Most businesses are failing to invest in needed climate adaptation as other business priorities and resources take precedence over climate initiatives, according to a survey published by Marsh, the insurance broker and business of Marsh McLennan.
While 75% of organizations are assessing future climate impacts, primarily from a risk perspective, many have yet to fully recognize climate adaptation as an investment opportunity to enhance their overall enterprise risk management, with 40% of respondents indicating that current funding for climate adaptation is inadequate, said Marsh’s 2025 Climate Adaptation Survey, which analyzed the responses of over 130 risk managers globally.
Many businesses fail to understand the full scope and benefits of climate adaptation, said Marsh, quoting a June 2024 report from the US Chamber of Commerce, which said, for every $1 invested in disaster resilience and preparation, $13 are saved in economic costs, damages, and cleanup.
According to Marsh’s research, 78% of organizations face climate-related impacts such as flooding, heat, and water stress, with 74% reporting asset losses and disruption stemming from these events. “Yet, only 38% perform detailed climate risk assessments, and 22% do not assess future climate impacts at all,” said the report.
Although there is widespread acknowledgment of climate risks, organizations are not conducting comprehensive cost-benefit analyzes to justify further adaptation investments, which is resulting in significant gaps between the outcome of climate risk assessments and adaptation strategies, Marsh explained.
“Our research shows organizations consistently underinvest in climate adaptation relative to the severity of their identified risks. There is clearly an urgent need for organizations to adopt a holistic approach to climate risk, integrating asset-level and system-level assessments, and embedding climate adaptation into enterprise risk management frameworks,” commented Amy Barnes, Marsh’s head of Climate and Sustainability Strategy and global head of Energy & Power, in a statement accompanying the report.
“As climate hazards continue to intensify, proactive resilience planning is essential to safeguard assets, maintain revenue streams, and protect long-term business viability,” Barnes added.
While the majority of respondents (60%) believe their organization has appropriate levels of funding dedicated to climate adaptation efforts, a significant portion of respondents (40%) feel their organization lacks sufficient funding for effective climate adaptation, according to the report. “The challenges cited include the tendency for other business priorities to overshadow climate initiatives, a lack of knowledge and understanding about future climate scenarios, and competing interests for limited resources.”
The survey found that 74% of respondents have experienced losses or disruptions to their physical assets due to extreme weather. In addition to physical risks, the reports highlights the fact that these events are increasingly affecting operational and personal safety, with 67% of respondents reporting disruptions or losses related to operations and people.
The peril referenced most commonly as a concern by respondents is flooding, followed by heat stress and water stress, although these sentiments noticeably diverged among regions, said Marsh, noting that these physical climate risks are exacerbating both “acute and chronic threats.”
The Marsh findings highlight the fact that climate hazards pose risks that extend beyond asset-level concerns. System-wide impacts are also significant, though at lower levels with 35% of organizations reporting impacts on their customers, 32% on critical infrastructure, and 21% on resources and ecosystem services.
The top three areas where additional support is needed were found to be asset engineering, business continuity management (BCM), and the development of early-warning systems. Engineering measures and BCM are also the areas most actively being implemented or planned for implementation, reflecting a clear strategic emphasis on operational resilience and risk mitigation.
By assessing both acute and chronic climate perils, organizations can more effectively anticipate the potential impacts of climate-related events. For example, multi-peril risk models that incorporate both acute and chronic hazards can enable organizations to prioritize resilience and adaptation investments, develop comprehensive contingency plans, and better understand the interconnected nature of these risks.
Climate Adaptation Not Driven by Insurance Needs
Interestingly, access to insurance is not yet driving investments in adaptation, the Marsh report revealed. “The survey shows that motivation for climate adaptation among respondents is largely driven by internal and stakeholder pressures rather than insurance considerations.”
Indeed, Marsh noted that approximately 75% of respondents report limited or no concern about the unavailability or unaffordability of insurance. “In fact, on average, only 5% of respondents identified access to insurance as their main motivation for investing in climate resilience and only 10% do not perceive a significant demand for adaptation from their insurers.”
On the other hand, the need to manage risk was the most referenced motivation for investing in climate adaptation, selected by 53% of respondents. “This motivation likely reflects a growing recognition that climate change presents systemic risks to companies, necessitating strategic adaptation to protect assets, maintain revenue streams, and enhance resilience.”
In terms of internal governance, Marsh said, responsibility for climate adaptation appears to be distributed unevenly, with 54% of respondents identifying the sustainability officer as the primary role accountable for climate-related initiatives. Only 28% of respondents said they had assigned this responsibility to the chief risk officer or head of risk.
“This distribution may indicate that climate adaptation is still viewed through a sustainability lens rather than as a risk management issue,” the report continued. “Integrating climate risk into broader enterprise risk management frameworks could enhance strategic coherence and accountability, ensuring that climate adaptation considerations are embedded across all levels of decision-making.”
Photograph: Emergency flood defenses help protect homes and businesses at Bewdley Bridge in Worcestershire, England; photo credit: AdobeStock.
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