Corporations say they'll lose nearly $1 trillion to climate change

• 215 of the world's largest companies predict they stand to lose $970 billion to climate-change-related disruptions over the next seven years.
• Risks include paying more for insurance, writing off facilities in threatened locations and customers shifting to more environmentally friendly companies.
• The same companies say they could make $2 trillion from adapting to climate change.

Corporations are waking up to the reality of a changing climate. Just over 200 of the world's largest companies — including some giants of Corporate America — calculate that they could lose $970 billion within the next five to seven years in climate-change-related upheaval, according to a new analysis. The report, released this week by the nonprofit CDP, marks the first substantial accounting of climate-related risks for corporations.

"We've been asking companies to disclose climate change risk for quite some time. Now we're really asking them for calculations," said Nicolette Bartlett, CDP's global director of climate change and the report's author.

A growing number of investors are pushing companies to be more transparent about their exposure to climate change, believing it will give a fuller sense of a company's strengths and weaknesses. Three-quarters of investors said they would prefer to buy a financial product with a low carbon footprint, according to recent a survey from Natixis Investment Managers.

"We're seeing a lot of professional money managers saying [environmental, social and governance] analysis is just as important as fundamental analysis," said Dave Goodsell, executive director of Natixis' Center for Investor Insight. "It does ultimately have an impact on the bottom line."

The risks in CDP's analysis range from increased operating costs in a hotter climate to writing off factories or offices because they're in high-risk locations. Still, the report is incomplete because many companies don't enumerate their climate-related risks.

Allstate Insurance predicted losing up to $6 billion as changing weather patterns lead to more severe losses for homes, businesses and other insured properties. The company currently considers cities on the U.S. Gulf Coast and East Coast to be one of the greatest areas of "potential catastrophe" due to hurricanes, according to its disclosures.  

Bank of America, whose international locations include Hong Kong, Japan, the Philippines, Taiwan, China and Australia, also foresees a growing threat of more frequent and stronger hurricanes. As a major financier for solar power projects, it expects a loss of revenue if solar installations slow down or become more costly, as could happen in several states under pending legislation.

Not all sectors are equally aware of their climate-change risks. But the financial industry so far has the most detailed disclosures, said Bartlett, although not all financial institutions fully accounted for the hits to their portfolio if their clients were to suffer from climate change. "The finance sector has been very focused on their own operations, and they haven't focused in-depth on what they're actually financing," she said.

Power companies and the fossil-fuel industry also offered full disclosures, since they're currently facing an energy transition. However, other sectors, including manufacturing, transportation and infrastructure, have yet to catch up.

"The increased costs for them are probably not just the obvious — increased insurance premiums, damages to their operation or shutdowns," Bartlett said. "The physical risks mean their workforce not being there, or 'it's too hot to have a factory in this country.' It's more existential than they realized."