Businesses must act now to address growing climate risks or face steep financial losses, according to two new reports released today by the World Economic Forum (WEF).
Companies that delay could see up to 7% of annual earnings wiped out by 2035-an impact akin to COVID-19-level disruptions every two years.
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 (BCG)–provide a roadmap for companies to navigate climate risks and unlock long-term value through decarbonization, safeguarding nature, adaptation and building resilience.
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, said the WEF press report.
Companies in energy-intensive sectors that fail to decarbonize face mounting transition risks as global climate regulations tighten, with carbon pricing alone potentially slashing up to 50% of earnings by 2030.
In contrast, businesses that invest in adaptation, resilience and decarbonization are already realizing tangible returns.
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 US $19 in avoided losses, based on data from CDP, which helps companies and public authorities disclose their environmental impact, it said.
Opportunities amid risks
Despite the risks, the evolving climate landscape presents substantial growth opportunities. Green markets are set to grow from US $5 trillion in 2024 to US $14 trillion by 2030, with early movers gaining competitive advantages in sustainable solutions and adaptation offerings.
“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,” said Gim Huay Neo, Managing Director, World Economic Forum.
Leading scientists, including Johan Rockström of the Potsdam Institute for Climate Impact Research, warn that five Earth systems are nearing irreversible tipping points that are likely to worsen food insecurity for at least half a billion people, added in the report.