The global financial system has become remarkably good at handling climate disasters after they happen. Even in 2026, a year insurers have called relatively quiet, natural catastrophes caused an estimated $100 billion in economic losses in the first six months alone, according to the Swiss Re Institute. Insurance covered only about 42% of it. A week of tornadoes and hail across the U.S. in late April 2026 cost insurers more than $5 billion. Windstorm Kristin hit Portugal and Spain in January, with insured losses above $1 billion. Record heat fuelled wildfires across Europe, and in August the Bald Range fire in British Columbia forced more than 20,000 people from their homes. Each time, the system did what it was built to do. Insurers priced the risk, reinsurers spread it, catastrophe bonds passed some of it to capital markets, and governments and households absorbed the rest. What it has not learned to do is pay anyone for stopping them.

Sienna Shankel, founder of Arctica Lab , sees that as one of the costliest blind spots in climate finance. Moving risk around does not make it smaller; it only changes who writes the cheque. Her answer is climate prevention finance, a proposed asset class in which the institutions that save money when climate risk falls agree to share a defensible portion of those verified savings with the investors who paid for the work.

Call it the Prevention Value Gap : the distance between the economic value prevention creates and the share of it that ever flows back to whoever financed it. The evidence suggests the gap is wide. The Global Commission on Adaptation estimated that $1.8 trillion invested across five resilience areas could generate $7.1 trillion in net benefits, with benefit-cost ratios of roughly 2:1 to 10:1. World Bank research puts the net benefit of more resilient infrastructure in low- and middle-income countries at $4.2 trillion, about $4 for every $1 invested.

Very little of that return is structured to reach the people who would put up the capital. Shankel is building the contracts that would change that.

From carbon fee advocate to market builder

Shankel’s route into climate finance emerged through studying law and quantitative economics rather than trading. At UC Berkeley she was drawn to where the two disciplines meet, an interest later sharpened by managing her own investment portfolio. Shankel is completing graduate-level data science coursework through Harvard University. Her career took her through transactional law and regulatory compliance, as Director of Operations at a law firm, Senior Legal Analyst and Senior Compliance Associate in risk management.

Her background matters, because structured finance is, at heart, the discipline of writing enforceable contracts around uncertain future cash flows. Shankel spent years learning how risk is documented, allocated and policed, she now applies her experience to the question of how climate prevention could be financed

Her climate work began in May 2017, when she joined Citizens’ Climate Lobby as a volunteer lobbyist and chapter co-leader. The group campaigns for a national carbon fee, with the revenue returned equally to households. Shankel still regards carbon pricing as one of the most effective economy-wide tools available. But she grew uneasy that federal action would not arrive at the pace the climate crisis demanded.

In September 2019 she changed tack, founding the nonprofit Brand New World Foundation to push for wider use of sustainable concrete. Cement was a deliberate target. The International Energy Agency (IEA) estimates the sector produces roughly 7% of global CO₂ emissions , and that production could rise 12–23% by 2050 as populations grow and cities expand. Within two years, relevant legislation passed in both states where the foundation had volunteers. California required a strategy for its cement sector to reach net-zero emissions by 2045. New York passed a 2021 law directing the state to establish guidelines for procuring low-embodied-carbon concrete on certain public projects (those guidelines followed in 2023). Shankel is candid that both efforts already had strong momentum and her organisation’s contribution was limited.

The more important lesson came next. When she turned the foundation toward private-sector adoption and spoke to manufacturers, she learned that demand was expected to outstrip supply, possibly for years, because of bottlenecks in production, commercialisation and procurement. Policy had created a market. It had not made that market clear.

Anyone who works on organisational change will recognise this pattern. A mandate can set direction, but it rarely resolves the financing. The inclusion of capacity and incentives dictate how successful the results are likely to be.

That experience, combined with the lack of political support for a national carbon price, left Shankel deeply disillusioned. According to the Global Carbon Budget, fossil-fuel CO₂ emissions hit a record 38.1 billion tonnes in 2025, about 1.1% above 2024. UNEP’s 2025 Emissions Gap Report puts current policies on course for roughly 2.8°C of warming this century.

No longer convinced that existing policy and markets could cut emissions fast enough, she did what a disciplined investor does with a thesis she cannot change. She repositioned her portfolio for a future of rising climate-related losses. This decision forced her to trace where those losses actually land: insurers and reinsurers, capital markets, public and sovereign balance sheets. Somewhere along that trail, the question flipped. If an entire financial architecture already exists to price, transfer and absorb climate losses, could the same machinery be pointed at preventing them?

“Ironically, losing hope pushed me to follow climate risk through the financial system. Through this challenge Arctica was born.”

Shankel runs the work through two entities. Arctica Risk develops the institutional and financial research behind the framework. Arctica Lab builds the quantitative, valuation, verification and transaction-design methods needed to test it in pilots.

The mechanics follow three steps:

  1. Identify who benefits. When a project lowers climate risk, the savings land with specific institutions: an insurer facing fewer claims, a utility avoiding damaged assets, a government spending less on recovery.
  2. Quantify a defensible share. Independent estimates of avoided losses, avoided costs and emissions reductions establish how much value each beneficiary receives, and how much of it can credibly be committed.
  3. Contract it. Beneficiaries sign outcome-based agreements to pay a portion of that verified value, supporting the return of investor capital and a competitive, risk-adjusted return.

One filter is non-negotiable. A qualifying project must both reduce expected climate-related losses and deliver net greenhouse-gas reductions. Arctica calls the combination “climate prevention”,mitigation tackles the cause, risk reduction limits the consequences.

Take forest management in wildfire country. Thinning overgrown forest lowers the risk of catastrophic fire, which benefits insurers, utilities and public agencies. Converting the removed biomass into biochar stores carbon. Each beneficiary would contribute in line with the value it receives, so no single party has to carry a project whose benefits are spread across many. Coastal wetland restoration, which reduces flood exposure while storing carbon, and durable infrastructure built with carbon-negative concrete follow the same logic.

That multi-beneficiary design is the point. Many prevention projects stall not because they lack value, but because the value is split across too many balance sheets for anyone to justify paying alone.

Two theses sit at the centre of Shankel’s case. The first is that climate prevention finance could set off a modern-day gold rush. Prevention projects create value over decades. The contracts let investors claim a share of that future value today, in exchange for funding the work now.

The second is political, and it brings her journey full circle. Suppose a carbon-pricing system directed part of its fee revenue to projects based on verified emissions reductions. Investors who financed those projects would then hold a direct financial stake in a stronger carbon price. Where contracts include carbon-price-linked avoided costs, a higher price means more prevention value.

That could build something carbon pricing has always lacked: a constituency of capital that wants it to succeed. The carbon fee Shankel once lobbied for as a volunteer might become more politically durable because investors, not just advocates, are arguing for it, ultimately at a global level.

Shankel is clear about the hurdles. Prevention projects carry high upfront costs, long horizons and fragmented beneficiaries. To scale, the structures must outlast short political cycles and fit within institutional mandates, fiduciary duties and existing accounting rules.

Arctica lists institutional realism alongside quantitative rigour and transparency about uncertainty among its core values. It also commits to tying investor returns only to a defensible share of verified value, rather than trying to privatise every social or environmental benefit a project creates. “Finance should do more than price, transfer and absorb climate losses after they occur,” Shankel says. “It should also reward capital for reducing climate risk.”

The enabling conditions are improving. Climate-risk modelling is now granular enough to estimate how a specific intervention changes expected losses at a specific asset. Multiple climate risk-data and analytics providers have confirmed their data can support Arctica Lab’s avoided-loss methodology through asset-level counterfactual modelling, and Arctica is preparing to discuss the scope of a potential pilot with them.

Why leaders should pay attention

For boards, insurers and public finance officials, Shankel’s framework poses an uncomfortable question. How much of what your organisation spends on climate risk goes to absorbing losses, and how much goes to preventing them?

Most institutions can answer the first part in detail. Few can answer the second. Climate prevention finance is an attempt to make that second number investable, turning avoided harm into a contracted cash flow rather than a public good everyone benefits from and no one pays for.

Whether it becomes a recognised asset class will depend on pilots, verification standards and beneficiaries’ willingness to sign. But the premise is hard to dismiss. Climate losses are already priced.

Shankel is betting prevention can be priced too.