From signal to strategy: A practical approach to physical climate risks
Billion-dollar physical climate events in the U.S. have tripled over the past four decades1, while communities and companies in Switzerland and across Europe are already feeling the effects of recent flooding and heatwaves2,3. Insurers are hitting coverage limits in high-risk areas4. This isn't a future projection, it's today's reality. Companies are increasingly driven to protect assets and maintain business continuity, respond to investor demands for resilience, and meet growing regulatory expectations around climate risk disclosure, yet many still lack the data and resources needed to assess physical risks with confidence.
In this article we focus on physical climate risks and present a straightforward, data-driven method which companies can use to evaluate their impact. Physical climate risks include:
- Acute events like hurricanes, wildfires, floods
- Chronic trends like rising sea levels and long-term temperature increases.
These hazards threaten infrastructure, disrupt ecosystems, harm public health, and undermine economic stability. The EU’s Corporate Sustainability Reporting Directive (CSRD) and EU Taxonomy provide a framework with 28 distinct climate-related hazards that can help companies identify relevant risks. This aligns with the Taskforce on Climate-related Financial Disclosures’ (TCFD) categorisation of climate-related physical risks, encouraging organisations to assess both acute and chronic hazards.
Understanding which hazards your business is most exposed to is crucial for effective climate risk management. Conversely, hazards that won't significantly affect your business can be excluded from further analysis. But how can companies accurately identify and prioritise these hazards?
In the full article we describe a three-step process to help determine which climate hazards pose the greatest risk to your company, enabling you to prioritise your responses, reduce uncertainty, and report with confidence.
Climate risk analytics and digital tools to aid climate reporting
(graphic courtesy of Correntics5)
