emerging
Climate Change Risk Surge
Climate change is rapidly becoming a top risk for organizations worldwide, driven by regulatory compliance, extreme weather events, and social impact.
Timeframe
near-term
Subcategories
Impact areas
Detailed Analysis
The report highlights a significant increase in the perceived risk of climate change, particularly over the next three years. While currently ranked lower than cybersecurity and business continuity, climate change is projected to climb rapidly in the risk rankings. This surge is attributed to a combination of factors, including increasing regulatory pressure, the tangible financial and operational impacts of extreme weather, and growing public awareness and social pressure. The report notes that "the steep climb expected for climate change risk is fueled by a combination of risk drivers."
Context Signals
European Union’s Corporate Sustainability Reporting Directive (CSRD) is driving higher risk ranking and audit effort on climate change
Extreme weather events are disrupting business operations and supply chains in Latin America, including impacting the Panama Canal
Social impacts of extreme weather in Africa include displacement and dependence on aid
Edge
Companies may face increasing pressure from investors and stakeholders to demonstrate climate resilience and disclose climate-related financial risks.
The increasing cost of extreme weather events could lead to new financial instruments and insurance products designed to mitigate climate-related losses.
Internal audit functions will need to develop expertise in assessing and auditing climate-related risks and controls.
