Climate Risks Dominate Risk Managers’ Concerns in 2025 as Environmental Challenges Intensify
Climate risks have maintained their position as the foremost concern among risk managers in 2025, sharing the top spot with geopolitical instability, according to the latest joint survey from the Casualty Actuarial Society and the Society of Actuaries. This continued prominence reflects the growing recognition of climate change’s profound impact on business operations and financial stability.
Rising Environmental Threats
The persistence of climate risks at the top of risk managers’ concerns stems from an unprecedented series of environmental challenges. The year 2024 marked the hottest year in 100,000 years, with widespread coral reef bleaching and ecosystem collapse threatening global biodiversity. These environmental shifts have translated into tangible business risks, with climate-related disasters causing over $3.6 trillion in damage since 2000.
Financial Implications
The financial impact of climate risks has become increasingly severe. Unprepared businesses could face physical risks costing between 5% to 25% of their earnings by 2050. McKinsey’s analysis suggests that failure to reduce emissions could put 20% of company profits at risk by 2030. These stark projections have pushed risk managers to prioritize climate-related threats in their assessment frameworks.
Operational Disruptions
Business operations face mounting challenges from extreme weather events:
Supply chain disruptions
Infrastructure damage
Production halts
Rising insurance costs
Asset devaluation
Regulatory Landscape
The regulatory environment continues to evolve, with new frameworks demanding greater accountability:
Corporate Requirements
Mandatory transition plans under CSRD and CSDDD
Enhanced climate risk disclosure requirements
Science-based emission reduction targets
Stricter environmental regulations
Risk Management Strategies
Organizations are implementing comprehensive approaches to address climate risks:
Governance Structure
Integration of climate considerations into board-level decisions
Enhanced risk oversight mechanisms
Clear accountability frameworks
Strategic Planning
Long-term resilience planning
Climate scenario analysis
Adaptation strategies development
Technology and Innovation
Risk managers are increasingly leveraging advanced technologies to better understand and manage climate risks:
Data Analytics
Machine learning applications for risk assessment
Predictive modeling for climate impacts
Real-time monitoring systems
Digital Solutions
Enhanced reporting capabilities
Automated risk tracking
Improved data collection and analysis
Industry Response
The insurance sector has responded to these challenges by:
Reassessing coverage policies
Developing new climate-specific products
Implementing stricter risk assessment criteria
Adjusting pricing models to reflect increased risks
Future Outlook
The World Economic Forum’s Global Risks Report indicates that climate-related concerns will continue to dominate the risk landscape . Business leaders are urged to:
Build greater operational resilience
Invest in adaptation measures
Strengthen risk management frameworks
Enhance stakeholder communication
Recommendations
Risk managers are advised to:
Develop comprehensive climate risk assessment frameworks
Implement robust monitoring systems
Create detailed adaptation strategies
Maintain flexible response capabilities
Foster cross-departmental collaboration
The elevation of climate risks to the top of risk managers’ concerns reflects a growing understanding of the profound implications of climate change for business operations and financial stability. As organizations navigate these challenges, the integration of climate risk management into core business strategies has become not just a regulatory requirement but a fundamental necessity for long-term survival and success.
The convergence of physical risks, transition risks, and regulatory pressures has created a complex risk landscape that demands sophisticated management approaches. Success in this environment requires a combination of strategic foresight, technological innovation, and operational flexibility, supported by strong governance frameworks and clear accountability mechanisms.
