The following blog summarizes a CDP analysis of extreme-weather risk disclosures and losses reported by thousands of firms.
It highlights a striking gap between actual weather-related losses (nearly $3 billion in 2025) and the prevalence of extreme-weather as a material financial risk (only 35% of 11,261 reporting firms).
The article also projects potential future impacts in the hundreds of billions or trillions.
This underscores how climate risk is moving from a scenario to a present-day financial reality that affects earnings, insurance access, and adaptation-strategies/”>capital planning.
Key findings from the CDP analysis on 2025 losses
CDP’s latest analysis reveals that actual extreme-weather losses in 2025 were driven primarily by heavy rainfall.
Remaining cost components added to the total.
The report also stresses that despite the growing exposure, a minority of firms perceive extreme weather as a material risk.
This creates a misalignment between exposure and governance.
Actual losses and cost components in 2025
- Heavy rain drove the largest share of losses, near $1.5 billion.
- Direct costs amounted to approximately $309 million.
- Operational shutdowns contributed about $266 million.
The CDP report notes that only 35% of the 11,261 firms identified extreme weather as material.
This signals a critical gap in risk awareness and governance across sectors.
Projected future financial impacts and near-term materialization
Looking forward, the CDP analysis considers potential future financial impacts from extreme weather.
Nearly half of the disclosed risks are anticipated to materialize within two years, intensifying the need for proactive planning.
Projected future impacts by category
- Flooding could account for about $528 billion of future impacts.
- Cyclones are expected to contribute roughly $161 billion.
- Heavy rain could yield around $86 billion.
Beyond weather categories, the report breaks out two additional material drivers of future harm: reduced production capacity ($326 billion) and infrastructure-investment-toward-climate-resilience/”>asset impairment or early retirement ($218 billion).
Many impacts are expected to unfold within current investment, insurance, and operational planning cycles.
Economic and systemic implications of under-hedged climate risk
The CDP analysis emphasizes that untreated physical climate risk poses not only firm-level challenges but also systemic threats to lenders, insurers, and public finances.
When costs of risk outpace mitigation, the consequences ripple through earnings, credit access, and service delivery.
Risks for lenders, insurers, and public finances
- Systemic exposure grows as uninsured or underpriced risks propagate through credit portfolios and local economies.
- Access to insurance and affordable credit may tighten for exposed sectors and geographies.
- Public finances can face higher default risk and capital allocation pressures in affected regions.
What needs to happen next: CDP’s policy and practice recommendations
The report calls for a stronger, more coordinated response to climate risk.
It urges actors across the policy and business landscape to act now rather than wait for losses to compound.
CDP’s recommended actions
- Assess system-wide dependencies such as infrastructure, utilities, and logistics to map critical vulnerability points.
- Subnational governments should disclose intersections of hazard exposure and service disruption to enable targeted resilience planning.
- National authorities should align fiscal and adaptation policies to support scalable risk reduction investments.
- Scale adaptation, pursue coordinated investment, and improve disclosure to protect assets and strengthen economic resilience as extreme weather shifts from a future scenario to a present-day reality.
Here is the source article for this story: CDP Says Extreme Weather Risks Could Cost Companies $898 Billion