The Cost of Inaction 2024

Climate inaction would cost far more than climate action globally FIGURE 8 Climate change investments & loss avoided (% cumulative GDP by 21 00) Investments required to achieve "below 2°C” GDP loss avoided (“below 2°C” scenario vs. BAU 3°C pathway)Investing ~3% of cumulative GDP into mitigation and adaptation saves 10%-15% in net GDP loss Mitigation investments <2%Impact avoided with mitigation 11-13% Impact avoided with adaptation 4%Adaptation investments <1% Notes: All effects relative to hypothetical baseline without climate effects – 2023 GDP with IPCC AR6 WGIII growth assumptions (global GDP growth (ppp) range from 2.5 to 3.5% per year in the 2019–2050 period and 1.3 to 2.1% per year in the 2050–2100 (5–95th percentile). Rounding to nearest tens/hundreds. Temperature scenarios refer to 2100. Source: Benayad, A. et al. (2024). Why Investing in Climate Action Makes Good Economic Sense, BCG. Businesses will need to carefully navigate risks associated with climate change (see Figure 9). The following chapters of this report analyse both physical and transition risks to businesses, as well as the opportunities that adaptation to climate change can bring. Chapter 2: Physical risks are becoming more significant, contributing to lower revenues caused by supply chain disruptions and higher operational and capital expenses due to structural damage.Chapter 3: Transition risks are reshaping industries at the same time, driven by factors such as changing regulations, asset write-downs and shifting customer and investor perceptions. Chapter 4: Opportunities. These challenges also bring opportunities for higher revenues, lower operational costs through energy efficiency and the preservation of assets by adapting early. Corporates need to navigate a new array of risks and opportunities FIGURE 9 Action opportunity New products and services, new markets, resilience, resource efficiency and more affordable energy source – Higher revenue & margins from commercialization of new offers – Preserved assets due to proper adaptation and conscious investment decisions – Lower OpEx due to energy and resource efficiency – Lower cost of capital – Easier hiring and retentionCorporate cost of global inaction Physical risks (acute and chronic) – Lower revenue due to downtime, productivity loss and supply chain disruptions – Higher CapEx due to restoration of structural damage to facilities – Higher OpEx due to increasing input prices, insurance premiumsCorporate cost of own inaction Transition risks (legal, technology, market, reputation) – Higher OpEx due to changing input prices and new regulation – Value adjustments on investments terminated prematurely – Lower revenue due to declining demand on grey portfolio – Lower capitalization due to shift in investor perception Sources: Task Force on Climate-Related Financial Disclosures (TCFD). The Cost of Inaction: A CEO Guide to Navigating Climate Risk 13