Extreme Weather Risk is Reshaping the Global Economy to the Tune of Nearly US$1 Trillion in Projected Losses

Only 35% companies recognize extreme weather as a material financial risk, but 62% of cities, states and regions already impacted
Nearly half (48%) of risks are imminent, placing extreme weather squarely within current investment, operations and risk management decisions
Cost of mitigating risks nearly 13 times lower than their financial impact

London, 12 May 2026: Extreme weather is already driving material financial impacts across the global economy, with risks set to escalate sharply according to new analysis from CDP, the world’s only independent environmental disclosure system.

Of the 11,261 companies that disclosed full environmental data through CDP in 2025, only 35% identified extreme weather as a material financial risk. However, despite this, firms disclosed that it caused nearly US$3 billion in real losses in 2025 alone, primarily through increased direct costs (US$309 million) and operational shutdowns (US$266 million). Heavy rain was the largest single driver of these losses, accounting for US$1.5 billion across disclosing companies.

Looking ahead, however, the figures escalate, with companies anticipating US$898 billion in future financial impacts, principally due to flooding (US$528 billion), cyclones (US$161 billion) and heavy rain (US$86 billion). Moreover, nearly half (48%) of extreme weather risks are envisaged to materialize in the next two years placing these risks firmly within current business planning and investment horizons.

Financial losses are expected to be driven by reduced production capacity (US$326 billion) and asset impairment or early retirement (US$218 billion). They are not anticipated to be confined to isolated assets or sectors either, but to be spread across systems businesses depend upon, such as infrastructure, supply chains, insurance markets and public services.

Nevertheless, although the price tag of environmental risks is very high, the cost of mitigating them is much lower. CDP’s 2025 Disclosure Dividend report showed that the median cost of risks per company stood at US$39.4 million, compared to only US$3.1 million to mitigate them, nearly 13 times lower.

The view from subnational governments

Of the 1,005 cities, states and regions across 80 countries reporting data through CDP-ICLEI Track and CDP’s States and Regions questionnaire in 2025, 62% identify already being significantly impacted by extreme weather events. Over 60% expect these hazards - especially extreme heat, urban flooding and drought - to increase in intensity, frequency, or both, in the future.

Subnational governments increasingly recognize extreme weather events as a financial and economic risk, with close to a quarter (23%) specifically highlighting financial and insurance activities as highly exposed to intensifying climate hazards. In response to these hazards, cities around the world are moving beyond pledges to concrete solutions, steadily designing new climate infrastructure projects that protect people and businesses.

Over 60% have at least one adaptation project for which additional funding is needed, highlighting a global investment gap of at least US$34 billion, and almost half (46%) report budget constraints limiting their ability to adapt to the effects of climate change. But when risks are made visible and actions implemented, all stakeholders are able to harness the social and economic benefits.

Amir Sokolowski, Global Director of Climate at CDP said:

“Extreme weather is already a financial risk. It has a dangerous domino effect, disrupting operations, reducing production and driving losses today, with far greater impacts lying ahead. This is a systemic challenge that no single actor can manage alone. Our report highlights that efforts to address this risk coherently are not sufficiently coordinated and that the gaps in collaboration are significant risk in their own right. By aligning investment, strengthening shared systems and scaling adaptation - with disclosure as a guide to enable better decisions - businesses and governments can not only reduce risk, but accelerate the transition to an earth-positive, resilient economy.”

Whole of economy solutions

Companies and financial institutions are best positioned to absorb or reduce environmental risk when operating within systems that are managed collectively and supported by adequate financing. Among other measures to safeguard against the effects of extreme weather, CDP is calling:

For companies to treat extreme weather as a system-exposed business risk - recognizing dependence on shared systems, such as infrastructure, utilities and logistics networks, rather than focusing solely on asset-level exposure.
For subnational governments to clarify - through public disclosure - where hazard exposure, infrastructure risks, and service disruption intersect, helping to reduce uncertainty and unlock private investment.
For national governments to align fiscal, adaptation, and risk-management policies around shared economic exposure for the public and private sectors, reducing economy-wide vulnerability to physical climate risks.
For regulators and central banks to use supervisory tools to address systemic financial risks, like uninsured physical risk.

--Ends--

Notes to Editors

Methodology

The analysis in Disconnected Defenses: Extreme Weather Risk across Corporates, Cities and Financial Systems is based on 11,261 companies disclosing through the 2025 CDP corporate questionnaire, including 149 insurers, and 1,005 cities, states and regions reporting through CDP-ICLEI Track and CDP's states and regions questionnaire.

For more information, or to arrange interviews, please contact:

Samika Meshram-Jasinski (samika.meshram@cdp.net)
George Bush (george.bush@cdp.net)

About CDP

CDP is a global non-profit that runs the world’s only independent environmental disclosure system. As the founder of environmental reporting, we believe in transparency and the power of data to drive change. Partnering with leaders in enterprise, capital, policy and science, we surface the information needed to enable Earth-positive decisions. We helped more than 22,100 companies and over 1,000 cities, states and regions disclose their environmental impacts in 2025. Financial institutions with more than a quarter of the world’s institutional assets use CDP data to help inform investment and lending decisions. Aligned with the ISSB’s climate standard, IFRS S2, as its foundational baseline, CDP integrates best practice reporting standards and frameworks in one place. Our team is truly global, united by our shared desire to build a world where people, planet and profit are truly balanced. Visit CDP.net or follow us @CDP to find out more.