Takeaways

• CDP estimates companies could face up to $898 billion in future losses linked to extreme weather events.
• Flooding, cyclones, and heavy rainfall are emerging as major threats to production, assets, and supply chains.
• The report suggests climate adaptation costs are significantly lower than the financial damage caused by inaction.

Extreme weather events are becoming a growing financial burden for businesses worldwide, according to a new report from CDP. The organization warned that companies could face as much as $898 billion in future financial impacts if climate risks continue to intensify.

The findings show that climate risk is no longer a long-term environmental concern but an immediate business challenge affecting operations, assets, and investment decisions.

CDP analyzed disclosures from 11,261 companies that submitted environmental data in 2025. Despite the increasing impact of climate events, only 35% of those firms identified extreme weather risks as financially material to their businesses.

Read More: Understanding the Carbon Disclosure Project (CDP), Scores, Climate & Sustainability

At the same time, companies reported nearly $3 billion in direct losses linked to extreme weather during 2025 alone. Heavy rainfall emerged as the largest contributor, accounting for $1.5 billion in damages. Businesses also recorded $309 million in additional direct costs and another $266 million from operational shutdowns.

The report highlights how climate-related disruptions are increasingly affecting production and business continuity. According to CDP, many companies still view physical climate risk as isolated or temporary, even as severe weather events become more frequent and financially damaging.

Future projections paint an even more serious picture. Flooding risks alone are expected to account for $528 billion in future losses, while cyclones could lead to $161 billion in damages. Heavy rain is projected to contribute another $86 billion.

Nearly half of the reported risks are expected to occur within the next two years, placing them directly within current financial planning and operational cycles.

Businesses said reduced production capacity could generate around $326 billion in losses, while asset impairment and early retirement of infrastructure may add another $218 billion. These risks are forcing investors and company leaders to reconsider how climate hazards affect asset quality, insurance access, and supply chain stability.

The report also points to a strong financial argument for climate adaptation. CDP’s 2025 Disclosure Dividend report found that the median cost of climate-related risks per company was $39.4 million. In comparison, the median cost of measures designed to reduce those risks stood at just $3.1 million.

The findings suggest that resilience investments could help businesses avoid far greater financial losses in the future.

The pressure is not limited to corporations. CDP also reviewed disclosures from 1,005 cities, states, and regions across 80 countries. Around 62% said they are already significantly affected by extreme weather events, including droughts, flooding, and extreme heat.

More than 60% of local governments expect climate hazards to become more frequent or intense. However, many said funding remains a major obstacle to climate adaptation projects. CDP estimates the global adaptation funding gap at more than $34 billion.

Amir Sokolowski said extreme weather now represents a systemic financial threat that affects economies, infrastructure, and supply chains simultaneously.

He added that stronger collaboration between governments, businesses, and financial institutions will be necessary to improve economic resilience and reduce future losses.

Also Read: Climate Risk in the Supply Chain Forces Companies to Rethink Resilience

CDP is urging companies to treat climate risk as a broader system-wide business issue rather than focusing only on individual assets. The organization also called on governments, regulators, and central banks to strengthen adaptation planning and integrate physical climate risks into financial systems.

The report concludes that the global climate adaptation agenda is rapidly becoming a core test of long-term economic resilience.

Follow more news and views via our Climate & Environment and Featured Articles sections, and stay updated on the top ESG events to attend in 2026 for industry insights and networking.

If you're looking for suitable ESG and Sustainability providers to share customized solutions specific to your business needs, you can check out KnowESG's Solutions page.

If you are an ESG provider looking to get your organization listed on our portal, visit this page.

Source: ESG NEWS