Podcast Summary

Podcast: TED Talks Daily
Episode: How climate shocks could break the economy | Edmond Rhys Jones
Date: November 13, 2025

Episode Overview

This episode features economic risk adviser Edmond Rhys Jones (ERJ) exploring a crucial and timely question: What happens when the disruptive impacts of climate change collide with a financial system unprepared for such shocks? Drawing on vivid examples and his experience advising investors, Edmond argues that the models we use to anticipate economic fallout from climate disasters are fundamentally lacking. He calls for more dynamic, system-based approaches capable of capturing turbulence before it breaks economies, and presents new ways to build resilience in the face of inevitable climate disruption.

Key Discussion Points and Insights

1. The Science–Economics Gap in Climate Risk (03:44–06:33)

• Opening Context: 2021 was a devastating year for natural disasters — deadly floods in Pakistan, Europe’s worst drought in 500 years.
• Investor Question: ERJ recalls a client asking, “Is it really worth solving climate change?” The investor wants to know if the trillions invested in climate solutions will yield a worthwhile economic return.
• The Problem: While climate science is explicit about escalating risks, economics translates this into overly smooth, reassuring graphs — “all that turbulence and that kind of disruption just seems to get lost in translation.”
• Key Quote:

  “There’s a huge gap between the science and the economics. The science is scary and really detailed… but economics reduces all that turbulence to suspiciously smooth curves.”
  Edmond Rhys Jones, 04:21

2. Underestimating True Economic Vulnerabilities (06:34–07:57)

• Insurance Data: Natural disasters cause $200–$300 billion in visible damage per year — bridges collapse, mines flood. But these stats leave out downstream effects.
• ‘Quadrillion Dollar Slide’: ERJ’s analysis for investors reveals that we may only be counting about 20% of the real problem — lost revenues, disrupted supply chains, diminished livelihoods often go uncounted.
• Core Insight: We need to “trace hurricanes” through financial relationships, not just physical destruction.
• Key Quote:

  “If we compare those numbers with that quadrillion dollar slide, we can see we’re missing about 80% of the problem.”
  Edmond Rhys Jones, 07:10

3. How Climate Shocks Ripple Through Financial Systems (07:58–10:55)

• Examples:
  • American Southeast Hurricanes: Not just coastal damage — rising insurance premiums hit even low-income families inland, leading to broader financial distress (mortgage defaults, credit card delinquencies).
  • Coffee Industry in 2021: Drought and frost in Brazil slashed supply, global prices spiked 30% in a week due to breakdowns in financial contracts and futures markets.
• Systemic Risk: These shocks cascade, and the real risk is financial infrastructure “breaking under rising pressure.”
• Florida & California Warning Signs: Insurers bankrupt or withdrawing; governments becoming last-resort insurers, increasing public financial exposure.
• Key Quote:

  “We may be heading towards a tipping point ... where the financial infrastructure can’t manage climate risk anymore. And this isn’t academic — if we can’t manage climate risk, we can’t do a lot of things.”
  Edmond Rhys Jones, 10:45

4. Rethinking Risk: New Tools and Simulations (10:56–13:40)

• Current Modeling Flaws: Traditional economic tools rely on historical data and failed assumptions of stability.
• Complexity Economics: Advocates for adopting systems-thinking from evolutionary biology, energy networks, and environmental science.
• Simulations (‘Digital Twins’): Using agent-based models to simulate economies and test “what if” scenarios for future shocks — can reveal counterintuitive effects, like road demolitions easing traffic or fish stocks collapsing despite quotas.
• Key Quote:

  “We need models that surprise us before the future does.”
  Edmond Rhys Jones, 12:55

5. Building Resilience and Opportunity (13:41–15:07)

• Example – Parametric Insurance: Automatically pays farmers after disasters — resilient innovation but challenging to scale.
• Simulation-Driven Innovation: Modeling the coffee industry can help tailor such products, suggesting broader paths to invigorate financial resilience in exposed sectors.
• Reframing Uncertainty: By developing sophisticated models, uncertainty transforms from fear into a landscape of opportunities.
• Key Quote:

  “With the right tools, what felt like an impenetrable fog of uncertainty starts to feel like a landscape ripe for opportunity.”
  Edmond Rhys Jones, 14:30

6. The Economic and Social Imperatives (15:08–15:11)

• Two-Part Investment Case:
  1. Huge returns from safeguarding up to 25% of global GDP by 2100.
  2. The immediate need to build resilience to weather the unavoidable turbulence of the coming decades.
• Final Takeaway: The inevitability of some climate change is clear, but the scale of economic devastation is up to us — our models, our products, our capacity to adapt will determine our fate (14:54–15:07).

Notable Quotes & Memorable Moments

• On Misleading Models:

  “Economics … doesn’t actually do a very good job of explaining how, in practice, climate change will impact businesses and households in the real economy.”
  Edmond Rhys Jones, 05:41

• On Financial System Fragility:

  “This isn’t the normal, you know — boom and bust cycle. This is just bust, bust, broken.”
  Edmond Rhys Jones, 10:58

• On Adaptation and Innovation:

  “We need models that surprise us before the future does.”
  Edmond Rhys Jones, 12:55

• On Reframing Uncertainty:

  “What felt like an impenetrable fog of uncertainty starts to feel like a landscape ripe for opportunity.”
  Edmond Rhys Jones, 14:30

Important Timestamps

• 03:44 – Edmond Rhys Jones begins his talk: climate disasters in 2021 and the investor’s “is it really worth it?” question.
• 04:21 – The gap between climate science and economic models.
• 07:10 – Economic analysis underestimates true losses from disasters.
• 08:40 – American hurricanes and the spreading financial fallout.
• 09:30 – The coffee industry’s climate-driven supply shock and contract breakdown.
• 10:45 – On tipping points and the risks to Florida’s insurance ecosystem.
• 12:55 – “We need models that surprise us before the future does.”
• 13:55 – Example: scaling up parametric insurance for climate resilience.
• 14:54 – The choice: resilience or chronic crisis as climate impacts intensify.

Conclusion

Edmond Rhys Jones makes a compelling case for a fundamental shift in how we anticipate, model, and respond to the economic risks of climate change. He argues for embracing complexity and preparing for turbulence, insisting that while some level of disruption is inevitable, the scale of devastation — and opportunity — remains in our hands, contingent on adopting smarter tools and more adaptive financial systems.