How to defend against $1.1 trillion in corporate climate losses

While climate lacks an obvious row on the balance sheet, its financial impacts are tangible. Businesses are increasingly affected by climate hazards, and without integrating climate and enterprise data, they struggle to quantify their exposure and allocate resources effectively.

Climate models can predict the likelihood of flooding at a company’s location over the next 10 years. But a preventive investment decision requires knowing the value of the asset, the revenue that depends on it and the cost of mitigation relative to potential losses.

Average annual estimated losses amount to $88 billion in asset damage and more than $1.1 trillion in business interruption, according to an MSCI Climate Change Metrics analysis of 9,409 public companies. With climate impacts worsening and losses compounding, businesses need defensible, decision-ready climate resilience strategies.

The sooner businesses integrate climate-risk data with enterprise data, the sooner they can streamline preparations for climate-related disclosure requirements, and improve investment decisions to strengthen resilience.

Climate risk is complex and compounding enterprise risk

For example, droughts and low river levels can disrupt inland shipping, constrain industrial production and raise logistics costs. On the Rhine River, one of Europe’s most important commercial waterways, prolonged low water levels have forced vessels to reduce loads or make additional journeys.     

Concurrently, an El Niño event is expected to intensify into the strongest ever on record in the coming months. The World Meteorological Organization forecasts a near-certain likelihood that El Niño will persist through February 2027.

This increase in global temperature and shifts in rainfall and temperature patterns can increase the risk of floods, drought and extreme heat. However, the precise impacts in a particular country or region vary by location and season, and other climate drivers can modify them.    

For businesses, this can result in damaged physical assets or disrupted supply chains with significant financial repercussions. Unfortunately, many leaders continue to view climate events as isolated shocks and overlook their chronic and compounding impacts.

Climate model outputs draw on numerous variables, and the science and modeling capabilities continue to improve. However, assessing at scale how climate hazards affect assets and supply chains remains highly complex.

Most corporate climate risk systems are inadequate

In a perfect world, we would know exactly when a hurricane is likely to hit a production facility or when a drought will cause grain supply shortages. With this information, businesses could calculate expected losses and take mitigating action well ahead of time.

Unfortunately, climate impacts are uncertain. Business leaders can estimate risks with climate scenario planning, but they still need to assess the effects on assets, operations and suppliers, and make strategic decisions based on those assumptions.

Is the bigger risk a 5% likelihood of destruction at a mission-critical production site or an 85% likelihood of drought in a supply region? How should resources be allocated to mitigate these risks? To confront such questions, business leaders need data integration.

Specialized climate risk tools and consultants help to assess business exposure to climate risk. They often keep enterprise data in another system and use spreadsheets to connect the two. This may highlight areas of low, medium or high risk, but it fails to provide the quantitative financial implications needed to prioritize preventive action.

Quantify risk by connecting hazard data to business data

The time to discuss plans and goals for managing climate risks has come and gone. As New York Climate Week 2026 just highlighted, now is the time for implementation.

Connecting climate-risk data to comprehensive business data, such as data held in an ERP system, can enable more informed resilience and investment decisions while supporting climate-related disclosure processes.

IFRS S2 is the ISSB’s climate-related disclosure standard. It requires entities to disclose material information about climate-related risks and opportunities that could affect cash flows, access to finance or the cost of capital over the short, medium or long term. Its application in practice depends on individual jurisdictions’ adoption or endorsement.

Integrated, traceable data can help companies substantiate the inputs, assumptions and calculations behind disclosures. But an ERP and climate data connection alone does not guarantee IFRS S2 compliance; companies must still meet the standard’s full requirements for governance, strategy, risk management, metrics and targets, as applicable.

Investment in prevention can also be more easily presented and approved when executives compare the cost of resilience measures together with quantified potential losses.

By 2035, climate hazards could expose businesses to annual earnings losses of 6.6 to 7.3%, according to the World Economic Forum. However, this is not the same as a forecast of $560-610 billion in annual fixed-asset losses, so that formulation should not be used unless supported by a separate, directly relevant source.

SAP works with Jupiter Intelligence on enterprise climate intelligence

A leader in enterprise data integration and reporting, SAP is now expanding into physical climate risk intelligence capabilities.

Working with Jupiter Intelligence, SAP will help connect enterprise data with climate risk intelligence. Together, SAP and Jupiter will deliver what no single vendor could alone: a clean, auditable path from physical climate exposure to IFRS S2 disclosure. This is the data foundation companies need to manage climate risk as a core business variable, not just a reporting obligation.  

With businesses more exposed to climate risk now than ever before, integrating climate data into enterprise data ensures regulatory compliance. Even more importantly, it protects assets and supply chains from future climate disasters.