Extreme weather could result in US$450 billion in losses in Asia Pacific over the short and longer term, found a new analysis by environmental disclosure nonprofit CDP, showing how climate hazards are fast becoming a frontline financial risk for the region’s real economy and financial systems.
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In Asia Pacific, 44 per cent of over 4,500 companies in the region identified extreme weather as a financial material risk, indicating heightened risk awareness among companies, said researchers. By contrast, only 35 per cent of 11,261 companies globally said extreme weather was a material financial risk.
Flooding alone is expected to account for US$286 billion of the region’s US$450 billion in projected damages, far exceeding the impacts of cyclones, drought and heatwaves, the study found. Globally, the report estimates that flooding will be responsible for about US$528 billion of the US$898 billion in anticipated future losses.
For companies in the region, the single largest financial hit is expected to come from lost revenue due to reduced production capacity, totalling US$188 billion, or 42 per cent of anticipated losses. That confirms operational disruption, rather than physical damage to individual assets, as the defining financial exposure for Asia Pacific corporates, warned the study.
Heavy precipitation, operational shutdowns and higher direct costs dominate reported loss drivers, showing that extreme weather strains cash flows and business continuity long before it fully shows up on balance sheets, it added.
Globally, flooding will be responsible for about US$528 billion, the bulk of the amount in projected damages, far exceeding the impacts of cyclones, drought and heatwaves. In Asia Pacific, flooding disasters are expected to account for US$286 billion of the region’s US$450 billion in anticipated losses. Image: CDP
Data collected from provinces, states, regions, cities or municipalities reinforced the “systemic nature” of the threat. The sectors most exposed to climate hazards — agriculture, human health, water supply, sewerage and waste management, and transport — are also the foundations of economic activity and the services on which businesses depend.
Disruptions in these systems ripple across supply chains, labour markets and financial performance, amplifying losses far beyond the initial impact zone.
CDP noted that companies and financial institutions are best positioned to absorb or reduce risk when operating within systems where these dependencies are managed collectively and supported by adequate financing.
“Extreme weather is a systemic risk, not a firm-level one,” said authors. “Financial outcomes are shaped by shared dependencies like infrastructure reliability, insurance market conditions, supply chain continuity and local adaptation capacity that require coordination across actors.”
