Embedding climate risk into business-as-usual makes it a core driver of strategy, decision-making and accountability across all functions. Build and adapt tools to measure climate risks and opportunities Companies should build and adapt measurement tools to assess both physical and transition risks. This involves designing new metrics, data collection methods and analytical models, while updating existing risk-management tools to incorporate climate-related factors. Depending on the type of company, this may include leveraging data-driven and digital technologies such as drones, internet of things (IoT), earth observation, augmented and virtual reality, advanced computing and AI to assess risks, build resilience and respond dynamically to climate events. For further information on the role of technology, see the World Economic Forum and BCG’s 2024 report, Innovation and Adaptation in the Climate Crisis: Technology for the New Normal.65Build capacity and know-how to understand new types of risks and opportunities Developing the expertise to understand new risks and opportunities is essential. Companies should ensure that their teams have the skills and knowledge to assess and respond effectively to climate risks. Setting up training programmes for employees, adding knowledge resources and hiring experts in risk management can help to meet this goal. For example, a major utility company, realizing they were not well-equipped to assess the opportunities associated with their transition to a lower-carbon economy, developed new valuation methods and capabilities to calculate the return on investment on unfamiliar asset types (e.g. microgrids, demand response, EV infrastructure).Develop effective climate risk systemsEnablerCreate a culture of climate risk awareness and innovation Establishing a culture of climate risk awareness throughout an organization is crucial because, for many companies, the risks influence every aspect of their business. Climate risk should no longer be confined to a sustainability team. For example, in real estate businesses, it involves not only evaluating location risks, but also using sustainable materials or planning for energy-efficient cooling systems. Cascade climate risk ownership throughout business units and functions Climate risk should become a core business topic, with ownership taken throughout an organization. This shift starts at the top, with management aligning on the messaging and leading by example. From there, it is essential to implement operational-level training, workshops and climate risk management into KPIs at the same level as financial objectives. At real estate services firm JLL, for instance, climate risk management is embedded into investment decisions and operational strategies, with the creation of a net-zero council that assigns accountability for carbon footprint and climate risks to senior business leaders. At ASPI, we’ve embedded climate risk into our core operations, supported by our 40+ ESG ambassadors, who promote broader sustainability initiatives, including climate preparedness, across all functions. Concetta Testa, Head of Sustainability, Autostrade per l’Italia (ASPI)Integrate climate risk into business-as-usualEnabler 2 3 The Cost of Inaction: A CEO Guide to Navigating Climate Risk 47

The Cost of Inaction 2024