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The business case for climate resilience

83% of organizations are assessing future climate risks to their organization, according to Marsh’s 2024 Corporate Climate Adaptation Survey. And yet 43% of businesses are not using cost-benefit analysis to make the business case for adaptation.

As part of New York Climate Week 2024, Marsh McLennan hosted a conversation with the US Chamber of Commerce, including scientists, policymakers, and business leaders from the National Oceanic and Atmospheric Administration (NOAA), the Department of Transportation, and the Alliance for Global Water Adaption, to discuss the priorities for adaptation and resilience.

83% of organizations are assessing future climate risks to their organization, according to Marsh’s 2024 Corporate Climate Adaptation Survey. And yet 43% of businesses are not using cost-benefit analysis to make the business case for adaptation.

While it remains important for organizations to anticipate risk and build resilience against changes to come, the impacts of climate change are already here. Prioritizing adaptation necessitates enterprise-wide alignment, beginning at the top, and a quantitative method of risk assessment.

Without understanding the financial costs and opportunities associated with climate adaption, businesses may be missing out on valuable insights that can support stronger decision-making and capital allocation — at a moment when the business case for climate resilience has never been more pronounced.

Public and private partnership

Becoming a climate-ready nation that can manage the current impacts of climate change and set its sights on future resilience will not happen in a silo. The cumulative work, data, and resources developed by federal agencies, scientific and regulatory bodies, and policymakers can help industries learn and capitalize on opportunities for further innovation.

A bureau within the Department of Commerce, NOAA, whose mantra is captured in three words — science, service, and stewardship — is an excellent example of partnering with the private sector to drive change.

Through a US$85 million investment funded by the Inflation Reduction Act, NOAA is working to create industry proving grounds that improve risk modelling at climate timescales to support decision-making, and partner with companies on the development of risk models for use in underserved communities.
In February 2024, NOAA announced US$3.9 million in awards to help small businesses improve climate resilience in communities across the nation through the ocean-based climate resilience accelerators program.
In 2023, NOAA funded US$562 million for coastal resilience under their climate-ready coasts initiative.
- rebuilding reefs, seagrass, and wetlands of those projects, US$477 million was used for natural infrastructure, including rebuilding reefs, seagrass, and wetlands.

Access to the robust data coming out of the insurance industry, as well as the sector’s expertise in modelling risk, can also help create alignment with public entities and inform government policy. It also may reveal to the public sector what businesses are most concerned about.

Marsh’s Climate Adaptation Survey found that:

50% of global businesses suffered an extreme weather event in the last three years.
72% are considering climate adaptation or resilience in their regular risk management process.
Heat stress is becoming more of a concern, rising up the rankings above flood or water stress.

In this mutually beneficial partnership, there is greater possibility for information-sharing, strategy-building, and the development of new resilience products aimed at addressing climate risks.

Funding roadblocks and opportunities

Scaling up solutions and technologies requires significant funding, and funders understandably want to ensure that these solutions will work and truly provide value in the push to adapt and build future resilience.

The insurance sector will play a significant role in mitigating risks associated with these solutions and technologies, while also enhancing the resilience of the transition process. And research demonstrates the payoff of preparedness: The Climate Resiliency Report from the US Chamber of Commerce, Allstate, and the US Chamber of Commerce Foundation found that every US$1 spent on disaster resilience and preparedness is worth US$7 in saved economic costs, plus US$6 of avoided cleanup costs on average after a disaster strikes.

Going beyond asset-level to system considerations

Asset-level business considerations, including operations, people, physical property, and emergency response, are often key priorities in a climate adaption framework — and with good reason. However, a recurring theme emerged during this conversation: the wider systems that these assets operate within, including critical infrastructure, governments and regulators, capital providers, communities, ecosystem services and suppliers, are not given the same attention.

The problem, captured in Marsh’s Climate Adaptation Survey, is that system-level considerations are still not routinely assessed. Going forward, businesses need to take a holistic view of how they have been impacted by losses from extreme weather events so that they can better prepare, respond, and allocate resources.

In the immediate term, prioritizing critical infrastructure remains necessary, from energy systems and transportation to water and wastewater systems to communication networks. These issues are deeply interrelated, and communities, governments, and businesses cannot enact meaningful change if they don’t understand what they are up against at a system-wide level.

Water as the currency of resilience

Zooming out, leaders agreed and continuously emphasized that water is at the heart of all resilience discussions. Not only is it essential for human survival and the functioning of ecosystems, but water has the power to impact public health, disrupt supply chains, damage infrastructure, affect agricultural productivity, increase operational costs for industries that rely on water for manufacturing processes or cooling systems, and beyond.

The Mississippi River alone is responsible for about 700 million tons of commodity, in and out of the river. It is the third largest river basin in the world, the second largest in the US, and a significant contributor to the steel industry.

With these water challenges come major financial implications. Mayor Melisa Logan of Blytheville, Arkansas drove the point home: 20 million people rely on the Mississippi River for drinking water, activity along the river generates US$496 billion in revenue for the US economy, and supports 1.5 million jobs. Evaluating water systems remains necessary, accompanied by thoughtful planning and strategy. A new water treatment center, for example, won’t be effective if people cannot get there easily or access it. If water is the currency of resilience, the call is to spend wisely.

Developing a shared definition of resilience

The challenges and opportunities ahead underscore the need for collective action and a national resilience strategy. The public and private sectors cannot work together effectively if they are subscribing to different definitions and understandings of resilience.

The challenge is pushing businesses and groups to think outside their own vantage point and pain points to consider the interrelatedness of risk. Only once there is alignment, or a shared language for talking about and working towards resilience, can these separate entities create collective impact.

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