Businesses must act now to address growing climate risks or face steep financial losses, according to two new reports released by the World Economic Forum.
The forum says in a statement that companies that delay could see up to seven percent of annual earnings wiped out by 2035—an impact akin to Covid-level disruptions every two years.
It says the reports— Business on the Edge: Building Industry Resilience to Climate Hazards, produced with support from Accenture, and The Cost of Inaction: A CEO Guide to Navigating Climate Risk, produced with support from Boston Consulting Group, “provide a roadmap for companies to navigate climate risks and unlock long-term value through decarbonisation, safeguarding nature, adaptation and building resilience”.
The WEF says that extreme heat and other climate hazards are expected to cause US$560–$610 billion in annual fixed asset losses for listed companies by 2035, with telecommunications, utilities, and energy companies most vulnerable.
“Companies in energy-intensive sectors that fail to decarbonise face mounting transition risks as global climate regulations tighten, with carbon pricing alone potentially slashing up to 50 percent of earnings by 2030.
“These risks, combined with cascading impacts on supply chains and communities, underscore the critical need for resilience strategies.”
The forum says that in contrast, businesses that invest in adaptation, resilience and decarbonisation are already realising tangible returns.
“Every dollar invested in climate adaptation and resilience can generate up to $19 in avoided losses…”
“Research from the Alliance of CEO Climate Leaders, which includes 131 global CEOs representing 12 million employees, shows that every dollar invested in climate adaptation and resilience can generate up to $19 in avoided losses, based on data from CDP, which helps companies and public authorities disclose their environmental impact.”
It adds that it offers a blueprint for CEOs and their companies “to navigate the risks and seize the opportunities with evidence that most industries could abate over 50% of their emissions cost economically in a fast-transition scenario”.
Opportunities amid risks
The forum says despite the risks, the evolving climate landscape presents substantial growth opportunities.
“Green markets are set to grow from $5 trillion in 2024 to $14 trillion by 2030, with early movers gaining competitive advantages in sustainable solutions and adaptation offerings. These markets span sectors and value chains, with the largest segments being alternative energy (49%), sustainable transport (16%) and sustainable consumer products (13%). All are growing well above GDP.”
Gim Huay Neo, Managing Director of the World Economic Forum, says pathfinders leading the charge on net-zero transitions and nature positive solutions “are showing how businesses can create value while improving the environment and supporting the communities”.
“By holistically and systematically addressing climate-related risks and opportunities, businesses can build stronger and more sustainable operations, safeguarding and restoring ecosystems, and fostering long-term economic and social resilience in an increasingly complex and uncertain world.”
Rising climate risks: A call to action
Leading scientists, including Johan Rockström of the Potsdam Institute for Climate Impact Research, warn that five Earth systems are nearing irreversible tipping points.
The forum says earth systems, such as ice sheets, ocean currents and permafrost are interconnected natural processes that regulate the planet’s climate, sustain ecosystems and provide vital services like carbon storage, water filtration and temperature stabilisation that enable societies and economies to thrive.
“These include the potential collapse of the Greenland and West Antarctic ice sheets, which are on track to unleash up to 10 metres of sea-level rise and worsen food insecurity for at least half a billion people.”
“While the science behind these tipping points and climate hazards is alarming, it can be difficult to translate into actionable business risks…”
It adds that while the science behind these tipping points and climate hazards is alarming, it can be difficult to translate into actionable business risks.
“These reports aim to bridge that gap, providing a foundation for business leaders to safeguard stakeholder value while contributing to sustainable, resilient societies. Both reports also provide full details on the methodologies, sources and datasets behind the findings.”
