First of all, we must note that it is not Diamond who uses climate as an explanation for the distribution of wealth and power in the world. Instead, this is one of the explanations that he raises in the Prologue to Guns, Germs, and Steel and then goes on to rebut. Some people believe that a harsher climate makes for richer and more powerful societies. Diamond would say that this is an inaccurate understanding of history.
Diamond provides a brief description of this argument on page 22 in the paperback edition of the book. There, he tells us that a cold climate ensures that people must
Be more technologically inventive to survive, because one must build a warm home and make warm clothing…
But Diamond dismisses this argument because he points out that there are plenty of cold places that did not (unlike Northern Europe) develop major civilizations.
Diamond does say that climate has some limited impact on the distribution of wealth and power. He argues that societies become powerful if they are able to develop agriculture before their neighbors. A good climate can help this to occur, but it is not the only factor at play.
For Diamond, then, climate plays only a minor part in determining which societies become powerful and wealth. He does not believe in the argument that a harsh climate forces people to be more inventive.