Insuring Against Extreme Heat Navigating Risks in a Warming World 2025

NBS are particularly impactful in cities, which are currently home to half the world’s population, and will host an additional 2.5 billion people by 2050 and are projected to experience double the intensity of heat stress compared to rural surroundings.62 A recent study from The Nature Conservancy institutes a roadmap for using NBS (particularly targeted tree plantings) in 61 of the world’s largest cities to increase urban tree cover from the current 1.5-3% to 7%.63 This change would meaningfully decrease temperatures and save lives. Insurance companies can help accelerate NBS, especially in cities where the urban heat island effect can raise temperatures by as much as 7°F due to heat-absorbing surfaces, heat-generating activities, and limited vegetation.64 Public utilities and grid providers would greatly benefit from reductions in energy demand during heat events. Insurers can work with investors, policy-makers and city planners to identify bankable NBS projects, de- risk investment in critical adaptation and resilience interventions, and work with government to provide vital coverage for these projects. NBS not only helps mitigate the climate impacts of extreme heat, but also addresses the interconnected environmental challenges, including declining soil health, increasing water scarcity and deteriorating water quality. These environmental challenges, often driven by land use changes, weaken the resilience of communities and economies. NBS are particularly impactful in vulnerable, low-income urban communities that disproportionately suffer from extreme heat. These solutions can benefit such communities by reducing temperatures, improving air quality, restoring ecosystems and biodiversity, and enhancing property values and economic vitality. Accelerating and scaling NBS will require public- private partnerships (PPPs) and a community-driven approach. Implementing NBS on the individual or single-asset level would likely not add as much value as a unified or community-driven approach. For example, a homeowner can begin targeted tree plantings on their property, but if a home next door fails to plant trees and the public land between homes does not have sustainable urban drainage, the positive externalities will be minimized. Furthermore, NBS must be implemented with a multi-hazard mindset. For example, tree plantings near homes in certain areas can increase overall wildfire risk. Therefore, implementing NBS requires the community-driven approach of uniting public and private leaders with other key stakeholders to capitalize on the benefits while mitigating risks. Sector breakdown of investment opportunities for NBS FIGURE 5 Investment opportunity Sustainable transport infrastructure Waste management solutions Nature-based systems for water supply Repurposed parking lots Wastewater treatment solutions Residential sharing Urban green roofs Flexible offices Infrastructure for resilience to climate shocks Coastal wetlands restoration Other nature-based solutions293 81293 Nature-based solutions Land-sparing intervention Total583 469 11345 42 16 15 11 10 4 1305 139 312 51 213 13 138 22 5 64Annualized capital expenditure, 2021-30 $, billions, 2019 valuesAnnual business value generated in 2030 (expected) $, billions, 2019 64 1,555 1,325 231 Insuring Against Extreme Heat: Navigating Risks in a Warming World 19