The Cost of Inaction 2024

Physical risks could harm 5-25% of EBIDTA under current trajectory (by sector and region) FIGURE 10 5-10 %Average financial impact of physical risks by 2050 % yearly EBITDA at risk vs. today in a >3°C (current trajectory) vs. <2°C (Paris-target) scenario Europe North America South America Asia-Pacific Africa & Middle East Sector average10-15 %10-15 % <5% 5-10 % 5-10 % <5% <5% 5-10 % 10-15 %10-15 % <5% 5-10 % <5% <5% <5% 10-15 % 15-20 %15-20 % 5-10 % 10-15 % 5-10 % 5-10 % 5-10 % 10-15 % >25% >25% 5-10 % 10-15 % 5-10 % 5-10 % 5-10 %Communication services Utilities Construction & infrastructure Materials Food & beverages Oil & gas Healthcare Industrials 10-15 % >25% >25% 5-10 % 10-15 % 5-10 % 5-10 % 5-10 % 10-15 % 20-25 %15-20 % 5-10 % 10-15 % 5-10 % 5-10 % 5-10 %<5% 5-10 % 5-10 % <5% <5% <5% <5% <5% <5% 5-10 % 5-10 % <5% <5% <5% <5% <5% <5% 5-10 % 5-10 % <5% <5% <5% <5% <5% 5-10 % 10-15 % 5-10 % <5% <5% <5% <5% <5%Communication services Utilities Construction & infrastructure Materials Food & beverages Oil & gas Healthcare Industrials 5-10 % 5-10 % 5-10 % <5% <5% <5% <5% <5% <5% 5-10 % 5-10 % <5% <5% <5% <5% <5%>3°C scenario >2°C scenario Notes: Estimates include economic impact from asset damage and business interruption from wildfire, heat, coastal flooding, fluvial flooding, cyclones, water stress and droughts vs. historical baseline normalized to today; >3°C scenario is based on SSP3.7-0, which is a moderate- to high-emissions scenario projecting temperature increases of 1.7-2.6°C by 2050 and 2.8-4.6°C by 2100 . Translation of impact from % of asset value to EBITDA margin is carried out using sector benchmarks on median fixed asset turnover ratios (FAT) and EBITDA margins assuming sector and regional composition in 2050 is identical to current levels. Individual company impact estimates can vary vs. sector estimates shown here depending on differences in e.g. share of fixed assets and EBITDA margins vs. benchmarks. See Appendix for methodology and sources. Sources: Swiss RE, S&P Global Sustainable, Oxford Economics, Capital IQ, BCG analysis.2.2 Physical risks will translate into material costs within the next two decades Climate risks could already trigger material losses in the next two decades Figure 10 shows how companies in different major sectors would be impacted by physical climate risks under different temperature scenarios. In a scenario of unchecked climate change (>3°C pathway), companies in these sectors could find an additional 5% to 25% of their EBITDA at risk by 2050. Under a Paris-aligned scenario, these costs would be materially lower. 16 The Cost of Inaction: A CEO Guide to Navigating Climate Risk