Number of the month: EUR 822 billion

According to data from the European Environment Agency,* this is the amount of economic losses caused by weather and climate extremes in the European Union between 1980 and 2024. Following this summer, marked by heat domes, water shortages and droughts, the figure is particularly striking in itself. However, it is even more telling that a quarter of the losses, EUR 208 billion, occurred in the last four years. The figures show that the economic consequences of climate change are already clearly measurable today.

Climate risk is a business risk

The impacts of summer heatwaves, droughts, floods, storms or wildfires can extend far beyond the affected areas. An extreme weather event can cause production losses, jeopardise the operation of a site, disrupt a logistics route, increase energy and insurance costs, or create problems in the supply chain.

For companies, climate change is therefore becoming less and less of an abstract sustainability issue: it must also be taken into account as a financial, operational and strategic risk.

The areas of focus may vary from company to company. For a manufacturing company, water supply or energy demand may represent the greatest exposure. For a logistics company, the vulnerability of routes and infrastructure may come to the fore, while in the real estate market, heat stress, flood risk or the adaptability of buildings may become increasingly important.

Adaptation is costly, but inaction costs even more

Climate adaptation naturally requires investment. At the same time, the EEA also points out that certain adaptation investments can deliver strong economic returns. This puts climate adaptation in a fundamentally different light, as professional and carefully considered preparation can not only prevent losses but may also generate tangible financial gains.

What should companies examine?

It is worth identifying which parts of a company’s operations are most sensitive to changes in the climate. These may include:

• the physical exposure of sites and production assets,
• the location of critical suppliers,
• the vulnerability of logistics routes,
• the security of water and energy supplies,
• business interruptions caused by weather events,
• expected changes in insurance and financing costs.

The next step is to quantify the risks and examine which measures can meaningfully reduce the company’s exposure. This requires a climate risk assessment, appropriate ESG data, clearly defined indicators and an adaptation plan aligned with the company’s strategy.

It is important to emphasise that the EUR 822 billion is no longer a forecast but a loss that has already been incurred and is increasing at an accelerating rate year by year. It is therefore becoming increasingly important for companies to understand their own climate exposure and determine whether they can quantify its business consequences.

This can be supported by assessing climate risks and ESG maturity, evaluating the financial and operational impacts of the risks, and developing an ESG strategy and adaptation measures based on the findings.

Source: https://www.eea.europa.eu/en/analysis/indicators/economic-losses-from-climate-related