Climate change-driven devaluations could drop corporate earnings up to 7.3% by 2035, a report found.
Extreme weather events like wildfires, hurricanes, floods and heatwaves are reshaping economies, disrupting supply chains, raising operational costs and threatening long-term business stability. Big Four Firm KPMG’s
Currently only 48% of companies quantitatively assess climate risks, despite its strategic and financial advantages and amid intensifying investor scrutiny. But business strategies will inevitably have to evolve in order to keep up with the ramifications of climate change.
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“In the near term, we are certainly seeing organizations increase their focus on wrapping their heads around immediate physical risks — to their assets, to their supply chains, to business resiliency,” Marcus Leach, KPMG’s managing director of deal advisory and strategy, said in the report. “A lot of this is still being handled manually, using more static models from historical data. It’s like looking at the one-in-100-year storm event as a benchmark, but that’s no longer enough.”
“In the longer term, you will see mandates around more dynamic modeling, driven by AI and better computing power, to predict things like convective storms, flooding, and wildfires,” he continued. “The risk focus will shift from static assumptions to real-time, constantly updated models. Companies that do not integrate this planning into their risk strategies will be caught off guard as climate events continue to escalate in frequency and severity.”
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One of the biggest challenges businesses face in meeting their sustainability goals is lack of funding directed toward areas like upgrading infrastructure, diversifying supply chains and securing stable energy sources.
“The reality is that many organizations have identified the risks, but they haven’t necessarily done the work to adapt,” KPMG’s U.S. sustainability leader Maura Hodge said in the report. “They know there’s a 27% chance of their operations being interrupted by a flood, but they haven’t built redundancy into their supply chains or made infrastructure changes to mitigate those risks.”
Another major challenge is the ever-changing and inconsistent adoption of regulation across jurisdictions.
“What we’re trying to help companies understand is that reporting is not just about compliance — it’s about strategy and value creation,” Hodge said. “If you’re spending all your time and resources getting compliant, but not using that data to inform business decisions, then you’re missing the point.”
“Historically, only companies that wanted to be ‘leaders’ in sustainability did climate reporting, and they could pick and choose what they reported,” Hodge added. “Now, with SEC regulations and Europe’s CSRD coming into play, transparency and comparability are being forced onto the market.”
The KPMG report also discussed topics like artificial superintelligence, quantum computing, space economy, computing infrastructure and advanced manufacturing.
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