Counteracting the costs of climate change with climate resilience

The financial consequences of climate change are evident. In 2024, natural disasters worldwide caused economic damage amounting to USD 328 billion, with 57% of the losses remaining uninsured.¹ Companies are affected not only directly, but also indirectly through their value chains. For instance, in 2024, the automobile manufacturer Porsche faced production delays and revised its profit forecasts after the facilities of an aluminum supplier were flooded.² 

Climate-related risks can be divided into two categories: physical risks, such as storms, flooding, or rising sea levels and transitional risks, which arise in the course of moving toward a climate-neutral economy, for example through statutory CO₂ pricing or changing market demands. 

Simultaneously, effective adaptation measures to climate change can also create opportunities. Companies may achieve long-term competitive advantages by diversifying their supply chains, investing in low-emission technologies, or relocating critical sites. The extent to which companies succeed in mitigating climate risks along the entire value chain, while also seizing related opportunities, is ultimately reflected in their climate resilience. 

The recognition of climate risks as financially material for companies has been shaped in particular by the Task Force on Climate-Related Financial Disclosures (TCFD). Since its establishment in 2015 by the Financial Stability Board (FSB), an international body founded by the G20, the TCFD has pursued the objective of promoting international financial stability by introducing climate-related transparency requirements for companies. 

According to the TCFD, without reliable information, investors risk mispricing or misjudging assets, potentially leading to a misallocation of capital.³ The organisation identifies climate risks as „one of the most significant, and perhaps most misunderstood, risks that organizations face today“.⁴ 

The importance of transparent disclosure and prudent management of climate risks is also reflected in statutory reporting obligations. The European Commission has incorporated the TCFD’s recommendations on the analysis of climate-related risks and the disclosure of climate resilience into the environmental section of the European Sustainability Reporting Standards (ESRS). This approach was retained in the revised draft of 31 July 2025. Similarly, the sustainability standards of the International Sustainability Standards Board (ISSB), which are gaining increasing international relevance, are based on the TCFD’s core principles. 

Beyond regulatory requirements, the financial markets are likewise exerting pressure. On 29 July 2025, the European Central Bank announced that, from 2026 onwards, it would incorporate a climate factor into its assessment of individual assets in the context of lending to commercial banks.⁵ This factor is intended to reflect the potential adverse financial impacts of uncertainties associated with climate change. As a result, banks will have greater incentives to disclose non-financial risks and to direct investments toward climate-resilient assets. This development therefore particularly affects co​mpanies in climate-intensive sectors, whose access to financing may become more restricted in the future. 

In order to meet the regulatory and market-driven expectations of stakeholders, an in-depth analysis of company-specific climate risks is essential. Standards and guidelines issued by the ESRS, TCFD, and ISSB can provide valuable support, particularly in identifying a​nd assessing such risks. The resulting insights contribute to understanding the potential impacts of climate change on businesses and thus form the basis for developing a transition plan to a resilient business model. 

Climate change presents companies with substantial financial risks, while at the same time offering new opportunities for sustainable growth. A robust climate-risk analysis in line with current standards, such as ESRS or TCFD, fosters a deeper understanding of corporate climate resilience and provides the foundation for targeted adaptation strategies. This enables risks to be managed effectively and organisations to adapt flexibly to uncertainty. Transparent disclosure of findings and measures builds trust among investors, business partners, and the public, thereby enhancing long-term competitiveness and financial stability.