
The Infrastructure Vulnerability Crisis
Perhaps nowhere is this climate shift more economically significant than in our built environment. Infrastructure systems designed using historical climate data are increasingly unable to withstand new extremes, creating cascading failures with substantial economic consequences.
Case Study: Pacific Northwest Heat Dome Effects
The report highlights explicitly how roads in the Pacific Northwest buckled under the 2021 heat dome event “as they were not built to withstand previously unrealized temperatures.” This example illustrates a fundamental challenge facing infrastructure owners and operators: systems designed for past climate conditions encounter extremes beyond their design parameters.
When roads buckle, it’s not just about repair costs. It’s about supply chain disruptions, emergency service delays, commuter impacts, and other economic ramifications that ripple through communities and businesses.
Flooding Infrastructure Failures
Similarly, the report points to 2024 flooding in Central Europe, where “exceptionally heavy rainfall rapidly overwhelmed water management infrastructure designed and upgraded for previous high-water marks.” Water infrastructure built to handle what were once considered rare flood events now faces a higher frequency of these extremes, often without the capacity to manage them.
The Non-Linear Challenge of Weather Extremes
One critical insight from J.P. Morgan’s analysis is that extreme weather events don’t increase linearly with rising temperatures. The report explains, “While average global temperature change may appear linear over time, other statistics like wildfire and heatwaves respond in non-linear ways.”
This mathematical reality means extreme events capable of damaging infrastructure are accelerating faster than average temperature increases would suggest. The report illustrates this through probability distributions, showing how a slight shift in average temperatures can dramatically increase the frequency of severe extremes.
This means that the risk landscape is changing more rapidly than many current risk models account for, which is good news for infrastructure planners.
Economic Impacts Across the Infrastructure Lifecycle
The economic consequences of climate-vulnerable infrastructure manifest throughout the asset lifecycle:
- Initial Design and Construction: Higher upfront costs to build more resilient systems capable of withstanding greater extremes
- Operations and Maintenance: Increased frequency of repairs, emergency responses, and adaptation measures
- Insurance and Risk Management: Rising premiums or coverage limitations for assets in climate-vulnerable locations
- Service Delivery Failures: Economic losses from infrastructure service disruptions during extreme events
- Shortened Asset Lifespans: Accelerated deterioration from conditions exceeding design parameters
- Retrofit Requirements: Additional capital expenditures to upgrade existing infrastructure for new climate realities
The Strategic Imperative for Infrastructure Resilience
J.P. Morgan’s report concludes, “Success in the New Climate Era hinges on our ability to integrate climate considerations into daily decision-making. Those who adapt will lead, while others risk falling behind.”
For infrastructure stakeholders, this means moving beyond historical data and static design standards toward dynamic, forward-looking approaches that:
- Incorporate climate projections rather than relying solely on historical patterns
- Build in greater resilience margins even when they increase initial costs
- Develop sophisticated climate risk assessment methodologies
- Consider system interdependencies and cascading failure scenarios
- Prioritize adaptability to changing conditions throughout the infrastructure lifecycle
A Call to Action
The J.P. Morgan report serves as both a warning and a roadmap. As Dr. Kapnick explains, “Continuing with static thinking based on experience alone will make it difficult to identify emerging climate risks and accurately price them in and will make it harder to identify opportunities to lead in response to these risks.”
The message for infrastructure developers, owners, operators, and investors is clear: climate adaptation cannot be an afterthought. It must be integrated into core business strategies, risk management practices, and investment decisions. In the new climate era, infrastructure resilience isn’t just an environmental consideration—it’s an economic imperative.
Organizations that develop robust climate adaptation strategies for their infrastructure assets will protect their investments and position themselves to thrive in an increasingly volatile climate future.
This blog post draws insights from J.P. Morgan’s February 2025 report “Navigating the New Climate Era: Building Intuition for Strategic Decision-Making.” ClimaTwin is committed to helping organizations build climate-resilient infrastructure through advanced digital twin technology and predictive climate analytics.
(Source: Dr. Sarah Kapnick. Navigating the New Climate Era: Building Intuition for Strategic Decision-Making, JPMorgan Chase & Co., New York, NY, 2025.)
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