The coronavirus crisis holds profound lessons that can help us address climate change—if we make greater economic and environmental resiliency core to our planning for the recovery ahead. Pandemics and climate risk are similar in that they both represent physical shocks, which then translate into an array of socio-economics impacts. By contrast, financial shocks—whether bank runs, bubble bursts, market crashes, sovereign defaults, or currency devaluations—are largely driven by human sentiment, most often a fear of lost value or liquidity. Financial shocks originate from within the financial system and are frequently remedied by restoring confidence. Physical shocks, however, can only be remedied by understanding and addressing the underlying physical causes. Our recent collective experience, whether in the public or the private sector, has been more often shaped by financial shocks, not physical ones. The current pandemic provides us perhaps with a foretaste of what a full-fledged climate crisis could entail in terms of simultaneous exogenous shocks to supply and demand, disruption of supply chains, and global transmission and amplification mechanisms.

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