Climate Adaptation Unlocking Value Chains with the Power of Technology 2025

Investing in adaptation reduces the cost of climate impact Despite imminent and growing risks, business leaders have failed to invest adequately in tackling climate change. They have responded to stakeholders’ pressure to report climate risks by using frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD) or the Corporate Sustainability Reporting Directive (CSRD) for companies operating in the EU. However leaders remain hesitant about shouldering the upfront costs of mitigation and adaptation. There are links between mitigation measures, which seek to reduce the damage from climate change by trying to shift the world to a lower temperature path, and adaptation efforts, which strengthen society’s resilience against the effects of climate change. Both efforts can reduce the costs of the climate crisis, but even if optimum measures are in place, some economic damage is inevitable. The net cost of inaction can be expressed as the difference between the projected costs of climate change before and after implementing mitigation and adaptation measures, minus the investments made. In other words, it represents the potential savings generated by taking climate action. The current 3.0°C-plus pathway is projected to lead to total economic losses of between 16% and 22% of cumulative GDP by 2100, but these figures are likely to be underestimated, as systemic or unquantifiable impacts such as social costs and the lagged impacts of climate shocks on economic output are not considered.13 However, investing around 2% of the world’s cumulative GDP in additional mitigation efforts could keep the temperature increase below 2.0°C. In this scenario, economic losses of 11% to 13% of cumulative GDP by 2100 could be avoided. By additionally investing a relatively small share of cumulative GDP – less than 1% – in adaptation, it may be possible to reduce these losses by an additional 4% of cumulative GDP by 2100 (see Figure 3). The net cost of inaction is thus estimated to range between 10% to 15% of global GDP by 2100. However, if leaders take necessary mitigation and adaptation actions now, these costs could be significantly reduced.14 Resilience across the value chain will unlock greater value for all Adaptation must be at the core of every organization’s climate strategy, but it cannot stop there. Vulnerability to climate change is not just about a company’s own exposure – it is also tied to the resilience of the entire value chain (see Figure 4). Most adaptation strategies are narrowly focused on individual organizations or regions, yet the ripple effects of climate change extend far further. The economic case for taking climate action now FIGURE 3 Source: BCG. (2024). Why Investing in Climate Action Makes Good Economic Sense.15stcapmi cimonoce lato T I ncrement al mit igation investment s I ncrement al adaptation investment s )noitagitim htiw dediova( noitcani fo tso C )noitatpada htiw dediova( noitcani fo tso C stcapmi cimonoce elbadiovan UTotal economic impacts in >3°C scenarioIncremental P aris- aligned climate actionCost of inaction / Avoidable economic impacts Unavoidable economic impacts in <2°C scenarioClimate change costs and investments as a shar e of cumulative global GDP until 2100 (%) ~16%-22%~1%-2% ~11%-13% ~1%-4% ~4%-6%~<1% Net cost of inact ion ~10%-15% of GDP Climate Adaptation: Unlocking Value Chains with the Power of Technology 7