The Business of Climate Change

Climate change. Global warming. Ubiquitous words in this day and age. Yet, new, increasingly-concerning statistics are released monthly; the consequences aren’t approaching, they’re a reality right now. Inevitably, our planet’s ecosystems are deteriorating at alarming rates - forests burn, oceans acidify, and once-stable climates shift beyond what species can survive.The Intergovernmental Panel on Climate Change (IPCC) states that approximately 3.6 billion people live in areas of high vulnerability to climate change.  But the ripple extends far beyond the natural world, shaking the foundations of global economies and industries. 

The financial toll of climate change is already immense and accelerating. In the past decade, extreme weather alone has cost the global economy over $2 trillion USD_[1], and threatened lives, livelihoods, and stability of businesses and economies worldwide. Droughts and floods destroy crops that feed entire regions, whilst natural disasters such as hurricanes, storms and rising sea levels have destroyed expensive infrastructure, costing billions of dollars. According to the World Bank, climate change could push up to 100 million people into poverty by 2030 if global warming continues unabated_[2]. As these severe weather events become more frequent, supply chains are being disrupted, damaging the reliability of trade routes across the globe. In addition, governments are having to put climate change adaptations into place in order to minimise destruction and reduce its impact, such as installing air conditioning, investing in flood defences, investing in infrastructure (ICT, power, water, road and rail), and securing food chains.  

Recent analysis for the UNFCCC and UNEP Adaptation Gap report _[3] has compiled the

estimated costs of adaptation reported by over 70 countries for the period up to 2030._[4] While

these majorly focus on developing countries, they do provide a benchmark. Based on an

analysis of this data and transferring average values from upper middle countries as the

nearest proxy, this would imply adaptation costs for the UK of £4 billion/year on a per capita

basis but £25 billion/year on a GDP equivalent basis._[4]

Furthermore, insurers (whose jobs are to study such risks) are beginning to retreat from high-risk areas altogether, such as California_[5], as these regions are beginning to come “uninsurable” due to alarmingly repeated wildfires - fuelled by intensifying heat, drought, and changing weather patterns driven by climate change - which in turn release vast amounts of carbon and accelerate global warming.

The escalating financial exposure to climate risks underscores the necessity for businesses to integrate adaptation into their core strategies, or fall behind in obsoletion. 

Despite the threats, climate change is also responsible for sparking a new wave of innovation: the green economy. A green economy is defined as low-carbon, resource-efficient and socially exclusive, which consists of infrastructure that allows reduced carbon emissions and pollution, enhanced energy and resource efficiency, whilst also preventing the loss of biodiversity services_[6]. This so-called “green economy” is now one of the fastest growing sectors globally; _[7]solar and wind energy are no longer niche alternatives but mainstream investments attracting trillions of dollars. Electric vehicle development and energy storage companies are now also redefining industrial growth. 

This up-and-coming green economy is changing finance by shifting investment from high carbon to sustainable project, integrating ESG (environmental, social, and governance) factors into risk assessments decision making, and increasing the creation of new financial products such as green bonds. This financial movement ensures that more firms are responding responsibly to the planet’s environmental circumstances. Governments, too, are incentivising decarbonisation through carbon pricing (a cost applied to carbon pollution to encourage polluters to reduce the amount of greenhouse gas emissions into the atmosphere) and subsidies. 

References 

1	https://iccwbo.org/global-insights/sustainability-and-climate-action/thebusinessofclimate/
2	https://documents1.worldbank.org/curated/en/706751601388457990/pdf/Revised-Estimates-of-the-Impact-of-Climate-Change-on-Extreme-Poverty-by-2030.pdf
3	https://www.unep.org/resources/adaptation-gap-report-2024
4	https://obr.uk/box/estimating-current-and-future-adaptation-costs-to-the-uk/ https://www.theccc.org.uk/wp-content/uploads/2023/01/The-Costs-of-Adaptation-and-the-Economic-Costs-and-Benefits-of-Adaptation-in-the-UK-Paul-Watkiss.pdf
5	https://triplepundit.com/2025/insurance-crisis-climate-change/
6	https://www.unep.org/regions/asia-and-pacific/regional-initiatives/supporting-resource-efficiency/green-economy
7	https://www.sciencedirect.com/science/article/pii/S2211467X25003116
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