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Illustration: Sarah Grillo/Axios

The COVID-19 pandemic underscores why market regulators, companies and investors should do a better job planning for climate risks to the financial system, a pair of reports finds.

Driving the news: The International Monetary Fund said projected increases in the frequency and severity of natural disasters are a potential threat that investors probably aren't weighing enough.

  • Separately, the investor advocacy group Ceres has a report that recommends steps that the Federal Reserve, banking, commodity and securities regulators should take to address "systemic risk" of global warming.

Why it matters: "While projections of climatic variables and their economic impact are subject to a high degree of uncertainty, aggregate equity valuations as of 2019 do not appear to reflect the predicted changes in physical risk under various climate change scenarios," IMF said in the latest analysis published in its wider "Global Financial Stability Report."

  • Meanwhile, the Ceres report could help provide a roadmap for regulators under a Joe Biden presidency, which would shift the partisan balance in independent regulatory agencies.

The intrigue: The IMF authors, in a blog post, say the COVID-19 crisis is a reminder that "crisis preparedness and resilience are essential to manage risks from highly uncertain events that can have extreme economic and human costs."

  • The Ceres report similarly cites COVID-19 in its warning of the potential for "unaddressed risks to massively disrupt both Wall Street and Main Street."
  • It also warns that "mispricing" climate risks adds further jeopardy to financial systems already vulnerable from the pandemic.

What they found: The IMF analysis finds that with some big exceptions — such as catastrophic 2011 flooding in Thailand that sent markets there reeling — large disasters have historically had a pretty minor effect on equity markets.

  • But they see trouble signs going forward, given estimates of more heatwaves, precipitation and more.
  • They compared very recent (2019) equity valuations in both advanced economies and emerging markets to growing climate-related risks.

The bottom line: "Looking retrospectively to 2019 equity valuations across countries, our study finds that they did not reflect any of the commonly discussed global warming scenarios and associated projected changes in hazard occurrence or incidence of physical risk," the summary notes.

  • "This apparent lack of attention could be a significant source of market risk looking forward."

What's next: The IMF report's recommendations include mandatory corporate disclosures on climate risks that would help banks, insurers and investors better grasp them.

Go deeper

What to know about the data vulnerabilities of the cloud

Illustration: Sarah Grillo/Axios

Moving data storage and processing to the cloud ameliorates some cybersecurity vulnerabilities while heightening others, according to a study published last week by the Carnegie Endowment for International Peace.

The big picture: More and more segments of both the public and private sectors are shifting their systems to the cloud, primarily relying in the U.S. on a handful of companies, chief among them Amazon, Microsoft and Google.

Resurrecting Martin Luther King's office

King points to Selma, Alabama on a map at his Southern Christian Leadership Conference office in Atlanta in January 1965. Photo: Bettmann/Getty Contributor

Efforts to save the office where Dr. Martin Luther King, Jr., planned some of the most important moments of the civil rights movement are hitting roadblocks amid a political stalemate.

Why it matters: The U.S. Park Service needs to OK agreements so a developer restoring the historic Prince Hall Masonic Lodge in Atlanta — which once housed King's Southern Christian Leadership Conference — can tap into private funding and begin work.

Off the Rails

Episode 4: Trump turns on Barr

Photo illustration: Eniola Odetunde/Axios. Photos: Drew Angerer, Pool/Getty Images

Beginning on election night 2020 and continuing through his final days in office, Donald Trump unraveled and dragged America with him, to the point that his followers sacked the U.S. Capitol with two weeks left in his term. Axios takes you inside the collapse of a president with a special series.

Episode 4: Trump torches what is arguably the most consequential relationship in his Cabinet.

Attorney General Bill Barr stood behind a chair in the private dining room next to the Oval Office, looming over Donald Trump. The president sat at the head of the table. It was Dec. 1, nearly a month after the election, and Barr had some sharp advice to get off his chest. The president's theories about a stolen election, Barr told Trump, were "bullshit."