(13 November 2025 – Australia) MSCI Institute reports that most companies experience physical risks, chiefly weather-related disruptions, which they are urgently addressing in their risk management and business continuity planning.
Severe storms have the most detrimental impact on businesses, followed by extreme heat and flooding. Transportation companies are disproportionately affected by severe storms which can disrupt logistics networks. Agricultural firms face heightened risks from drought and wildfires that threaten productivity.
Nearly all companies experience weather-related disruptions to operations that encompass both their own activities and supply chains. MSCI estimates that over the last decade extreme weather events have cost the global economy over US$2 trillion.
Australia represents many of the highest cumulative losses in the world with annual damages expected to increase to A$8.7 billion by 2050. Despite this, only one in five enterprises are actively pursuing revenue opportunities that help clients mitigate physical climate impacts.
“Most companies are factoring resilience into business planning and capital spending. If your company has been impacted by flooding that disrupts operations or heat that endangers employees, you’re even likelier to make resilience to physical risk a priority” commented MSCI Institute Founding Director Linda-Eling Lee.
“The management of physical risk takes place on the front lines of commerce, typically in manufacturing plants, warehouses, retail stores and at utilities, where the costs of extreme weather unfold with immediate impact. It takes place in the C-suite and boardroom as well, with many companies linking the pay of officers and directors to physical risk management” Lee added.
“In short, physical risk is financial risk, based on how most companies say they are confronting it.”