Linda-Eling Lee, Founding Director, MSCI Institute | Katie Towey, Senior Associate, Climate Risk Center, MSCI |
Umar Ashfaq, Research Director, Americas, MSCI Institute
Companies are confronting the rise in physical risk head-on. In industries at highest exposure to extreme weather, the overwhelming majority of companies are prioritizing plans to withstand such impacts as a key part of risk management.
That’s among the main findings of our study on corporate resilience, which examines how risk, operations and finance officers at listed and unlisted companies alike are experiencing floods, heat and other hazards and taking steps to protect their firms’ operations.
This report offers a snapshot of current company planning and action to mitigate extreme weather events. Conducted in September and October by the MSCI Institute, the report explores corporate resilience from several angles, drawing on a survey of 550 companies in 15 countries across nine industries at highest exposure to physical risk, augmented by interviews with select executives and contextualized by MSCI’s physical risk analysis.[1]
Weathering the impact
More than 80% of companies say extreme weather events such as dangerous heat and flooding have disrupted operations or added to their operational costs in the past five years. Most companies report impacts from severe storms (62%), followed by dangerous heat (49%) and flooding (47%), with differences reflecting sector-specific exposures. Companies that have been recently impacted by extreme weather events (32%) are twice as likely as companies not impacted (14%) to have upgraded their infrastructure for resilience, highlighting how direct experience accelerates action.
Severe weather events or natural disasters that have affected companies surveyed in the past five years (%)
Assessing physical risks
Nearly all companies surveyed say they assess the risks of extreme weather, with severe storms (87%), flooding (78%), natural disasters (76%) and extreme heat (67%) topping the list of hazards assessed. Most companies (85%) estimate potential losses from extreme weather events, with most saying acute hazards such as severe storms (67%), natural disasters (61%) and flooding (52%) pose the highest risk of disruption to operations.
Formalizing oversight
Three-quarters of companies say they have instituted a framework, ranging from real-time monitoring systems that track hazards to climate scenario analysis, with adoption of such frameworks highest (81%) among companies recently impacted by extreme weather events. A majority of companies (61%) link the pay of directors and offers to physical risk management, while nearly three-quarters (73%) assign oversight of physical risk to both the board and senior management.
Expecting a warmer (and costlier) future
Sixty-three percent of companies say that climate-induced physical risk is currently having a significant impact on the global economy, while 36% expect a significant impact at some point in the future. That parallels a 2024 MSCI Institute survey of global investors, 57% of whom who said that climate-related physical risk is impacting the global economy currently and 36% who said they anticipate such impacts in the future.
A return on resilience investments
Eighty-two percent of companies say that investing in operational resilience led to positive financial or reputational outcomes, with over two-thirds citing increased interest from investors and lower insurance costs. Servicing resilience needs as a future business opportunity is not yet on the radar. Only one in five companies currently offer products or services that help their customers mitigate the impacts of extreme weather.
Types of investments to build resilience against extreme weather events
[1] We assessed industries’ exposure to physical risk physical using MSCI Climate Value-at-Risk, a forward-looking climate risk metric.