Executive summary Companies are grappling with the implications of the nature and climate crisis. As tangible business risks rise, they need to make better-informed decisions that safeguard corporate supply chains and secure industries and societies. The stakes are high: a recent study suggests that emissions already in the atmosphere today will lower global GDP per capita by between 11% and 29% by 2050.3 But where should business leaders and investors focus their attention and resources today? The urgency to decarbonize is clear. However, to date, little work has been done to connect climate science with even more immediate business risks and the pressing need for resilience and adaptation.4 This report fills that gap - offering a tangible assessment of climate hazards (specifically extreme heat, wildfires, drought, water stress, tropical cyclones, coastal flooding and fluvial flooding) and the risks they pose to companies’ fixed assets (property, plant and equipment) across 20 industries globally. Economies and societies are dependent on these assets to generate returns and drive societal value. The headlines are stark. Climate hazards could drive $560-610 billion of fixed asset losses per year across listed companies by 2035, depending on the emissions scenario, rising as high as $1.1 trillion by 2055.5 Without evidence-based resilience strategies, this equates to a drop of between 6.6% and 7.3% in average company earnings every year by 2035.6 As a comparator, S&P 500 profit margins declined by 15.3% during the depths of the Covid-19 pandemic but quickly recovered thanks to significant government investment and policy interventions.7 By contrast, recurring annual losses on the scale identified in this report would cause performance shocks that would become increasingly challenging to safeguard against through insurance and offsets. Associated impacts could include lower company valuations, disruption to the financial systems we rely on for trade and investment and ultimately, reduced global social and economic prosperity.The nature and climate crisis poses a growing threat to business profitability, supply chains and societal stability. This report shows how business leaders can adapt and build resilience. Fixed asset losses across listed companies by 2035 equate to a drop of 6.6- 7.3% in average company earnings every year. Summary of estimated annual fixed asset losses TABLE 1 Total estimated annual fixed asset losses ($ billion, all companies)Annual fixed asset losses (% EBITA, average per company) Emissions scenario Low High 2035 2045 2055 Sources: S&P Global Sustainable1, Accenture analysis. The first chapter of this report explores how seven climate hazards affect fixed assets held by listed companies around the globe. The analysis reveals that extreme heat accounts for 72-73% of the potential losses accruing to these fixed assets over the next decade. These losses are likely to manifest in the form of business interruption, higher repair and operating costs, and lower employee productivity. The most exposed industries - telecommunications and utilities - face losses equivalent to a drop in yearly earnings of more than 20% by 2035. Moreover, given the focus on fixed assets only, and the fact that commercial and scientific climate risk models do not fully account for the scale and scope of cascading threats, the total costs facing businesses from climate hazards are likely much higher.560 6.6 7.3 8.1 1 0.1 9.9 12.8610 680 850 830 1,070 Business on the Edge: Building Industry Resilience to Climate Hazards 5

Business on the Edge 2024