A new report from climate disclosure nonprofit CDP warns that extreme weather is becoming a systemic financial threat, with companies, cities and insurers increasingly exposed through shared infrastructure, supply chains and insurance markets rather than isolated disasters alone.
The report, Disconnected Defenses: Extreme Weather Risk Across Corporates, Cities and Financial Systems, draws on disclosures from more than 11,000 companies and over 1,000 local governments across 80 countries. It argues that current adaptation efforts remain fragmented, even as climate-related shocks intensify and spread across the global economy.
According to the findings, 62% of cities, states and regional governments say they are already significantly affected by extreme weather events, including floods, droughts and heatwaves. Yet only 35% of companies surveyed identified extreme weather as a financially material risk, revealing what researchers describe as a dangerous disconnect between public-sector experience and corporate risk perception.
The economic toll is already mounting. Companies reported US$2.9 billion in weather-related losses in a single year, with heavy precipitation accounting for more than half of that figure. Operational shutdowns and rising direct costs emerged as the biggest immediate impacts, highlighting how climate disruption is affecting day-to-day business continuity before balance sheets fully reflect the damage.
The report estimates companies anticipate nearly US$900 billion in future climate-related losses, with flooding alone projected to generate more than US$500 billion in financial impacts. Lost revenue from reduced production capacity represents the single largest risk category, underscoring how vulnerable global operations have become to interruptions in transport, utilities and supply networks.
Researchers also identified growing concerns around insurance availability. While companies expect US$218 billion in asset impairment and stranded assets, only a small number have accounted for the possibility that insurers may withdraw coverage from high-risk areas altogether. Meanwhile, insurers themselves reported anticipating US$49 billion in future climate-related claims liabilities, suggesting corporate expectations may underestimate future premium increases and coverage restrictions.
The report further highlights a widening adaptation finance gap. Nearly half of subnational governments surveyed cited budget constraints as a major barrier to climate adaptation, while more than 60% reported seeking funding for resilience projects. CDP estimates the shortfall in adaptation financing has reached at least US$34 billion.
Authors of the report argue that resilience can no longer be treated solely as a company-level issue. Instead, they call for stronger coordination among businesses, governments, regulators and financial institutions to strengthen public infrastructure, stabilize insurance systems and reduce cascading risks across entire economies.
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.
‘y 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.’
The full report can be downloaded here.