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1、The Cost of Inaction:A CEO Guide to Navigating Climate RiskA N N U A L R E P O R TD E C E M B E R 2 0 2 4In collaboration with Boston Consulting GroupImages:Getty Images,PexelsDisclaimer This document is published by the World Economic Forum as acontribution to a project,insight area or interaction.

2、The findings,interpretations and conclusions expressed herein are a result of a collaborative process facilitated and endorsed by the World Economic Forum but whose results do not necessarily represent the views of the World Economic Forum,nor theentirety of its Members,Partners or other stakeholder

3、s.2024 World Economic Forum.All rights reserved.No part of this publication may be reproduced or transmitted in any form or by any means,including photocopying and recording,or by any information storage and retrieval system.ContentsForeword 3Executive summary 41 Climate inaction could severely harm

4、 the world economy 51.1 Impacts of climate change are increasing andwill accelerate with further warming 91.2 Climate-related economic costs have more than doubled over the past 20 years 111.3 Further warming could put an increasing strain on the world economy 122 Corporate cost of global inaction:p

5、hysical risks onthe rise in the next twodecades 142.1 Climate change poses substantial physical risks to private sector 152.2 Physical risks will translate into material costs within the next two decades 162.3 Companies recognize physical risks but likely underestimate their impact 182.4 Corporate a

6、daptation investments have an increasingly positive business case 203 Corporate cost of own inaction:transition risks are increasing 223.1 Companies that do not decarbonize mayface increasing transition risks 233.2 If transition risks materialize,they could translate into material financial losses 2

7、63.3 Companies seem to underestimate these financial losses and overestimate 29 the cost of action4 Unlocking new growth by advancing the climate transition 324.1 Climate leadership still pays off 334.2 In heavy industry,climate leaders play along-term game 344.3 The warming climate is creating a ma

8、rket for adaptation solutions 355 The CEO Climate Leaders Guidebook 36Step 1 Conduct a comprehensive climate risk assessment 38Step 2 Manage risks in the current business portfolio 41Step 3 Pivot your business to unlock opportunities 44Step 4 Monitor risks and report on progress 45Enabler 1 Upgrade

9、climate risk governance 46Enabler 2 Integrate climate risk into business-as-usual 47Enabler 3 Develop effective climate risk systems 476 How corporates and governments can rise to the challenge 48Appendix 51Contributors 53Endnotes 55The Cost of Inaction:A CEO Guide to Navigating Climate Risk2Forewor

10、dClimate risks are no longer distant threats they are materializing today,with impacts already felt across industries and regions.Companies and societies must now confront a new reality:the world we operate in today will look quite different tomorrow.Last year,we called for systemic global change to

11、 combat the climate challenge.This year,we focus on something equally critical:how corporate leaders should step up to manage climate-related risks andseize opportunities as we navigate this complexlandscape.Climate inaction comes at a cost,even for businesses.The companies that fail to act could fa

12、ce substantial operational,financial and reputational risks in the near term,while early movers are already realizing tangible benefits from adaptation and decarbonization.For those who take bold steps,there is a path to sustained success.This report is a call to action for CEOs to redefine their ap

13、proach to climate risks and seize climate-smart opportunities.Climate leadership is not about avoiding risks it is about building resilience for businesses and societies and unlocking value in a transforming world.Businesses face intensifying physical risks and transition risks that will likely resh

14、ape industries,but within these challenges lies the potential for growth,innovation and competitive advantage to shape a growing climate adaptationmarket.Featuring innovative case studies and comprehensive frameworks for managing climate risks,this report equips CEOs and their companies with a bluep

15、rint to take decisive steps towards climate transformation,ensuring resilience,innovation and long-term success.The World Economic Forums Business on the Edge:Building Industry Resilience to Climate Hazards further explores how resilience strategies can be embedded across the C-suite.Now is the time

16、 for business leaders to act boldly and decisively.The decisions made today will not only shape the future of individual businesses but will also determine the trajectory of the global economy and the future of our planet for decades to come.Patrick HerholdManaging Director&Senior Partner,Boston Con

17、sulting GroupPim Valdre Head,Climate Action,World Economic ForumThe Cost of Inaction:A CEO Guide to Navigating Climate RiskDecember 2024The Cost of Inaction:A CEO Guide to Navigating Climate Risk3Executive summaryRising climate risks are already impacting the global economy and the business case for

18、 collective action is clear.Intensifying climate events will cause significant economic costs in the next two decades.However,climate inaction could cost far more than global action,as climate adaptation and mitigation investments could be“repaid”five to six times in avoided losses and damage in the

19、 long run.1Physical risks of climate change are becoming material for businesses,putting significant value at risk and increasing potential opportunity costs in the medium term.Under the current climate trajectory,companies are becoming increasingly exposed to both systemic risks arising from lower

20、global economic growth and individual physical risks threatening supply chains and operations.For unprepared businesses,individual physical risks alone could put 5%to 25%of their 2050 EBITDA at risk,depending on sector and geography,with infrastructure-heavy sectors being most exposed.The cascading

21、effects of such losses would ultimately disrupt communities,with impacts on jobs,lives,livelihoods and the cost of goods and services.Transition risks for businesses are also significant.After a decade of very significant(albeit insufficient)progress,ambitious climate action has recently seen more p

22、ublic resistance,triggering doubts about the pace of decarbonization and the future course of climate policies.But as climate change affects the life and wealth of people and businesses more seriously,relying on the status quo is a risky bet to make and businesses need to prepare for a broader range

23、 of developments.In a scenario of accelerating climate action,unprepared companies risk significantly higher cost pressure from carbon pricing or comparable regulation,write-downs on their fossil asset base and a much faster-than-expected demand decline for fossil fuels and technologies.Under a“well

24、 below 2C path”,the impact of carbon pricing alone could create additional costs equivalent to 50%of EBITDA in certain emission-intensive sectors.As capital markets respond to long-term threats to future performance,early signals of heightened transition risks could affect company valuations well be

25、fore those risks fully materialize.Corporate inaction also comes at a cost:there is a clear business case for adaptation and a better case for mitigation than most might think.Companies report that their current adaptation and resilience investments could yield between$2 and$19 for every dollar inve

26、sted.On mitigation,while full decarbonization across sectors comes at a cost,sustainability leaders can still find cost-efficient ways to reduce emissions in the short term.Addressing these risks also informs companies how to navigate the transition and adaptation opportunities and develop innovativ

27、e offerings fit for a warmer and greener world.Companies need to change the way they manage climate risks and opportunities,as outlined in the CEO Guidebook presented at the end of this report.Climate-related incidents and market shifts are hard to predict and discontinuous,but have potentially high

28、-impact consequences.While many companies are aware of these risks,most are insufficiently prepared:Climate risks and opportunities should be a critical component of company strategy,guiding risk management,financial,strategic and operational decisions at all levels.Understanding climate risks is ke

29、y for maintaining business resilience,unlocking opportunities and ensuring a competitive edge.Businesses need to ramp up scenario thinking to be prepared well ahead for both a 3C world and a future with accelerated decarbonization.Climate transition and resilience plans to manage these risks should

30、be informed by a quantified assessment of underlying climate risks across a range of scenarios.Capital allocation should match climate risk strategy,balancing short-term profits with long-term strategic resilience and optionality.Climate risk management should become part of business-as-usual for al

31、l employees,as these impacts are far reaching and likely to influence many aspects of business operations.All companies will face a cost of climate inaction:how their leadership prepares for a warmer or greener world will determine whether they thrive or fall behind.The Cost of Inaction:A CEO Guide

32、to Navigating Climate Risk4Climate inaction could severely harm the world economy1Climate change has caused over$3.6 trillion in damage since 2000.Without urgent action global GDP could drop by up to 22%cumulatively by 2100.The Cost of Inaction:A CEO Guide to Navigating Climate Risk5Atmospheric CO2

33、is increasingFIGURE 1Our planet is getting warmerFIGURE 2Atmospheric CO2 concentration across millennia parts per million(ppm)and since the industrial revolutionparts per million(ppm)8004000100500200300600700Millennia before today175018001850190019502020June 2024:427 ppmJune 2024:427 ppm1959:316 ppm

34、Temperature anomalyC18751890190519201935195019651980199520102024+1.2C in 2024Annual meanSources:National Oceanic&Atmospheric Administration(NOAA),NASAs Goddard Institute for Space Studies.Note:Global average land-sea temperature anomaly relative to the 1961-1990 average temperature.Source:Met Office

35、 Hadley Centre.The Cost of Inaction:A CEO Guide to Navigating Climate Risk6Frequency and intensity of extreme events rise with temperatureFIGURE 3 Some regions will suffer more than others a glimpse of a 3C worldFIGURE 4Increase in frequency and intensity of extreme events1 under different warming s

36、cenarios x for increase in frequency,C for increase in temperature,%for increase in precipitation intensity1.0 x2.8x1.3x4.1x1.5x5.6x1.7x9.4x2.7x+1.2C+7%+10%+14%0C(1850-1900 average)+1C+1.5C+2C+4CGlobal warming scenariosCurrent temperature increase+1.9C+2.6CHotter temperaturesIncrease in precipitatio

37、n+30%+5.1CAverage temperatureChange in total annual precipitationLikelihood of 1 year-plus droughtsChange in frequency of historical“1-in-100-year”stormTemperature(0C)Change in precipitation(mm)No data-30 01 78 1415 2526 3132 60No data+100Annual likelihood(%)No data0 1011 3334 5051 6768 9091 100Time

38、s more/less frequentNo data 41.Vs.1850-1900 average;variation in frequency and intensity for extreme heat event or 1-day precipitation event that occurred on average once every 10 years in a climate without human influence.Source:Intergovernmental Panel on Climate Change(IPCC).Source:Adapted from th

39、e Probable Futures climate tool.The Cost of Inaction:A CEO Guide to Navigating Climate Risk7Several earth systems tipping points risk accelerating warming irreversiblyFIGURE 5The next three decades of emissions will shape the temperature of the next 10 millenniaFIGURE 60.8-3CMeltdown of Greenland ic

40、e sheet1.1 3.8CStandstill of North Atlantic subpolar gyre1.5-3CAndes glacier retreat1-3CWest Antarctic ice sheet collapse2-6CAmazon rainforest diebackConfidence levelsHighMediumLow5CEast Antarctic ice sheet collapse1-1.5CWarm-water coral reefs die-off1.4-8CStandstill of Atlantic meridional overturni

41、ng circulation(AMOC)1.4-5CBoreal forest southern dieback1 2.3C Boreal permafrost abrupt thawAtmospheric CO2 concentrationparts per million(ppm)Years vs.todayTodayAnthropoceneHolocene2C5C4C3C2100(RCP 8.5)-20,000-15,000-10,000-5,00005,00010,000Note:Earth system tipping points are displayed as a functi

42、on of temperature increase,although other factors(e.g.deforestation,precipitation levels,water salinity)also play a significant role in triggering them.Five Earth systems(highlighted)are at immediate risk of tipping into irreversible decline,accelerating warming on a planetary scale.Source:Global Ti

43、pping Points Report,Lenton,T.et al.,Boston Consulting Group(BCG)analysis.Note:RCP 8.5 scenario represents a high-emissions“business-as-usual”scenario characterized by sustained increases in greenhouse gas emissions.Source:Clark,P.et al.The Cost of Inaction:A CEO Guide to Navigating Climate Risk81.1

44、Impacts of climate change are increasing andwill accelerate with further warmingThe effects of human-induced climate change are already being felt todaySince the beginning of industrialization,about 2,300 billion tonnes(gigatonnes or Gt)of anthropogenic CO2 have been released into the atmosphere,2 w

45、ith over 900 GtCO2(approximately 40%of that total)added within the last three decades.3 This pushed the CO2 concentration beyond 427 parts per million in the summer of 20244 a level not previously seen in at least 3 million years5(see Figure 1).As a result,average global temperatures have already in

46、creased approximately 1.2C versus pre-industrial levels6(see Figure 2).Meanwhile,according to the World Meteorological Organization,the frequency of natural disasters such as extreme heat,floods,droughts,storms and wildfires has increased five-fold over the past 50 years.7 While it is difficult to a

47、ttribute any one individual disaster to climate change,there is very high certainty that the increasing frequency has been strongly influenced by man-made emissions.8 For example,the European 2019 heatwave,which caused approximately 2,500 excess deaths across the continent,was made 10 to 100 times m

48、ore likely by human-induced climate change.9 Extreme rainfall in Brazil(Rio Grande do Sul)in April and May 2024 led to catastrophic flooding,displacing over 580,000 people.Human-induced climate change made this event twice as likely and increased its intensity by 6%to 9%.10As global temperatures con

49、tinue to rise,so will the rate and severity of extreme weather eventsAs long as humanity continues to add greenhouse gases to the atmosphere,global temperatures will continue to increase.This will not only increase the frequency but also the intensity of extreme weather events.Warmer temperatures sh

50、ift historical weather patterns,resulting in increasing evaporation,lower soil moisture,worsening drought conditions and a greater risk of devastating wildfires.Warmer oceans provide more energy for storms,intensifying both their frequency and strength.Warmer air can hold more moisture,increasing ra

51、infall amounts and flooding risks.The world will also experience more frequent extreme heat events,with higher peak temperatures(see Figure 3).These events already cost lives,increase damage to infrastructure and threaten global food systems(see Table 1).They also make our societies more unstable by

52、 disrupting livelihoods,displacing populations and straining resources.The likely resulting political instability would make global climate-related challenges even more difficult tosolve.Carbon dioxide concentrations in summer 2024 hit a level not previously seen in at least 3 million years.The Cost

53、 of Inaction:A CEO Guide to Navigating Climate Risk9Climate hazards will increasingly disrupt our way of livingTABLE 1Note:RCP 8.5 scenario represents a high-emissions“business-as-usual”scenario characterized by sustained increases in greenhouse gas emissions;FTE=full-time equivalent.Sources:1.Unive

54、rsity of Cambridge,2.European Environment Agency,3.NASA,4.De Lellis,P.et al.and New York University,5.Bloemendaal,N.et al.,6.Hotspot Fire Project,7.Fischer,E.et al.,8.Multiple sources estimate 55,000-72,000 death toll,9.Alfieri,L.et al.,10.World Meteorological Organization(WMO),11.Naumann,G.et al.,1

55、2.World Bank,13.Kulp,S.et al.,14.National Geographic,15.Budiyono,Y.et al.,16.Bloemendaal,N.et al.,17.Lenzen,M.et al.,18.United Nations Environment Programme(UNEP),19.BBC.Some regions will suffer more than othersAlthough contributing the least to global warming,low-and middle-income countries will ge

56、nerally be hit hardest(see Figure 4).These countries face the highest average risk of extreme weather;but compounding this risk,they have economies that are more dependent on vulnerable activities such as outdoor manual labour and agriculture,their infrastructure tends to be weaker and they have few

57、er resources to invest in adaptation.In Sub-Saharan Africa,for example,160 million people already live with water scarcity today;11 this is expected to worsen as warming intensifies.At the same time,vulnerable rainfed agriculture currently covers 95%of cultivated land and accounts for 10%to 70%of th

58、e GDP of most local economies.12However,developed nations will also be increasingly affected.In the Southwest of the United States(US),rising temperatures and more frequent droughts are expected to increase competition for water resources,affecting cities,agriculture and energy production,while the

59、Southeast is likely to be hit by more regular storms and floods,becoming a threat to life and infrastructure and depreciating values of real estate.Today,five Earth systems are at immediate risk of tipping into irreversible decline,accelerating warming on a planetary scale(see Figure 5):13 these inc

60、lude the melting of the Greenland and West Antarctic ice sheets,the thawing of boreal permafrost,the extinction of warm-water coral reefs and the standstill of the North Atlantic subpolar gyre(part of the Atlantic Meridional Overturning Circulation or AMOC),which plays a vital role in regulating the

61、 climate of Western Europe as well as global weather patterns.When global temperatures surpass 1.5C above pre-industrial levels,irreversible warming will become a reality as some of the Earths landscapes turn into net emitters of carbon(such as permafrost)or accelerators of heating(such as the loss

62、of sea ice).The World Economic Forum publication Business on the Edge:Building Industry Resilience to Climate Hazards provides a detailed briefing on Earth system tipping points14 and their implications for business risk across landscapes,supply chains and societies.In this new era of the Anthropoce

63、ne,the warming triggered over the coming decades will shape Earths climate for millennia(see Figure 6),making it a global imperative to understand andrespond to Earth systems disruption.Rainfed agriculture covers 95%of cultivated land and accounts for 10%-70%of the GDP of most local economies.A glim

64、pse of 2050Global scientific projectionsSocio-economic impact Extreme heat300m+people could be affected by heatwaves in India11-in-1,000-day hot extremes 5x as likely with 0.85C warming760k deaths in European heatwave(2022)8 Flood5x increase in annual flood losses expected in EU270%of population cou

65、ld face 5x surge in flood impacts at+4.0C92021 flooding losses were$18.4bn in China&$3.2bn in India10 Drought80%chance of decade-long droughts in the US starting 20503Current 1-in-100-year droughts could occur every 2-5 years11Food lost to drought can feed 81m people daily12(=population of Germany)S

66、ea-level rise1.3m Bangladeshis could forced to migrate due to sea-level rise4Global mean sea level expected torise 1m by 100 per RCP8.513Jakarta is sinking 28 cm yearly14&facing$186m p.a.in flood damage15 Storm3x increase in annual probability of typhoons in Tokyo5Hurricane frequency could double by

67、 2050168,500 FTE jobs&$1.5bn of value lost in Cyclone Debbie(2017)17 Wildfire35%increase in area burnt yearly by bushfires in Sydney6Wildfires likely to increase byathird18Canadian wildfires displaced 230k people&claimed 8 lives(2023)19 Today,five Earth systems are at immediate risk of tipping into

68、irreversible decline,accelerating warming on a planetary scale.The Cost of Inaction:A CEO Guide to Navigating Climate Risk101.2 Climate-related economic costs have more than doubled over the past 20 yearsClimate change is already causing significant economic costsAccording to EM-DATs international d

69、isaster database,climate-related disasters have caused more than$3.6 trillion in economic damage since 2000,more than half of which is attributed to storms.15 This figure very likely underestimates actual costs,as it primarily reflects direct damage such as infrastructure destruction,insured losses

70、and immediate economic impacts,while excluding indirect effects such as longer-term health consequences,loss of productivity and natural resource depletion.The economic strain of climate change is already massive,with a significant portion,especially the unaccounted indirect effects,currently borne

71、by society at large.Since the turn of the century,average damage costs have more than doubledThe costs of climate-related damage increased from around$450 billion between 2000 and 2004 to more than$1 trillion between 2020 and 2024(see Figure 7).Early estimates for Hurricane Helene,which wreaked havo

72、c in Southeastern US states in September 2024,indicate that this event alone might be responsible for over$100 billion worth of damage,16 making it one of the costliest hurricanes in US history.An increasing frequency and intensity of such events would mean that costs are likely to escalate further.

73、The impact of future disasters can already be feltInsurance premiums for climate resilience and protection from“natural catastrophes”are estimated to increase by around 50%until 2030,reaching a total of$200 billion to$250 billion.17 As companies pull back coverage in vulnerable areas,properties in c

74、ertain parts of the world are essentially becoming uninsurable.18Economic cost of climate-related disasters has more than doubled since 2000FIGURE 7Economic cost of climate-related disasters1($billion)five-year sum of reported cost of disasters from 2000-202423520122005-200948211566410662010-2014343

75、31774666522015-2019599192914392020-202422476211,023Floods:1.7xOver two decadesStorms:2.6xDroughts:4.1xWildfires:2.6xOthers:3 0.4x15262000-20042441504582310659101.EM-DATs database categorizes and shares economic data across:floods;storms;extreme temperature events;droughts;“mass movement(dry and wet)

76、”i.e.landslides&mudslides;wildfires;volcanic activity;and earthquakes.Disasters related to volcanic activity and earthquakes are excluded here as they are not directly linked to climate or climate change.2.Data is extrapolated for 2024s disasters,based on 2020-2023 averages,to show the trend for fiv

77、e years from 2020-2024.3.“Others”include extreme temperatures and mass movement(dry and wet);data for these fluctuates due to reporting.Notes:Graph uses 2023 adjusted dollar figures across the analysis for parity;pre-2000 figures have reporting biases,hence excluded from analysis.These costs are onl

78、y a subset of total damage from physical risks and hence underestimate likely total impacts and costs.Sources:EM-DATs international disaster database,hosted by the Centre for Research on the Epidemiology of Diseases(CRED),UCLouvain;BCG analysis.Climate-related disasters have caused more than$3.6 tri

79、llion in economic damage since 2000,more than half of which is attributed to storms this figure very likely underestimates actual costs.The Cost of Inaction:A CEO Guide to Navigating Climate Risk111.3 Further warming could put an increasing strain on the world economyClimate change is slowing down g

80、lobal GDPgrowthCompared with the physical impacts of warming,its systemic effects on GDP are more difficult to quantify.Climate-related events have many indirect consequences that are almost impossible to measure.At the same time,it is hard to project to what degree economic systems self-adapt.Even

81、in cases where the immediate consequences are clearer,such as property damage after increased flooding,the sustained strain on GDP is often lessobvious.Global warming has several impacts that slow down GDP growth by reducing economic output and/or funnelling resources away from growth-orientated act

82、ivities.For example:Reduced labour productivity:Extreme heat reduces productivity,especially in outdoor manual labour such as construction and agriculture.According to the International Labour Organization(ILO),by 2030,heat stress alone could reduce global work hours by 2%.19 Lower agricultural yiel

83、ds:Increasing droughts and extreme precipitation events reduce agricultural productivity.In recent years,affected regions have seen up to a 10%reduction in yields during extreme weather.20 Infrastructure and property damage:Climate-related disasters repeatedly destroy infrastructure and property,div

84、erting public and private funds from productive investments towards costly repairs.Ecosystem decline:The collapse of key ecosystem services,such as wild pollination,marine fisheries and timber,would further impact GDP,particularly in countries reliant on natural resource exploitation.Severe macroeco

85、nomic impact could already be felt in the next decadesNumerous studies that have attempted to quantify the impact of climate change warn it could already put a material strain on global GDP in the coming decades.By 2100,the current 3C trajectory could reduce global cumulative GDP by 16%to 22%that is

86、 10%to 15%more than on a trajectory of less than 2C.21 Some recent estimates,such as Kotz et al and the fifth vintage of NGFS macroeconomic climate scenarios,indicate that the impacts on GDP of current emissions could be even greater and feltsooner.Global climate action very likely has a positive ec

87、onomic business caseSeveral studies indicate that humanity would need to invest around 2%of cumulative global GDP in mitigation measures to move onto a“below 2C pathway”.On top of this,around 1%of cumulative global GDP needs to be invested to adapt to already unavoidable warming.22 Given these inves

88、tments could prevent 10%to 15%in losses to global GDP over this century,they would jointly pay off up to fivefold(see Figure 8).These investments will require government mandates and incentives,as voluntary business actions alone are unlikely to be sufficient.Any delay to emissions reduction in the

89、present will cost humanity dearly in the future both in hard economic terms and through long-term impacts that could fundamentally reshape our societies,such as the increasing risk of mass migration,increased mortality,biodiversity loss and conflicts over resources.There will also be a greater risk

90、of reaching critical environmental tipping points,where damage to lives,nature and the economy would become even more significant.While the long-term benefits of climate action far outweigh the immediate costs,human behaviour is prone to overvaluing short-term expense and underestimating future gain

91、.This mental discounting cognitive bias leads to hesitation,even when the positive net present value of climate action is clear and urgent change is economically justified.By investing 2-3%of cumulative global GDP in mitigation and adaptation measures,humanity could prevent 10-15%in GDP losses over

92、this century.In too many businesses,climate risks are wrongfully perceived as a pure compliance topic.The most advanced companies are looking at them from a financial perspective to inform strategy,risk management and disclosure assurance at the highest levels.Sarah Barker,Managing Director,Pollinat

93、ion Law,Co-Chair of the World Economic Forums Climate Governance Community of ExpertsThe Cost of Inaction:A CEO Guide to Navigating Climate Risk12Climate inaction would cost far more than climate action globallyFIGURE 8Climate change investments&loss avoided(%cumulative GDP by 2100)Investments requi

94、red to achieve below 2C”GDP loss avoided(“below 2C”scenario vs.BAU 3C pathway)Investing 3%of cumulative GDP into mitigation and adaptation saves 10%-15%in net GDP lossMitigation investments 2%Impact avoided with mitigation 11-13%Impact avoided with adaptation 4%Adaptationinvestments 3C(current traje

95、ctory)vs.2C(Paris-target)scenarioEuropeNorth AmericaSouth AmericaAsia-PacificAfrica&Middle EastSectoraverage10-15%10-15%5%5-10%5-10%5%5%5-10%10-15%10-15%5%5-10%5%5%25%25%5-10%10-15%5-10%5-10%5-10%Communication servicesUtilitiesConstruction&infrastructureMaterialsFood&beveragesOil&gasHealthcareIndust

96、rials10-15%25%25%5-10%10-15%5-10%5-10%5-10%10-15%20-25%15-20%5-10%10-15%5-10%5-10%5-10%5%5-10%5-10%5%5%5%5%5%5%5-10%5-10%5%5%5%5%5%5%5-10%5-10%5%5%5%5%5%5-10%10-15%5-10%5%5%5%5%5%Communication servicesUtilitiesConstruction&infrastructureMaterialsFood&beveragesOil&gasHealthcareIndustrials5-10%5-10%5-

97、10%5%5%5%5%5%5%5-10%5-10%5%5%5%5%3C scenario2C scenarioNotes:Estimates include economic impact from asset damage and business interruption from wildfire,heat,coastal flooding,fluvial flooding,cyclones,water stress and droughts vs.historical baseline normalized to today;3C scenario is based on SSP3.7

98、-0,which is a moderate-to high-emissions scenario projecting temperature increases of 1.7-2.6C by 2050 and 2.8-4.6C by 2100.Translation of impact from%of asset value to EBITDA margin is carried out using sector benchmarks on median fixed asset turnover ratios(FAT)and EBITDA margins assuming sector a

99、nd regional composition in 2050 is identical to current levels.Individual company impact estimates can vary vs.sector estimates shown here depending on differences in e.g.share of fixed assets and EBITDA margins vs.benchmarks.See Appendix for methodology and sources.Sources:Swiss RE,S&P Global Susta

100、inable,Oxford Economics,Capital IQ,BCG analysis.2.2 Physical risks will translate into material costs within the next two decadesClimate risks could already trigger material losses in the next two decadesFigure 10 shows how companies in different major sectors would be impacted by physical climate r

101、isks under different temperature scenarios.In a scenario of unchecked climate change(3C pathway),companies in these sectors could find an additional 5%to 25%of their EBITDA at risk by 2050.Under a Paris-aligned scenario,these costs would be materially lower.16The Cost of Inaction:A CEO Guide to Navi

102、gating Climate RiskExposure to climate risks varies significantly across sectorsCompanies with extensive physical assets,complex supply chains and/or operations in high-risk areas are generally more vulnerable.The exact exposure is of course highly individual and not always apparent.Companies with s

103、imilar business models can be impacted differently,depending on their specific circumstances.But few companies are unexposed given the numerous ways in which climate change can impact corporate operations.The following examples of more strongly impacted sectors show why:Communication services and ut

104、ilities.Cell towers,communication lines,data centres and other extensive communication infrastructure can be severely damaged by storms,floods,fires and other extreme weather events,leading to service interruptions and increasing repair costs.The same goes for power plants and transmission lines,whi

105、ch are costly to repair.Prolonged power outages can also expose utilities to fines and significantly reduce their revenue.For example,Australias 2020 bushfires caused widespread communication outages and inflicted millions of dollars of damage to the infrastructure of Telstra,the countrys leading te

106、lecom player,with 36 cell towers affected.29 Food and beverages.More frequent extreme weather events and growing water stress would reduce crop yields and increase costs for irrigation and protective measures,particularly in water-intensive sectors.In a CDP(Climate Disclosure Project)report,Nestl de

107、tailed the impact on its operations of exceptional droughts in Brazils arabica coffee regions between 2014 and 2016.Reduced coffee production led to price increases of over 50%for arabica and 40%for robusta beans,with an estimated cost to Nestl of CHF 0.8 billion to 1.0 billion(approximately$925 mil

108、lion to$1.15 billion).30Companies operating in emerging markets will be more impactedThe Asia-Pacific region,home to six of the 10 countries most affected by extreme weather events and disasters,31 along with many emerging economies in Africa,the Middle East and Latin America carry higher-than-avera

109、ge exposure risk to climate impacts,while at the same time struggling to finance the resilience projects needed to protect their societies and economies.Companies that are exposed to these regions either directly or through their supply chains would therefore face greater financial impacts.However,t

110、hese impacts are not limited to emerging economies and certain regions in developed markets will also be exposed to significant losses.On top of physical risks,companies will be impacted by slowing overall GDP growthIf unchecked climate change limits the world economys ability to grow,this would als

111、o be detrimental to the top-line growth of businesses,but is more difficult to adapt to this scenario.Companies at the forefront of climate risk management are building a comprehensive view of their exposure and vulnerability to various hazards across their full value chain.This can lead to surprisi

112、ng discoveries,both in terms of new risks and the scale of existing risks and where they are located(see Case Study 1).A case study from a European highway operator illustrates why future cost risks are so high,even in the short to medium term.The company historically incurred average annual costs o

113、f 5%of EBITDA to deal with physical damage to its infrastructure from natural hazards.In a scenario of unchecked climate change,the company expects these costs to roughly double by 2050,even though the frequency of weather events such as extreme precipitation might only increase by 10%to 15%over thi

114、s period.The reason is that such events will not only become more frequent,they will also become more severe and spread over larger geographical areas.As a result,assets that were previously unexposed now face greater potential risks and high-damage infrastructure events in the future(see Figure 11)

115、.CASE STUDY 1Why are these costs so high?Case study from a European highway operator17The Cost of Inaction:A CEO Guide to Navigating Climate Risk2.3 Companies recognize physical risks but likely underestimate their impactCompanies increasingly recognize physical risks,but likely underestimate the fi

116、nancial impact of these risksIn response to CDPs annual climate change questionnaire in 2023,32 72%of the largest thousand or so respondents across eight sectors indicated that they identified physical climate risks which could substantially impact their business(see Figure 12).Yet many companies st

117、ruggle to translate broad climate scenarios and general physical impacts into measurable business risks.Climate risk data is often fragmented and inconsistent,making it difficult to assess the full impact across a companys value chain andintegrate climate risks into traditional planningprocesses.The

118、 relatively few that do attempt to quantify climate-related business risk(and report their financial exposure)report lower figures on average than analysis conducted for this report would indicate(see Figure 13).One reason for this could be that many businesses currently identify only their most imm

119、ediate risks and treat them in isolation.However,as global inaction increases the threat and diversity of exposure,this approach is increasingly inadequate for most businesses.Seemingly small changes in risk can create disproportionately more damageFIGURE 11Example:EU highway operatorImpact of clima

120、te-related physical risks,%EBITDAHeavy precipitation damage to bridgesTotal impact across physical risks1.2%+10%+40%2%8-12%5%Today2050 in a 2.7C scenario+10%more frequent precipitation+10%larger average area of rainfallMore intense in shorter timemore damageat risk as more bridges affected&suffering

121、 heavier damage(+70%overall)at risk from precipitation,flooding and hail across bridges,tunnels&highwaysto cover repairs from all physical hazards(e.g.floods,hail,frost)on all assets(e.g.bridges,tunnels,highway segments)to cover precipitation damages to bridgesEBITDA EBITDA EBITDA EBITDA Illustratio

122、nNote:Total EBITDA lost compared to todays financial baselines.Source:BCG analysis.The Cost of Inaction:A CEO Guide to Navigating Climate Risk18Companies likely underestimate the financial impact of physical risksFIGURE 13Company self-perceived financial impact of physical risks%annual EBITDA at ris

123、kFood&beveragesConstruction&infrastructureIndustrialsUtilities1Oil&gasCommunication servicesHealthcareMaterialsn=22n=16n=123n=24n=13n=14n=17n=472-13%1-7%0-5%0-4%0-3%0-2%0-1%6%2%2%2%2%1%1%0%0-4%Company self-perceived impact as reported to CDP(median)Company self-perceived impact as reported to CDP(qu

124、artiles 1 to 3)Sectoral estimate based on comprehensive physical risk assessment1.Utilities include power grids.2.CDP questionnaire sample size:n=276.Note:Based on companies reported potential maximum financial impact from identified physical climate risks at medium-and long-term time horizons.Sourc

125、e:BCG analysis,based on data from the CDP Climate Change 2023 Questionnaire.More than 70%of companies see significant impact from physical risksFIGURE 12Companies identifying physical climate risks with potential to have a substantive impact on their business%of CDP respondentsCommunication services

126、TotalFood&beveragesIndustrialsConstruction&infrastructureMaterialsHealthcareOil&gasUtilities1 n=35n=1,011n=84n=412n=50n=207n=74n=61n=8872%86%85%82%72%70%66%64%59%1.Utilities include power grids.Source:BCG analysis,based on data from the CDP Climate Change 2023 Questionnaire.The Cost of Inaction:A CE

127、O Guide to Navigating Climate Risk192.4 Corporate adaptation investments have an increasingly positive business caseInvestments in adaptation and resilience measures can reduce companies financial exposure.These solutions can be divided into three categories:strategic,financial and operational.Strat

128、egic solutions involve adjustments to the business model to enhance long-term resilience.This includes increasing the role of service-based revenue streams and/or reducing reliance on physical assets such as owned real estate.Financial solutions involve managing climate risks through financial strat

129、egies.Companies can transfer risk via innovative financial tools such as catastrophe bonds or parametric insurance which provide rapid pay-outs based on predefined events or retain risk through designated budget allocations for climate contingencies.Operational solutions focus on protecting and enha

130、ncing the resilience of key assets and operations.This can include both physical infrastructure improvements and nature-based solutions to mitigate climate risks,including the following:Fortifying assets,such as installing flood protection barriers and/or reinforcing critical facilities to withstand

131、 extreme weather.Nature-based solutions,such as mangrove plantations,can economically buffer against natural hazards while enhancing the security and livelihoods of surrounding communities.Resource security,such as investing in water conservation technologies,for example drip irrigation or energy st

132、orage systems to ensure operational continuity.Additional strategies include onsite water reuse systems and nature-based solutions such as permeable surfaces and retention ponds to manage flooding and support continuous operations.Supply chain resilience,as highlighted in the World Economic Forums r

133、eport From Disruption to Opportunity:Strategies for Rewiring Global Value Chains.Leading companies are already pre-qualifying new suppliers as standby options and building globally connected,multi-local supply chains to enhance resilience and flexibility.33 Companies can reduce their exposure to phy

134、sical risks through a mix of strategic,financial and operational measures.The Cost of Inaction:A CEO Guide to Navigating Climate Risk20Many companies see a positive business case for adaptationFIGURE 14Company self-perceived benefit-to-cost ratio of adaptation and resilience measuresBenefit-to-cost

135、ratioFood&beveragesOil&gasMaterialsIndustrialsCommunication servicesConstruction&infrastructureUtilities1 Healthcaren=22n=13n=47n=123n=14n=16n=24n=17Company self-perceived benefit-to-cost ratio as reported to CDP(median)19x5x14x5x7x6x6x2x8-35x1-26x10-25x2-23x2-21x3-20 x2-18x0.5-4xCompany self-percei

136、ved benefit-to-cost ratio as reported to CDP(quartiles 1 to 3)21.Utilities include power grids.2.CDP questionnaire sample size:n=276.Notes:Based on companies reported potential maximum financial impact from identified physical climate risks at a medium-and long-term time horizon and the associated c

137、ost of responding to the risk.Considerable complexity underlies these numbers:first,the companies use a variety of methodologies in their calculations;second,the nature of the returns on adaptation investments is a challenge.The investments require capital expenditures today,whereas the returns are

138、often a mix of avoided losses(such as prevention of costly damages and business interruptions)and potential opportunities(such as enhanced operational efficiency,access to new markets,or improved reputation)that are realized in an uncertain timeframe and are not as bankable as traditional cashflows.

139、Source:BCG analysis,based on data from the CDP Climate Change 2023 Questionnaire.Companies that do make such investments report a very positive business caseFew companies comprehensively assess their risk exposure and make adequate adaptation investments.Those that do and disclose the returns to CDP

140、 report a very positive anticipated payback,ranging from$2 to$19 for every dollar invested(see Figure 14).Climate adaptation investments pay off across a range of different measures:an analysis by the US Agency for International Development(USAID),in collaboration with BCG and the Global Resilience

141、Partnership,highlights a benefit-to-cost ratio of 2x to 7x from flood protection measures and 2x to 6x for water efficiency collection technologies such as drip irrigation and other low-flow technologies,with even greater returns inemergingmarkets.34The message from these figures seems clear:compani

142、es should develop a more scientific understanding of the risks that they face and invest in adapting to them,both for their own benefit and to help mitigate rising global costs from inaction.The Cost of Inaction:A CEO Guide to Navigating Climate Risk21Corporate cost of own inaction:transition risks

143、are increasing3As global climate regulations tighten,companies that fail to decarbonize would face rising transition risks,with potential EBITDA impacts of up to 50%from carbon pricing alone in energy-intensive sectors by 2030.The Cost of Inaction:A CEO Guide to Navigating Climate Risk223.1 Companie

144、s that do not decarbonize mayface increasing transition risksGlobal climate commitments,regulations and incentive schemes have significantly accelerated in the last decade,particularly since the Paris Agreement was adopted in 2015.While the world is far away from achieving the 1.5C ambition,signific

145、ant progress has been made across the world,albeit at different speeds.The following actions are the most notable:Over 140 countries,including China,the European Union(EU),India and the US,covering 88%of global emissions,have made national net-zero commitments.35 At COP30 in Brazil,many countries ar

146、e expected to strengthen their commitments further.In the EU Green Deal,Europe has followed up its net-zero commitment with the most ambitious emission reduction legislation globally,including initiatives such as tightening the emissions cap of its Emissions Trading System(ETS),introducing an emissi

147、on trading scheme for non-ETS sectors(ETS II),banning new internal combustion engine(ICE)car sales by 2035 and enacting rules to drive the adoption ofsustainable fuels and hydrogen.The US introduced its Inflation Reduction Act in 2022,which drives billions of dollars of investments in green technolo

148、gies such as electric vehicles(EVs),renewables,hydrogen and carbon capture,utilization and storage(CCUS).China has reinforced its ETS in 2024,adding stricter penalties and a revamped emission reduction market,while at the same time pouring billions into the expansion of renewables,EVs and hydrogen.A

149、ccelerating climate action creates transition risks for companies.The Task Force on Climate-Related Financial Disclosures(TCFD)identified four main types of transition risks:36 Policy and legal,such as carbon pricing rules and the risk of litigation.Technological,such as lower-carbon ways to make st

150、eel or power big ships that disruptincumbents.Market,meaning shifts in supply and demand for commodities,products and services.Reputation,stemming from negative stakeholder perceptions of a companys climateactions.Similar to physical risks,transition risks can materialize through additional financia

151、l costs.They are equally difficult to predict because they depend on future government decisions,future technological innovation and other unknowns.37 Global climate commitments,regulations and incentive schemes have significantly accelerated in thelast decade.The Cost of Inaction:A CEO Guide to Nav

152、igating Climate Risk23Transition is underway at different speedsFIGURE 15Price of carbon around the world,1$/tCO2eOil demand evolution,%change from 2018 to 2023$80Price range12%4 to 12%-4 to 4%-12 to-4%50%20-30%20-30%10-20%5-10%5-10%30-50%30-50%20-30%30-50%5-10%5-10%50%20-30%10-20%5-10%5-10%5-10%50%

153、30-50%10-20%30-50%1-5%5-10%50%30-50%50%50%5-10%1-5%50%30-50%30-50%30-50%5-10%5-10%MaterialsMetal&miningChemicalsUtilitiesIndustrialsOil&gas50%20-30%10-20%10-20%1-5%1%1-5%1-5%1-5%1-5%1%1%1-5%1%1%1%1%1%20-30%1-5%1-5%1-5%1%1-5%1%1%1%1%1%1%20-30%5-10%1-5%1-5%1%3C and 2C warming scenarios.Data sources:Va

154、lue at risk per sector(in%of asset value)from S&P Global Sustainable1s Quantifying the financial costs of climate change physical risks for companies,2023.Sectoral benchmarks for asset turnover ratio and EBITDA margins from BCG internal databases and Capital IQ.Regional climate risk distribution of

155、impact from Swiss Res The economics of climate change:no action not an option,2021.Estimation methodology:Sectoral impact:Sector-specific financial impact in%of EBITDA is calculated by dividing the percentage of asset value damage by the asset turnover ratio and EBITDA margin for each sector.Distrib

156、ution by region and scenario:Regional impact variations are based on a weighting factor derived from Swiss Re data.Scenario weighting is applied using Swiss Re data to adjust impact under various warming scenarios.To account for current impact,impacts are discounted by an assumed+1.1C temperature ri

157、se,as of today.Annex 2:EBITDA at risk due to carbon pricing(Figure 16)This analysis estimates the financial impact of carbon pricing on companies across various sectors and geographies,expressed as a percentage of EBITDA under both a slow transition(current policies)and afast transition(net zero by

158、2050)scenario.Data sources:Carbon intensities by sector and region are sourced from BCG benchmarks.Carbon price:For slow transition:2030 carbon price levels are sourced from the IEA Stated Policies Scenario where available and the current value(from World Bank)when no target 2030 price is available.

159、For rapid transition:carbon prices are based on IEA projections under Net Zero Emissions by 2050 scenario.Share of emissions taxed,by region:For slow transition:regional estimates are derived from World Banks State and Trends of Carbon Pricing,2024.For the European Union,a bespoke analysis assesses

160、the coverage of EU ETS and CBAM using European Environment Agency data and BCG internal databases(for iron and steel,cement,aluminium,fertilizers,electricity and hydrogen).For rapid transition:regional estimates are based on BCG assumptions,building on an IEA Net Zero by 2050 scenario.Estimation met

161、hodology:Sector-and region-specific carbon intensity is multiplied by the estimated share of emissions taxed and the regional average price on carbon to determine the initial impact on each sector.The financial impact is converted into EBITDA at isk,using sectoral EBITDA margins from BCG benchmarks

162、and Capital IQ.The Cost of Inaction:A CEO Guide to Navigating Climate Risk51Annex 3:Stock value at risk from asset write-downs(Table 2)This analysis estimates the potential asset write-downs on key asset categories(upstream oil fields,coal plants,blast furnaces,heavy fuel vessels and steam crackers)

163、expressed as a share of total 2030 stock value under slow,medium and rapid transitionscenarios.Data sources:Asset unitary CapEx and lifespan are derived from benchmarks of public and industry sources.Lists of grey assets(including commissioning year and capacity,for current and announced assets)are

164、sourced from industry databases(e.g.WFR for shipping,UCube for oil).Estimation methodology:For upstream oil fields,coal plants and blastfurnaces:2030 demand for grey commodities is derived from IEA scenarios(Stated Policies,Announced Pledges,Net Zero Emissions by2050).Global 2030 capacity is estimat

165、ed per grey asset class,accounting for current capacity,pipeline additions and projected retirements highlighting a potential overcapacity vs.future demand under each scenario.Total asset write-down value is calculated per asset class based on the residual book value of assets to decommission to mee

166、t demand under each scenario,assuming older assets are retired first and CapEx is depreciated linearly.This value is then divided by the residual book value of total 2030 stock.For heavy fuel vessels and steam crackers:A theoretical“required decommissioning year”is estimated for grey assets,based on

167、 the date by which capacity for these assets is projected to fall below 10%of current capacity,under different IEA scenarios.For each asset,lost useful value is estimated by calculating the difference between“required decommissioning year”and regular decommissioning year based on usual lifespan,assu

168、ming linear CapEx depreciation.Total sector write-down is calculated by summing all asset-level lost useful values and dividing by total stock residual book value as of 2030.The Cost of Inaction:A CEO Guide to Navigating Climate Risk52ContributorsAcknowledgementsThe World Economic Forum and BCG woul

169、d like to extend their gratitude to the following individuals for their valuable contributions to this report.The paper does not necessarily reflect the views of these individuals and/or their companies.Expert advice is purely consultative in nature and does not imply any association with the takeaw

170、ays or conclusions presented within this paper.Ester BaigetPresident and Chief Executive Officer,NovonesisSarah BarkerManaging Director,Pollination LawOlivier BlumChief Executive Officer,Schneider ElectricJesper BrodinChief Executive Officer,Ingka Group(IKEA)Greg Brouwer Senior Vice President,Operat

171、ions Excellence,TeckAmita ChaudhuryGroup Head of Sustainability,AIA GroupVincent ClercChief Executive Officer,A.P.Moller-MaerskDan FutterChief Commercial Officer,Dow IncPierre-Alain GrafChief Executive Officer,GETECGuy GraingerGlobal Head of Sustainability&ESG Services,JLLWorld Economic Forum Pedro

172、GomezHead,Climate;Member of the Executive CommitteePim ValdreHead,Climate Ambition InitiativesBoston Consulting Group Olivia BendixenConsultantJens BurchardtManaging Director&PartnerGiovanni CovazziPartnerLorenzo FantiniManaging Director&PartnerPatrick HerholdManaging Director&Senior PartnerRich Les

173、serGlobal ChairMarion MerendaConsultantCornelius PieperManaging Director&Senior PartnerNicolas SalomonProject Leader,World Economic Forum FellowRishi SinhaConsultantThe Cost of Inaction:A CEO Guide to Navigating Climate Risk53Bronwyn Grieve Director of Global Sustainability and External Affairs,Fort

174、escueSimon Henzell-ThomasGlobal Director of Climate&Nature,Ingka Group(IKEA)Shiro KambeSenior Executive VP,Corporate Executive Officer,Sony Group CorporationStefan KlebertChief Executive Officer,GEA GroupMark KonynChief Investment Officer,AIA GroupAdam PradelaChief Financial Officer,Corporate Sustai

175、nability,DHL GroupIngrid Reumert Senior Vice President,Global Stakeholder Relations,rstedFeike Sijbesma,Chairman,Royal PhilipsSumant SinhaChairman and Chief Executive Officer,ReNewJavier Rodrguez SolerGlobal Head of Sustainability and Corporate&Investment Banking,BBVAPascal SoriotChief Executive Off

176、icer,AstraZenecaBernhard StormyrVice President,Sustainability Governance,Yara InternationalConcetta TestaHead of Sustainability,Autostrade per lItaliaBill WintersGroup Chief Executive,Standard Chartered BankThomas WozniewskiGlobal Manufacturing and Supply Officer,Takeda Pharmaceutical CompanyBoston

177、Consulting Group Joud AlmaimanConsultant,Boston Consulting GroupAvital AmranyConsultant,Boston Consulting GroupSylvain SantamartaManaging Director&Senior Partner,Boston Consulting GroupAnnika ZawadzkiManaging Director&Partner,Boston Consulting GroupProductionLaurence DenmarkCreative Director,Studio

178、MikoCharlotte IvanyDesigner,Studio MikoCat SlaymakerDesigner,Studio MikoJonathan Walter EditorThe Cost of Inaction:A CEO Guide to Navigating Climate Risk541.Benayad,A.et al.(2024).Why Investing in Climate Action Makes Good Economic Sense,BCG.https:/ et als analysis is based on a review of recent lit

179、erature and expert engagement.The authors relied on the macroeconomic modelling of Network for Greening the Financial System(NGFS),Phase IV,as of November 2023.Some recent estimates suggest climate change will have even higher impacts on global GDP,such as the fifth vintage of NGFS released in Novem

180、ber 2024,which builds on the damage function proposed by:Kotz,M.et al.(2024).The economic commitment of climate change.Nature,no.628,2024,pp.551-557.https:/ et als research,published in April 2024,estimates an impact on global GDP expressed as income(per capita)reduction of 11-29%(with a midpoint of

181、 19%)by 2050,based on current emissions levels(RCP2.6).2.Anderson,K.(2024).What was the Industrial Revolutions Environmental Impact?Greenly.https:/greenly.earth/en-us/blog/ecology-news/what-was-the-industrial-revolutions-environmental-impact.3.Climate Watch.(2024).Historical GHG Emissions.https:/www

182、.climatewatchdata.org/ghg-emissions?end_year=2021&gases=co2§ors=total-including-lucf&source=Climate%20Watch&start_year=1990.4.Sources:Statista.(2024).Average monthly carbon dioxide(CO2)levels in the atmosphere worldwide from 1990 to 2024.Arctic News.(2024).Temperature rise threatens to accelerat

183、e even more.https:/arctic- last time the CO2 concentration was this high,global surface temperature was 2.5-4C warmer than during the pre-industrial era and sea level was 5-25 metres higher than it was in 1900.6.Referring to the 10-year average global temperature,above the 1850-1900 average.7.World

184、Meteorological Organization(WMO).(2024).Early warning system.https:/wmo.int/topics/early-warning-system#:text=On%20average%2C%20from%201970%2D2019,disaster%20has%20occurred%20every%20day.&text=The%20number%20of%20disasters%20has,period%20(19070%2D2019).&text=50%25%20of%20all%20disasters%20recorded,%

185、2C%20climate%2C%20and%20water%20hazards.8.Intergovernmental Panel on Climate Change(IPCC).(2021).Climate Change 2021:The Physical Science Basis.https:/www.ipcc.ch/report/ar6/wg1/downloads/report/IPCC_AR6_WGI_FullReport_small.pdf.9.University of Oxford,News&Events.(2019).European heatwave made up to

186、100 times more likely due to climate change.https:/www.ox.ac.uk/news/2019-08-02-european-heatwave-made-100-times-more-likely-due-climate-change.10.World Weather Attribution.(2024).Climate change,El Nio and infrastructure failures behind massive floods in southern Brazil.https:/www.worldweatherattrib

187、ution.org/climate-change-made-the-floods-in-southern-brazil-twice-as-likely/.11.UN-Water.(2021).The United Nations World Water Development Report 2021:Valuing Water.https:/unhabitat.org/sites/default/files/2021/07/375751eng.pdf.12.Biazin,B.et al.(2012).Rainwater harvesting and management in rainfed

188、agricultural systems in sub-Saharan Africa A review.ScienceDirect,Physics and Chemistry of the Earth.https:/ al.(2023).Global Tipping Points,Report 2023.Global Tipping Points.https:/report-2023.global-tipping-points.org/.14.Intergovernmental Panel on Climate Change(IPCC).(2021).Climate Change 2021:T

189、he Physical Science Basis.https:/www.ipcc.ch/report/ar6/wg1/downloads/report/IPCC_AR6_WGI_FullReport_small.pdf.A tipping point is defined as a critical threshold beyond which a system reorganizes,often abruptly and/or irreversibly.15.EM-DAT.(2024).The International Disaster Database.(2024).https:/ww

190、w.emdat.be/.Note:EM-DATs database classifies disasters into two groups of hazards:naturalandtechnological.The natural group is further classified into hydrological,meteorological,geophysical,biological and climatological hazards.This report uses the term“climate-related disasters”to refer to those e

191、vents referenced by EM-DATs datapoint of disasters causing$3.6 trillion in economic damage since 2000,as well as to those events captured in Figure 8.This terminology makes clear that these disasters are not“natural”but related to extreme weather events,which may or may not be individually attributa

192、ble to climate change,but whose frequency and intensity is amplified by climate change.16.AccuWeather.(2024).Helene aftermath:More than 130 dead,historic flooding,millions without power amid catastrophic destruction.https:/ 30 September 2024).17.Howden-BCG.(2024).The bigger picture:The$10 trillion r

193、ole of insurance in mobilising the climate transition.https:/ four of the five costliest wildfires in the past decade struck California,State Farm(one of the largest local insurance firms)stopped selling homeowners insurance state-wide,not just in wildfire zones.The vast majority of flood damage fro

194、m Hurricane Helene will likely be uninsured.Examples such as these are going to become more prevalent.EndnotesThe Cost of Inaction:A CEO Guide to Navigating Climate Risk5519.International Labour Organization(ILO).(2018).The employment impact of climate change adaptation:Input Document for the G20 Cl

195、imate Sustainability Working Group.https:/www.ilo.org/sites/default/files/wcmsp5/groups/public/ed_emp/documents/publication/wcms_645572.pdf.20.McSweeney,R.(2016).Droughts and heatwaves cause 10%drop in annual crop harvests.Carbon Brief.https:/www.carbonbrief.org/droughts-and-heatwaves-cause-10-drop-

196、in-annual-crop-harvests/.While production currently still usually recovers,this would become harder as events grow more frequent and severe.These disruptions also lead to increased price volatility for crops globally,reduce the stable supply of quality inputs and negatively impact livelihoods,causin

197、g further instability in vulnerable regions.21.Benayad,A.et al.(2024).Why Investing in Climate Action Makes Good Economic Sense,BCG.https:/ al.(2024).Why Investing in Climate Action Makes Good Economic Sense,BCG.https:/ al.(2022).China drought highlights economic damage wrought by global warming.Fin

198、ancial Times.https:/ Square.(2021).Flooding Causes$1.5B in Damages to German Railway.https:/ Press in San Francisco.(2019).PG&E:California utility firm files for bankruptcy after deadly 2018 wildfires.The Guardian.https:/ decade on,learning from Thailands devastating 2011 floods.Swiss Re.https:/ Her

199、ald.(2021).Toyota cuts annual profit forecast after Thai floods disrupt output.https:/ Economic Forum.(2025).Business on the Edge:Building Industry Resilience to Climate Hazards.29.Samios,Z.(2020).Tens of millions:Telstra,Optus start counting bushfire cost.Sydney Morning Herald.https:/.au/business/c

200、ompanies/tens-of-millions-telstra-optus-start-counting-bushfire-cost-20200108-p53psv.html.30.Nestl.(2019).Nestl-Climate Change 2019 answers to CDP climate questionnaire 2019.https:/ Nations Economic and Social Commission for Asia and the Pacific(ESCAP).(2023).Asia and the Pacific unprepared to face

201、climate-induced catastrophes,warns new UN study.https:/www.unescap.org/news/asia-and-pacific-unprepared-face-climate-induced-catastrophes-warns-new-un-study.32.CDP.(2023).CDP Climate Change 2023 Questionnaire.https:/ Economic Forum.(2024).From Disruption to Opportunity:Strategies for Rewiring Global

202、 Value Chains.https:/www3.weforum.org/docs/WEF_From_Disruption_to_Opportunity_2024.pdf.34.Chau,V.et al.(2023).From Risk to Reward:The Business Imperative to Finance Climate Adaptation and Resilience.BCG,Global Resilience Partnership and USAID.https:/www.globalresiliencepartnership.org/wp-content/upl

203、oads/2023/12/from-risk-to-reward-report.pdf.35.United Nations.(2024).Climate Action.https:/www.un.org/en/climatechange/net-zero-coalition.36.Task Force on Climate-Related Financial Disclosures(TCFD),TCFD Hub.(2017).B.Climate-Related Risks,Opportunities,and Financial Impacts extract from the Final Re

204、commendations Report.https:/www.tcfdhub.org/Downloads/pdfs/E06%20-%20Climate%20related%20risks%20and%20opportunities.pdf37.Note that while physical risk exposure can be predicted relatively well,any individual risk event is nonetheless very unpredictable.In this chapter,we consider three transition

205、scenarios:Slow:Little change to current policy and technology landscape;continuation of business as usual,with significant temperature increase.Medium-paced:Uncoordinated change to policy and technology landscape across regions leading to slower(and more costly)transition.Rapid:Faster and more succe

206、ssful changes to policy and technology landscape,with limited temperature increase beyond 1.5C.38.Sources:Taylor,L.(2014).Australia kills off carbon tax.The Guardian.https:/ Market Institute.(2023).Safeguard Mechanism Reform.https:/carbonmarketinstitute.org/safeguard-mechanism-reform/.39.United Nati

207、ons Environment Programme Finance Initiative(UNEPFI)and MinterEllison.(2021).Liability risk and adaptation finance.https:/www.unepfi.org/wordpress/wp-content/uploads/2021/04/UNEPFI-Climate-Change-Litigation-Report-Lowres.pdf.40.Black,S.et al.(2023).IMF Fossil Fuel Subsidies Data:2023 Update.Internat

208、ional Monetary Fund.https:/www.imf.org/en/Publications/WP/Issues/2023/08/22/IMF-Fossil-Fuel-Subsidies-Data-2023-Update-537281.41.World Bank Group.(2024).State and Trends of Carbon Pricing Dashboard.https:/carbonpricingdashboard.worldbank.org/compliance/coverage.42.With the European Unions carbon bor

209、der adjustment mechanism(CBAM)coming into effect,free allowances for EU companies will largely be withdrawn.The Cost of Inaction:A CEO Guide to Navigating Climate Risk5643.Figures,T.et al.(2021).The EUs Carbon Border Tax Will Redefine Global Value Chains.BCG.https:/ Energy Agency(IEA).(2024).A steep

210、 decline in coal emissions is essential to reach our climate goals.https:/www.iea.org/reports/coal-in-net-zero-transitions/executive-summary.45.Examples of premature asset write-offs already exist today.Uniper,a German utility,brought its last new coal power plant a 45-year asset online in 2020,just

211、 after Germany announced its 2038 exit from coal.Under the most ambitious current coal exit roadmap,it may have to shut down after only ten years.The Nord Stream 2 gas pipeline a 40-year asset would have gone online just as European gas consumption passed its peak and less than 30 years before Europ

212、e aims to consume no more natural gas whatsoever.46.Grey assets refer to mainly fossil-fuel based assets.47.Between 2008 and 2018,several conventional German utilities lost 75%to 80%of their market capitalization.48.The fact that a green investment is economic relative to the fossil alternative does

213、 not automatically translate into an investment incentive;but it does indicate that companies in most sectors can still find cost-efficient mitigation investment opportunities even those that are far advanced in their transition and increasingly so as carbon prices increase.49.BCG and CO2 AI Carbon

214、Emissions Survey 2024.(2024).Boosting Your Bottom Line Through Decarbonization:Carbon Emissions Survey Report 2024.https:/web- just transition could help the 1.7 million US fossil fuel workers and millions globally who will need new jobs due to decarbonization(as per Alkin et al.,Brookings).The ILO

215、estimates 24 million new energy sector jobs could be created by 2030,offering opportunities for sustainable growth51.BCG Center for Sensing&Mining the Future;BCG analysis.52.World Economic Forum.(2022).Winning the Race to Net Zero:The CEO Guide to Climate Advantage.https:/www3.weforum.org/docs/WEF_W

216、inning_the_Race_to_Net_Zero_2022.pdf.53.2023 BCG/The Network/The Stepstone Group proprietary web survey and analysis.54.Kronthal-Sacco,R.and Whelan,T.(2024).Sustainable Market Share Index.New York University(NYU)Stern Center for Sustainable Business.https:/www.stern.nyu.edu/sites/default/files/2024-

217、05/2024%20CSB%20Report%20for%20website.pdf.55.BCG analysis.56.BCG analysis.57.Jennifer Meszaros,J.(2024).Airbus Forges Ahead With Sustainability Goals.AIN.https:/ and partners invest in Sustainable Aviation Fuel financing fund.https:/ Economic Forum(2023).Accelerating Business Action on Climate Chan

218、ge.https:/www3.weforum.org/docs/WEF_Climate_Change_Adaptation_2023.pdf.60.World Economic Forum.(2010-2024).Global Risks Report.https:/www.weforum.org/publications/series/global-risks-report/.61.Network for Greening the Financial System(NGFS).(2024).Scenarios Portal:The future is uncertain.https:/ Ec

219、onomic Forum.(2023).How scaling up collaboration and engagement can help tackle scope 3 upstream emissions.https:/www.weforum.org/agenda/2023/11/scaling-up-collaboration-engagement-scope-3-emissions/.63.World Economic Forum.(2024).Net-Zero Value Chain Support Hub.https:/initiatives.weforum.org/net-z

220、ero-supply-chain-support-hub/home.64.Repsol.(2023).Investor Update March 2023:Stepping up the Transition,Driving growth and value.https:/ Economic Forum.(2024).Innovation and Adaptation in the Climate Crisis:Technology for the New Normal.https:/www3.weforum.org/docs/WEF_Innovation_and_Adaptation_in_

221、the_Climate_Crisis_2024.pdf.66.World Economic Forum.(2024).Bold Measures to Close the Climate Action Gap:A Call for Systemic Change by Governments and Corporations.https:/www3.weforum.org/docs/WEF_Bold_Measures_to_Close_the_Climate_Action_Gap_2024.pdf.67.Based on CMIP6 modelling results(Coupled Mode

222、l Intercomparison Project),Carbon Brief estimates that the world will likely exceed 1.5C between 2026 and 2042 in scenarios where emissions are not rapidly reduced,with a central estimate of between 2030 and 2032.The 2C threshold will likely be exceeded between 2034 and 2052 in the highest emissions

223、 scenario,with a median year of 2043.Source:Hausfather,Z.(2020).Analysis:When might the world exceed 1.5C and 2C of global warming?Carbon Brief.https:/www.carbonbrief.org/analysis-when-might-the-world-exceed-1-5c-and-2c-of-global-warming/.The Cost of Inaction:A CEO Guide to Navigating Climate Risk57

224、World Economic Forum9193 route de la CapiteCH-1223 Cologny/GenevaSwitzerland Tel.:+41(0)22 869 1212Fax:+41(0)22 786 2744contactweforum.orgwww.weforum.orgThe World Economic Forum,committed to improving the state of the world,is the International Organization for Public-Private Cooperation.The Forum engages the foremost political,business and other leaders of society to shape global,regional and industry agendas.