Preparing for climate change: an adaptation blueprint
Climate change is here: rising temperatures, extreme weather events and resource shortages are happening more frequently, causing tangible losses for operations, supply chains and long-term business value.
Its damaging effect has cost over US$3.6 trillion worldwide since 2000, with losses more than doubled in the past two decades, according to the World Economic Forum (WEF). Companies must also contend with the growing impact of regulations, which are evolving to meet the challenge.
The smart move is to anticipate and adapt, from reactive responses to proactive measures. Here’s how to be really prepared for climate change.
WEF data shows that by 2035, climate related risks will account for 50% of the top 100 global threats identified by organizations, ranking higher than the misuse of AI and cybersecurity risks.
Climate risks are associated with physical impacts that are either:
- Acute, meaning event-driven, such as increased severity of extreme weather events like cyclones, droughts, floods, and fires
- Chronic, when related to longer-term shifts in climate conditions like sustained yearly higher temperatures, sea level rise or changes in precipitation patterns.
They have financial implications either directly, through damage to assets, or indirectly through supply chain disruption. The financial impact of physical risks on businesses, as studied by WEF, range from 5% to above 25% (annual EBITDA) in a +3°C scenario, with higher impact on communications services and utilities in the Global South.
But climate change can also present a range of opportunities to build a long-term and sustainable future. Efforts to manage, mitigate and adapt to potential changes and climate-related risks can have financial benefits for organizations in several areas.
Organizations who respond to and manage their climate-related risks will enhance their resilience, especially when considering supply chain disruptions. Climate adaptation is also an opportunity to diversify and invest in new markets to enhance and organizations position in the transition to a low-carbon economy.
Investors and regulators are increasingly asking – or mandating – the assessment and quantification of the impact climate change may have on business portfolios, and public disclosure. Showing a robust adaptation strategy not only demonstrates leadership by staying ahead of new regulations but can also help to drive investment forward.
A deep understanding of risk and vulnerability is essential for a robust climate adaptation strategy, integrating potential costs and damages, which in turn guides business strategy, providing stakeholders with deep insights to market dynamics and competitor trends.
Risks occur when exposure to an event intersects with an organization’s vulnerability – that is, its ability or inability to cope with the consequences. So, as with every good anticipation strategy, it’s important for businesses to study their environment, assess their exposure and measure their vulnerability.
First, explore the intensity and frequency of hazards, based on geographic location and activities across your value chain, under various climate scenario conditions. Relevant hazards will depend on your company’s strategic direction.
To assess exposure, analyze asset-level impacts of hazards under different climate projections over a range of timeframes. Decisions and priorities should be informed by the uncertainty and confidence levels associated with the exposure indicators.
Then, evaluate vulnerability, by considering financial importance of the system (criticality), the degree to which the system is affected by specific climate hazards (sensitivity), and the resources and measures available to the system to adapt to or mitigate the impacts of climate change (adaptive capacity).
To get a precise and in-depth climate risks assessment, the answer lies in data. For example, data can help companies understand how business interruption from various climate hazards (e.g. floods, storms, droughts and wildfires) could impact financial statements, or how much damage to property values can be projected with climate change.
Going further, it is possible to anticipate how these financial impacts will evolve over time and across different climate scenarios. Overall, data supports decision-making by highlighting the most critical financial priorities: protecting property value, strengthening business continuity plans, and investing in actions that reduce costs.
A case study: flooding risk
- 58 million peopleexposed to river flooding
- 15% increaseof land inundated by coastal flooding by mid-century
- US$7.8 trillionof global assets threatened by episodic coastal flooding
Global warming is expected to drive rising sea levels, and lead to more frequent extreme precipitation events that will intensify the risk of coastal, river and pluvial floods, according to the IPCC. Currently, 58 million people are exposed to river flooding, more than half of whom live in Asia, and 148 million people in low-lying coastal cities are exposed to episodic coastal flooding.
IPCC assesses that the global population exposed to extreme river flooding with a 100-year return period is projected to increase by 2.5% to 3% by mid-century, for global warming scenarios above 2°C. In the ‘business-as-usual scenario’, the area of global land inundated by coastal flooding may increase by 15%, leading to a 17% increase in population exposure, and a 16% increase in exposed assets.
So, the risk is real, tangible and growing, with potential dire consequences on people, infrastructure and business. And floods can result in costs not only for damage and loss of assets, but also costs associated with recovery, insurance, flood adaptation, and mitigation measures. Episodic coastal flooding is estimated to threaten around US$7.8 trillion worth of assets globally – and sea level rise under the ‘business-as-usual’ scenario could push this figure up to US$11 trillion by 2050.
Flood management – through mitigation or adaptation – is a way to reduce or prevent the risk of flooding. Organizations and countries can put in place a multiple-layer safety approach, including:
- Human built solutions, such as dikes, levees, channels and reservoirs, and nature-based protection measures, for instance mangroves;
- Floodproof spatial planning;
- Disaster management, with early warning systems, emergency response planning, and a continuity plan for businesses.
Getlink is a key player in mobility infrastructures and international transport between the UK and Continental Europe, managing and operating the infrastructure of the Channel Tunnel between England and France.
The EU and the UK are implementing climate policies aimed at net-zero targets by 2050. This includes legislation and high carbon prices in sectors such as transport and shipping, which directly impact Getlink’s business.
Climate change has already started to impact Western Europe, and climate projections show that these climate hazards will only increase in the future – which may lead Getlink to face many challenges in the years to come, because of its activity and geographical location.
Adaptation – a proactive approach grounded in scenario analysis of climate change over the coming decades – is no longer an afterthought, it has become a business continuity imperative. WBCSD forecasts US$2.3 trillion losses due to increased physical risks between 2025 and 2100 under a ‘business-as-usual’ scenario. By 2050, up to 4.4% of the world's GDP could be lost annually, without adaptation, if global warming exceeds 2°C.
To adapt to climate risks, World Bank estimates that US$56.6 to 74.1 billion per year until 2050 are needed to assess all climate risks, in order to prepare for the consequences of climate change.
At the global level, international public adaptation finance flows are rising, from US$22 billion in 2021 to US$28 billion in 2022 from industrialized countries to developing countries, but there remains a huge gap between what is needed and what is being delivered. The UN Environment Program (UNEP) estimates the adaptation finance gap at US$187-359 billion per year.
Similarly, national planning and implementation of adaptation capabilities are generally increasing, but not fast enough. As of 2024, 171 countries now have at least one national adaptation policy, strategy or plan in place. 16 of the 26 countries without a national planning instrument are developing one, but 10 countries show no indication of developing an instrument – 7 of which rank highly on the Fragile States Index.
In the private sector, investment is encouraged through climate risk disclosure frameworks, transition planning and adaptation taxonomies, and by strengthening approaches and blended finance instruments, that de-risk private-sector finance using public finance.
For businesses, protection of assets and long-term resilience call for adaptation plans, that identifies and implements measures to reduce climate vulnerability over time – a cost-effective way of reducing the escalating economic costs of climate change. A typical adaptation plan should follow 6 key steps, and can be supported by data-based platforms such as Climate Risk Tool.
Assess risks & prepare the ground
Engage with key stakeholders to understand and prioritize risks, define scope and ambition for adaptation plan and desired outcomes, and assess resources available for adaptation.
Identify adaptation measures
Develop a list of relevant adaptation options considering priority risks, multi-hazard events, co-benefits, and potential opportunities.
Assess & select
Select adaptation options based on financial cost, risk reduction potential, co-benefits, implementation process, desired outcomes and other factors relevant to the situation.
Develop a plan
Set up a list of actions, timeline for implementation and monitoring, review cycle of risks and measures, roles and responsibilities, and resources.
Implement
Put the adaptation measures into practice, in line with the plan.
Monitor & evaluate
Assess effectiveness and update, based on primary results and available knowledge.
Adaptation options align with different components of vulnerability within an organization. They are typically categorized into physical measures - such as human built or nature-based solutions implemented on the ground - and non-physical measures which focus on integrating adaptation into operations and processes, and decision-making strategies, including partnerships with local communities.
The time is now for organizations to act proactively as climate risks intensify globally. Despite initial costs, adaptation is cost-effective, potentially avoiding losses of real asset value – 3.3% average and up to 28% according to S&P. It also offers co-benefits such as improved water management, biodiversity conservation, communities well-being and improved public health. Integrating adaptation into a business strategy supports long-term resilience, making it an imperative for sustainable operations.
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