Five themes shaping 2026

The evolution of pricing risks

Matt Christensen

25/02/2026

Sustainability is moving past politics and back to fundamentals – pricing the financial consequences of climate events and emerging risks more accurately through advanced modelling capabilities.

After the political noise of 2025, sustainable investors are increasingly refocusing on what really matters: how climate‑related events and other global risks might affect financial performance. What are the real‑world costs of floods, heatwaves, supply‑chain shocks, litigation risks and shifts in policy – and how should those risks be priced into portfolios?

These questions will lead to new capabilities in assessing climate, planetary and social scenarios and testing the impact on portfolios. A combination of enhanced modelling capabilities, the rise in systematic and quantitative investing, and greater attribution of controversies and harm can support a more structured approach to integrating sustainability opportunities and risks in financial modelling.

The price of risk

However, below the macro lens, insurance and litigation trends are emerging, and will likely have specific sector implications. Decades ago, the insurance and legal industries helped shape risk perspectives around tobacco, asbestos and glyphosate – resulting in significant corporate remediation costs. We expect sectors such as food, water and health to be similarly impacted by being able to better quantify their impact on the environment and society.

Insurers are already focusing on climate risk. This is driven by the ongoing rises in both total economic and uninsured losses, advances in climate risk modelling, and continuing developments in climate litigation.

We see several specific areas for development this year:

Integrating location: Sustainable investing typically refers to activities, rather than their location – which is critical for many key impacts and dependencies. Advances in location-risk assessments across climate,¹ water, biodiversity and social factors will improve screening for operations and supply chains.
Advancing mapping: Improved mapping of material environmental and social impacts and dependencies across sectors will emerge. An example of this advanced mapping is Moody’s environmental and social sector heat maps.
Capturing controversies: European sustainability regulation is changing and could lessen the reporting of potential harmful impacts, but investors are demanding broader and more sophisticated capture and estimated financial impact of controversies.
Analysing correlations – Quantifying the rising interdependence of risk factors will be critical to financial modelling and investment outcomes and understanding the impact of both action and inaction.

While pricing risks is currently centred on climate, it’s likely that biodiversity and social issues will not be far behind. We anticipate that sustainability will increasingly be incorporated into factors like market risk, growth assumptions and profitability in the investment process, to provide more advanced and specific scenario analysis for investment outcomes.

¹AllianzGI, Getting physical: when climate change hits home, 2025

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Disclaimer

Investing involves risk. The value of an investment and the income from it may fall as well as rise and investors might not get back the full amount invested.

Past performance does not predict future returns. If the currency in which the past performance is displayed differs from the currency of the country in which the investor resides, then the investor should be aware that due to the exchange rate fluctuations the performance shown may be higher or lower if converted into the investor’s local currency.

This is for information only and not to be construed as a solicitation or an invitation to make an offer to buy or sell any securities. The views and opinions expressed herein, which are subject to change without notice, are those of the issuer or its affiliated companies at the time of publication. The data used is derived from various sources and assumed to be accurate and reliable at the time of publication. but it has not been independently verified; its accuracy or completeness is not guaranteed and no liability is assumed for any direct or consequential losses arising from its use, unless caused by gross negligence or willful misconduct. The duplication, publication, extraction or transmission of the contents, irrespective of the form, is not permitted, except for the case of explicit permission by Allianz Global Investors.

This material has not been reviewed by any regulatory authorities.

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