MSCI report shows rising climate risks

As part of its Corporate Resilience Survey, MSCI Institute surveyed more than 550 global institutions, including 40 Australian organisations, across nine industries about the impacts of physical climate risks, such as extreme heat and flooding, to corporate operational resilience.

The company said over the last decade, extreme weather events have cost the global economy in excess of US$2 trillion. Australia has faced some of the highest cumulative losses in the world, with annual damages expected to climb to $8.7 billion by 2050.

The research revealed physical, climate-related risks were causing significant disruption to business operations, including:

• Almost two-thirds (63%) of the respondents believe climate-induced physical risks are significantly impacting the global economy.
• More than 80% of organisations say operations have been directly disrupted by extreme weather in the past five years.
• Two-thirds of companies say the effects of extreme weather have affected employee wellbeing, damaged critical infrastructure or reduced revenue.
• More than two in three organisations (68%) are focused on near-term physical risks (two to five years) with long-term risk management a strategic blind spot.
   

The research also stated that global organisations are set to manage climate-risk more proactively, including:

• Nearly all companies (94%) are conducting site-specific physical risk assessments, evidencing that climate-induced risks are a priority.
• More than 60% of companies are linking director and executive remuneration to physical risk management.
• Three in four (76%) have instituted a framework for managing physical risk, with adoption highest among those companies recently impacted by extreme weather events.
• 82% of companies reported that investing in climate-resilience had positive financial and reputational outcomes, including bolstering investor interest and reducing insurance premiums.
   

While most companies, investors and scientists agree global temperatures are set to exceed 2.8°C this century, only one in five companies are actively pursuing revenue opportunities that help clients mitigate physical climate impacts.

Market research has shown that AU$500 billion of investment would be needed for Australia to cut emissions 70% by 2035. The MSCI Institute’s Transition Finance Tracker, which reports on financing the shift to a low-carbon economy, shows that private-sector investment is fuelling the transition.

This includes:

• 57% of climate project finance is coming from the private sector — more than half of the US$1.9 trillion climate project finance funds came from the private sector (2018–2023), growing at 30% CAGR versus 18% for public finance.
• As at September 2025, assets in public climate-themed funds rose nearly 12% to US$625 billion, extending the double-digit growth of recent years.
   

Attending COP30 at Belém, MSCI Institute Founding Director Linda-Eling Lee said, “The energy transition and the physical impacts of our changing climate compete with AI, geopolitics and domestic challenges for investor attention. They complicate the path to a cleaner and more resilient global economy but also underscore the role of capital in getting there.”

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