Climate change is putting 7% of corporate earnings in jeopardy

Companies must adapt to climate risks or risk losing 7% of their annual earnings by 2035, two new World Economic Forum (WEF) reports warn.

The yearly financial impact of not acting on climate change is nearly half of that caused by Covid-19-related global disruptions This means that companies that do not adapt could effectively suffer pandemic-level impacts every two years, with extreme heat and other climate hazards expected to cause US$560-610 billion in annual fixed asset losses for listed firms.

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The reports published this week by WEF ahead of its annual conference in Davos (taking place from January 20 to 25, 2025) aim to serve as a roadmap for companies to protect themselves from climate risks and unlock long-term value through decarbonisation, climate adaptation and nature action.

Climate adaptation investments pay off

According to the Forum, the sectors most exposed to climate-related financial losses include telecommunications, utilities and energy. Moreover, companies in energy-intensive sectors are also facing mounting transition risks amid more stringent climate regulations, with carbon pricing alone potentially slashing up to 50% of earnings by 2030.

At the same time, investing in adaptation could pay off handsomely, with companies seeing up to US$19 in avoided losses for every dollar spent on decarbonisation and resilience, according to CDP data analysed by the Alliance of CEO Climate Leaders, which includes 131 global CEOs representing 12 million employees.

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‘Green markets’including alternative energy, sustainable transport and sustainable consumer products are also projected to nearly triple in value, from U$5 trillion to US$14 trillion by 2030.

“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. “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.”