The evidence is difficult to ignore. 2023, 2024, and 2025 were the three hottest years on record, and the UK’s Met Office expects 2026 to rank among the warmest years ever observed, with global temperatures projected to remain around 1.46°C above pre-industrial levels[1]. The cause- increased pressure on our natural systems which result in aggravated changes in climate regulation. We often view climate risk as a future challenge, but for many organisations it is already a present-day operational reality.
This extreme weather caused by inflated pressure from human-induced activities leads to a knockdown effect: communities and businesses are experiencing more frequent and severe heatwaves, flooding, droughts, wildfires, and storms, creating growing disruption to operations, infrastructure, and supply chains. The stable climate that is used as a reference point for infrastructure, supply chains, and business models, which underpin modern economies, are changing drastically. Thus, how can we continue to rely on such climate conditions of the past when they no longer represent the present?
The changing climate is creating a growing range of climate hazards that organisations must now consider as part of their risk landscape. Extreme rainfall, flooding, heatwaves, droughts, wildfires, and severe storms are no longer rare events that can be treated as exceptions. Instead, they represent increasingly material threats to infrastructure, operations, supply chains, employees, and customers. As historical weather patterns become less reliable predictors of future conditions, understanding exposure to climate hazards is quickly becoming a critical component of effective risk management.
As climate hazards become a more prominent feature of the business landscape, organisations are increasingly experiencing their operational and financial consequences. Climate change is no longer solely an environmental issue; it is a strategic challenge that requires proactive management. In response, adaptation, resilience, and long-term risk management are becoming central to protecting assets, maintaining operational continuity, and creating value in an increasingly uncertain future.
An unlikely warning signal of the present-day reality of climate change comes from the insurance industry. A variety of examples are available to directly showcase the uncertainty of climate change translating into increased insurance premiums and restrictions. Recent example is in Florida, where home insurance rates have increased at double the rate of the rest of the U.S. due to the increased risk of hurricanes[2]. Another is the announcement from major insurance companies limiting new homeowner policies in wildfire-prone areas of California, with “rapidly growing catastrophe exposure” cited among other reasons for limiting their coverage area[3].
Insurance markets often act as the economy’s early warning system. When insurers struggle to price climate risk, businesses should take notice and prepare for this uncertainty in their financial planning.
Much of the infrastructure in use today was designed using historical climate data. Asset lifetimes, design tolerances, maintenance schedules, and operational assumptions were developed based on environmental conditions that were considered relatively stable and predictable. As these conditions change, many assets are being exposed to stresses beyond those anticipated during their design. The consequences are increasingly visible, from drainage systems operating beyond capacity to transport networks, power systems, and other critical infrastructure experiencing greater disruption and deterioration.
In response, organisations, governments, and infrastructure operators are increasingly adopting resilience-focused approaches that account for a wider range of future climate conditions rather than relying solely on historical records for system designs. This may include incorporating climate projections into planning and investment decisions, enhancing asset design standards, implementing nature-based solutions, and strengthening maintenance and monitoring programmes. By considering future climate uncertainty during design and operation, infrastructure systems can become more adaptable, reducing the likelihood of costly failures, service disruptions, and premature asset degradation. As climate risks continue to evolve, resilience is becoming not just an environmental consideration, but a fundamental component of long-term infrastructure performance and value.
Climate risks are rarely confined to a single asset, location, or organisation. Today’s global economy is built on highly interconnected infrastructure, supply chains, and services, and as a result the impacts of extreme weather can spread far beyond the area directly affected. Organisations may face significant disruption or financial stress even when their own facilities avoid physical damage.
Many assume that because they are not located in a floodplain, wildfire zone, or coastal area, they have limited exposure to climate risk. However, climate impacts increasingly arrive indirectly through supply chains and critical dependencies. Drought can reduce agricultural yields and disrupt raw material availability and cost[4]. Low river levels can restrict freight transport[5], while heatwaves can reduce labour productivity and strain logistics networks[6]. In a connected economy, disruption in one region can quickly create operational and financial consequences elsewhere.
These interconnected impacts are often referred to as cascading risks. Unlike traditional risk events, where a single hazard causes a single consequence, climate-related events can trigger a chain reaction of secondary and tertiary impacts[7]. Understanding these cascading risks is becoming increasingly important for effective climate risk management. Building resilience therefore requires organisations to look beyond their own assets and consider the wider systems in which they operate. Those that identify vulnerabilities across their supply chains, infrastructure networks, and operational dependencies will be better positioned to adapt to and withstand future climate-related disruptions.
Regulatory expectations are also evolving. Frameworks such as the EU Corporate Sustainability Reporting Directive (CSRD), ESRS E1, and IFRS S2 (TCFD) increasingly require organisations to identify, assess, and disclose climate-related risks, including physical climate hazards and their potential impacts on business operations, assets, supply chains, and long-term resilience.
At this point, it may be tempting to conclude that reducing GHG emissions is the solution. While emissions reduction remains essential, it addresses only part of the challenge. Greenhouse gases already accumulated in the atmosphere will continue to influence the climate for decades to come, meaning many of the physical changes we are experiencing today are already underway.
Even under optimistic emissions scenarios, many climate risks are already locked into the coming decades. The effects of decades of environmental degradation will continue to influence natural and human systems long after emissions begin to decline. At the same time, the degradation of natural systems can amplify these risks by reducing the ability of landscapes to absorb floodwaters, regulate temperatures, store carbon, and support biodiversity. Protecting and restoring nature represents an opportunity to strengthen resilience. Nature-based solutions such as wetland restoration, sustainable water management, and habitat enhancement can help reduce climate risks and deliver wider benefits.
This changes the nature of the conversation. Climate resilience is no longer solely about protecting assets from individual hazards; it is about strengthening the systems that support long-term business continuity and societal wellbeing. Organisations that understand their exposure, invest in adaptive measures, and work with natural systems rather than against them will be better positioned to manage uncertainty and recover from disruption. The question is no longer whether change is coming, but whether we are building the resilience needed to navigate it.
The organisations that thrive in the coming decades will not necessarily be those that predict every risk correctly. They will be the ones that recognise uncertainty, invest in resilience, and adapt before disruption forces their hand. As climate risk continues to grow, preparation is no longer a competitive advantage. It is rapidly becoming a prerequisite for long-term success.
Emily Alexander is Senior Associate Scientist at Tunley Environmental
[1] https://www.metoffice.gov.uk/about-us/news-and-media/media-centre/weather-and-climate-news/2025/2026-outlook-likely-another-year-above-1.4c
[2] https://www.wusf.org/economy-business/2026-05-26/homeowners-insurance-in-florida-increased-at-double-the-national-rate-report-says
[3] https://newsroom.statefarm.com/state-farm-general-insurance-company-california-new-business-update
[4] https://www.drought.gov/sectors/agriculture
[5] https://www.drought.gov/sectors/navigation-and-transportation
[6] https://wmo.int/resources/publication-series/climate-change-and-workplace-heat-stress/climate-change-and-workplace-heat-stress
