As extreme weather events become more frequent and intense, businesses face growing exposure to their negative impacts. Reducing their vulnerabilities is essential, but so is mobilising business innovation, technical and investment capacity to deliver adaptation solutions.
There is growing evidence that businesses take adaptation action – including retrofitting facilities, diversifying supply chains, and adjusting their operations – but these efforts are uneven and fragmented across firm size, sectors and regions.
Many businesses face significant barriers to adaptation, including limited access to relevant weather data, low awareness of weather-related risk and insufficient technical capacity to assess risks and opportunities. The cost of adaptation is seen as high or difficult to quantify.
Businesses can play a critical role in delivering adaptation solutions, driving innovation and facilitating knowledge transfer. This policy brief highlights technology, infrastructure, nature-based solutions and insurance to illustrate this.
Public policy is essential to unlock the private sector contribution to building resilience in the real economy. Policy action can generate and facilitate the exchange of risk information and establish clear policy, regulatory and fiscal frameworks that support adaptation investments.
Harnessing the private sector’s contribution to climate adaptation
The last decade has been the warmest on record, fuelling the intensity of extreme weather events (WMO, 2026[1]). Adapting to extreme weather events – including floods, wildfires, storms, and heatwaves – and weather variability is essential, as these events pose mounting risks to people, economies, and ecosystems.
As extreme weather events become more frequent and intense, businesses are not immune to their negative impacts. Recent OECD work shows that the share of firms experiencing two or more heatwaves annually rose from just 10% in 2000 to over 40% by 2021 across a sample of 23 countries, underscoring a growing exposure even in traditionally low-risk geographies (Figure 1) (Costa et al., 2024[2]). Heatwaves significantly reduce labour productivity and could reduce global working hours by the equivalent of 80 million full-time jobs by 2030, with the most pronounced impacts in agriculture, construction, transport, and tourism (Costa et al., 2024[2]) (International Labour Office, 2019[3]). Other extreme events can also significantly disrupt business. For example, in the United Kingdom (UK), the 2007 floods caused business damages amounting to USD 1.4 billion, affecting 7 300 businesses (OECD, 2014[4]). A recent global business survey reveals that 50% of responding firms reported they had suffered from extreme weather events in the past three years (MarshMcLennan, 2024[5]). While often underestimated, the indirect impacts of weather-induced disruptions on business can be significant. For instance, OECD analysis suggests that up to 85% of business losses from a potential major flood in Paris (France) would be caused by interruptions of electricity and transport, rather than by the flood itself (OECD, 2014[6]).
Business losses have ripple effects across the broader economy. Physical damage to business assets and disruptions in production cascade through value chains and thereby lead to higher input costs, reduced productivity and forgone revenues. These firm-level shocks can translate into aggregate lower output and investment levels, job losses, inflationary pressures that increase input costs, and reduced government revenues, potentially undermining growth in some sectors. An example of these ripple effects is the slowing of shipping traffic along the Rhine River during the 2018 drought, when water levels fell so low that cargo ships could carry only a fraction of their normal loads. As a result, transportation costs increased and supply chains were disrupted, leading to a 1% reduction in Germany’s manufacturing output (Deutsche Bank, 2023[7]) and a 10% reduction in the production of chemicals and pharmaceuticals over three months (OECD, 2023[8]). These events can impact financial institutions by generating credit losses, reducing liquidity, and increasing market volatility (OECD, 2025[9]).
Businesses’ vulnerability to extreme weather varies significantly depending on business type, structure, and size, as well as across sectors – and largely depends on businesses’ reliance on natural resources and interconnected physical infrastructure (Agrawala et al., 2011[10]). Their exposure is defined by the location of their assets. Overall, companies operating in climate-sensitive sectors, such as agriculture, forestry, fisheries, energy, and tourism, are particularly affected, with measurable impacts on both commodity-producing and service-oriented firms. For example, the 2022 drought in France reduced hydropower production by 30% in the first half of the year, resulting in income losses of EUR 1.4 billion (Franke, 2022[11]).
In view of this, mobilising private sector action for adapting to extreme weather is essential. This is important to reduce their own vulnerabilities as well as to harness their innovation capacity, investment potential, and technical expertise in developing and using adaptation solutions. More broadly, it can also help reduce government contingent liabilities and enhance whole-of-society resilience and preparedness for weather extremes. Adaptation investments generate tangible economic benefits for firms through avoided losses, productivity gains, or reduced financing risks, and many firms are already taking action by retrofitting facilities, diversifying supply chains, or adjusting operations. However, these efforts remain uneven and fragmented across sectors and regions because of challenges related to information, awareness and capacity, as well as perceived costs and incentives.
Share of firms experiencing one or more heatwave episodes annually between 2000 and 2021, across 23 countries
Note: The figure shows the frequency of the number of heatwaves per year, where a heatwave is defined as a period of five or more consecutive days with maximum temperature above the 95th temperature percentile observed in the pre-analysis period (1995-1999). The figure shows the proportion of firms, by year, experiencing 0, 1, 2, or 3+ heatwaves at their operational locations. The 23 countries included in the analysis are: AUT, BEL, BGR, CZE, DEU, DNK, ESP, EST, FIN, FRA, GBR, HUN, ITA, JPN, KOR, LUX, NLD, POL, PRT, ROU, SVK, SVN, SWE.
Source: (Costa et al., 2024[2]).
Challenges for businesses increasingly also emanate from extreme events occurring outside of national borders, especially when value chains, suppliers, or critical trade networks are affected. Adaptation is particularly relevant for firms with global sourcing strategies in climate-sensitive sectors like agriculture, textiles, manufacturing, pharmaceuticals and raw materials, where disruptions abroad can have significant domestic economic impacts. In 2023-2024, for example, record-low water levels in the Panama Canal reduced shipping traffic by 29% in fiscal year 2024 (Seatrade Maritime News, 2024[20]), leading to disruption in international trade flows and increasing logistics costs across different sectors. In Ireland, the pharmaceutical sector is estimated to face high operational risks due to its dependence on overseas suppliers of medicines and raw ingredients (Adaptation Without Borders, 2024[21]). Such examples underscore that no firm, sector, or country is immune, as physical distance offers little protection in an interconnected global economy.
In addition to physical and operational risks, financial risks are also mounting. Firms that are highly exposed to physical extreme weather events face rising insurance premiums, more restrictive coverage terms, and in some cases, reduced insurability (e.g. this has been the case for some property owners in California following repeated wildfires). Growing weather-related risks are also influencing businesses’ access to finance: recent studies show that firms perceived as heavily exposed to and/or unprepared for weather-related risks may experience higher borrowing costs and weaker credit ratings (Bloomberg, 2025[22]). For example, firms located in Italian regions prone to floods tend to pay significantly higher interest rates on loans and higher cost of debt (Bassetti, Dal Maso and Pieroni, 2025[23]).
Nonetheless, adaptation opens strategic opportunities. Firms that proactively integrate resilience into their operations and planning can reduce the costs of disruptions induced by extreme weather. At the same time, investing in adaptation can enhance their competitive advantage by improving efficiency, opening new innovation and business opportunities, and securing new markets (OECD, 2015[24]) (Agrawala et al., 2011[10]) (Systemiq, 2025[17]). In the context of a changing climate, the growing demand for resilient infrastructure and crops, water- and energy-efficient technologies, data and modelling services, or integrated ecosystem-based solutions creates new business opportunities. The UK investigates opportunities in its Climate Risk Assessment (UK Climate Change Committee, 2021[25]). Companies that respond early to these needs can diversify revenue, access new markets, and contribute to shaping wider societal resilience in the years to come.
Existing evidence suggests that business engagement in own adaptation remains relatively low, with more adaptation action taking place in larger businesses than in SMEs. Such efforts can include strengthening the physical resilience of assets (e.g. developing more resilient assets or retrofitting existing ones), investing in back-up measures that allow for business continuity during extreme events (e.g. planning for diversified or redundant supply chains), and adapting business strategies and working patterns to enhance long-term resilience (e.g. developing new protocols, shifting planting dates, or altering crop mixes). These efforts are often underpinned by firm-specific risk assessments and planning processes that integrate resilience into business planning processes. Data from across European countries shows that large firms are more likely to undertake adaptation measures (EIB, 2024[26]) (EIB, 2023[27]), as shown in Figure 2. However, the data may not fully observe adaptation by smaller firms with lower capacity to report on adaptation measures. In 2024, 66% of EU firms indicated being directly impacted by extreme weather events (EIB, 2024[26]). However, only 57% of EU firms declared to be concerned about the physical risks posed by extreme weather (EIB, 2023[27]) and many private firms tend to see adaptation efforts only as relevant to them in the future (MarshMcLennan, 2024[5]).
Share of EU firms taking adaptation measures to build resilience to physical climate risks (2024)
Note: This figure is based on responses to the question “Has your company developed or invested in any of the following measures to build resilience to the physical risks of climate change? Sample: 13 500 firms from across all EU Member States and the United Kingdom (excluding do not know/refused responses).
Source: adapted from (EIB, 2024[26]).
Adaptation efforts tend to be more advanced in critical service providers – those who operate services deemed critical to the economy and society such as critical infrastructure (water, transport, energy). Utilities are more likely to assess weather variability, due to its effect on supply operations and infrastructure (Agrawala et al., 2011[10]). One telling example is that of Electricité de France (EDF), which has scaled up its High Heat Programme to adapt the nuclear powerplant fleet to maintain output during heatwaves and droughts. Adaptation efforts included asset retrofitting (e.g. reinforcing the reactor buildings to withstand higher temperatures), new cooling sources, larger reservoirs, and innovations to reduce the plants’ water consumption (EDF, 2023[28]). Vegetation clearance protocols were set up in Greece around power lines and transport corridors (OECD, 2023[13]). In the Netherlands, logistics and port operators are collaborating with national authorities and research institutions to develop a digital twin of selected Dutch inland waterways to monitor and stress-test transport routes in an effort to ensure supply chain resilience despite drought-induced low river levels (Deltares, n.d.[29]).
The level of business engagement in adaptation also varies significantly across regions. Across OECD countries, firms tend to be more likely to engage in structured climate risk management, supported by regulatory drivers and evolving disclosure frameworks. In contrast, businesses in developing and emerging economies often face larger barriers, such as limited access to finance, technical capacity, or lack of relevant data. Despite these challenges, innovative private-sector adaptation examples are emerging in parts of the Global South too, particularly in agriculture and infrastructure (WEF, 2022[30]). For example, many firms in export-oriented sectors in Guatemala (e.g. sugar, coffee and cocoa industries) invest in resilience autonomously, to ensure minimal disruptions to their supply chains if and when hazards strike. In Senegal, the tourism sector invested in mangrove and beach restoration and preservation against coastal erosion to ensure business continuity. These actions have been implemented, often without financial support from governments or development co-operation (Casado Asensio, 2021[31]).
In recent years, increasing regulatory expectations, investor demand, and the need to manage weather-related impacts have prompted firms to increasingly assess and report on their physical risks and resilience levels. Voluntary and mandatory disclosure frameworks – such as the G20 Task Force on Climate-related Financial Disclosures (TCFD) and the Global Reporting Initiative (GRI) – encourage companies to report on, inter alia, their exposure to physical climate risks and adaptation measures. The EU’s taxonomy for sustainable activities includes provisions on adaptation for the buildings, infrastructure, agriculture, and water sectors. While reporting practices are still evolving and often limited by inconsistencies and data gaps, these initiatives signal a shift toward greater transparency and standardisation in how private firms evaluate and communicate about their resilience.
Despite the growing evidence of weather-related risks affecting activities and assets, several barriers continue to hinder businesses from adapting for their own interests as well as bringing adaptation to scale. These include:
Information
Businesses, in particular SMEs, face particular challenges in accessing granular and business-relevant weather information, in making risk and cost-benefit assessments tangible, and in undertaking quantitative assessments of the potential impacts of extreme weather events (Li, 2024[32]) (IEA, 2022[33]). Forward-looking risk information by sector is particularly important too, as relying solely on historical data already available to firms may lead to an underestimation of future risks and impacts. A recent global survey revealed that nearly half of the surveyed businesses solely rely on qualitative analyses for mapping potential weather-related impacts (MarshMcLennan, 2024[5]). Climate risk information, including supply-chain risk maps, can also help businesses better appreciate the benefits of adaptation – such as supply chain stability, reduced operational disruptions, and long-term competitiveness.
Awareness and capacity
Businesses’ awareness of physical weather-related risks and opportunities in adaptation remains uneven. Awareness tends to be higher among business leaders in areas that have previously been affected by losses (MarshMcLennan, 2024[5]). Many firms also lack the technical expertise and financial capacity needed to assess weather-related risks, design appropriate responses, or integrate adaptation into core business strategies. Furthermore, some firms may not attribute extreme weather events to climate change, which reduces their motivation to adapt (Li, 2024[32]). In France, voluntary water management agreements such as the contrats de nappes offer an example of how farmers and industries can build capacity to respond to increasing water stress through co-ordinated action on groundwater management. Similarly, the UK Resilience Academy provides professional training for businesses and serves as a one-stop learning hub for resilience, as well as Japan’s National Institute for Environmental Studies, which has established an open-access platform to facilitate adaptation knowledge exchange (The UK Resilience Academy, 2026[34]) (A-Plat, 2025[35]).
Similarly, there are research partnerships, innovation incubators, and pilot projects to support research and innovation that can help reduce the costs and uncertainty of adaptation investments, especially for SMEs and sectors with lower innovation capacity. For example, New Zealand’s government is supporting agriculture businesses through a targeted research programme. Public-private and B2B dialogues are also important to raise awareness, as illustrated by the EU’s Climate Resilience Dialogue.
Perceived costs and benefits
The high upfront costs of adaptation also act as a barrier to action: adaptation is seen as a cost rather than an investment. Retrofitting assets and restructuring entire supply chains can be expensive, and the business case for such investments is often difficult to make, given the long-time horizons over which benefits materialise and the uncertainty inherent in climate projections. Whereas adaptation investments tend to yield results over the medium to long term, this may not align with shorter business planning cycles (Li, 2024[32]). Private investment in resilience may also be hindered when the benefits of resilience measures are difficult to quantify or do not create revenue streams (IEA, 2022[33]). Overall, in the absence of clear rules, standards, or financial incentives, adaptation is often perceived as a cost rather than a strategic investment (MarshMcLennan, 2024[5]). As a result, only a minority of large global businesses are currently investing significantly in climate resilience (WEF, 2023[36]).
Incentives
Private companies often face few direct incentives or regulatory mandates to adapt their business to the impacts of extreme weather events. For instance, firms may lack the incentive to invest in resilience if they expect the government to absorb and compensate for extreme weather-related losses. For example, the Australian government no longer provides ad hoc disaster assistance at the federal level as a way to encourage better ex ante drought risk management, but some states and territories have continued to offer ad hoc drought assistance (Glauber et al., 2021[37]). Certain public interventions – such as poorly designed ex post compensation for extreme weather-related damages – can weaken this incentive by creating expectations of government bailouts, which might discourage proactive risk management.
Businesses have an important role in delivering effective adaptation solutions and fostering innovation, e.g. by investing in resilient infrastructure, developing new weather-resilient products, or enhancing supply chains. Engineering firms, insurers, digital technology providers, and companies delivering nature-based solutions can play a key role as solution providers, offering critical services and innovations. This section explores how business-led adaptation efforts can support broader resilience objectives in selected areas such as technology, infrastructure, nature-based solutions, and insurance.
Technology
The private sector is at the forefront of developing and deploying digital and innovative technologies to accelerate adaptation. Digital tools such as artificial intelligence (AI), drones, earth observation systems, and advanced computing enable better risk assessments, forecasting, and early-warning systems (WEF, 2024[38]). These tools can contribute to developing increasingly sophisticated weather and climate models, as well as better monitoring and early-warning systems (e.g. by integrating sea surface temperature data into ocean models or including smart sewer systems that avert flooding during heavy rainfall). For example, in agriculture, drone-based monitoring combined with AI can help optimise irrigation schedules and detect crop stress early, enabling farmers to better manage drought risk (WEF, 2024[39]). In addition, private investment in research and development accelerates the creation of new materials, climate-resilient infrastructure designs, and adaptation-focused products and services. Overall, innovation in adaptation technologies is advanced in sectors such as water management, infrastructure and agriculture, where market demand for adaptation solutions is gradually rising (Touboul et al., 2023[40]). Innovation in agricultural adaptation technologies has almost tripled in OECD countries relative to overall innovation in agriculture, suggesting a real switch towards «climate adaptation technologies» (OECD, 2025[41]).
Infrastructure
Engineering and construction firms play a critical role in weather-proofing physical assets and systems. Across OECD countries, a large share of critical infrastructure is operated by the private sector (OECD, 2014[4]) and constructed by private sector contractors. By integrating extreme weather risk considerations into the design, construction, and maintenance of infrastructure, firms contribute directly to reducing the vulnerability not just of the infrastructure service itself, but also of communities and economies. For example, the development of flood-resistant transport networks or drought-resilient water systems can ensure the continued functioning of essential services and business operations under changing climatic conditions (OECD, 2024[42]) (OECD, 2018[43]). Public-private partnerships (PPPs) in infrastructure planning can further help advance adaptation by mobilising long-term financing, unlock technical expertise (e.g. on risk assessment), and accelerate the deployment of resilient infrastructure at scale provided risks are adequately taken into account. Korea has done so for green roofs and cooling centres as part of larger urban developments. However, a recent study in five coastal regions shows that transport, construction and utilities lag behind in terms of business expenditures for adaptation (Filatova, T., Taberna, A. and Chatzivasileiadis, T., 2025[44]).
Nature-based solutions
Firms can also support adaptation through nature-based solutions (NbS), which consist in the protection, restoration, or sustainable management of ecosystems to address societal challenges such as extreme weather events. Private actors – especially in sectors such as agriculture and forestry – can invest or participate in the delivery of NbS like ecosystem restoration, agroforestry and reforestation projects, and sustainable land management. These measures not only reduce physical climate risks, such as flooding, heatwaves and soil erosion, but also provide co-benefits in terms of biodiversity, carbon sequestration, and well-being (OECD, 2020[45]). By aligning business operations with ecosystem protection, firms can contribute to systemic resilience while enhancing their own sustainability performance. Yet, recent evidence shows that there remains significant scope to further leverage the private sector’s engagement in this area (MarshMcLennan, 2024[5]).
Insurance
The insurance industry plays a critical role in adaptation by helping households, businesses, and governments manage extreme weather risks and recover from the related shocks. At its core, insurance can provide a mechanism to signal risks and incentivise adaptation, cover the costs of reconstruction and, in many cases, compensate for business disruption provided that there is accurate risk pricing, sufficient insurer capacity, and appropriate regulation. Through tools such as climate risk modelling and parametric insurance, insurers can also help clients better understand and price weather-related risks. By linking coverage terms and pricing to the level of risk and the adoption of specific adaptation measures, insurers can create incentives for risk reduction. Parametric insurance, in particular, also facilitates faster recovery following extreme weather events by enabling rapid payouts (OECD, 2022[46]) (OECD, 2021[47]). Some local governments have begun to harness this: for example, the City and County of San Francisco partnered with local insurers, building on private sector catastrophe modelling expertise to inform the development of a comprehensive sea-level rise adaptation plan (OECD, 2018[48]). By expanding access to weather-related risk insurance, particularly in underserved regions and sectors, the industry can play a key role in strengthening societal resilience as a complement to effective adaptation policies, land-use regulations and early-warning systems. However, insurance coverage remains limited, with only 21% of EU firms being insured against weather-related risks (EIB, 2023[27]; EIB, 2024[26]). For instance, in the UK, 90% of the businesses affected by the 2007 floods were underinsured (OECD, 2014[4]).
Policy plays a critical role in harnessing business’ potential to adapt (OECD, 2024[49]) and can be prioritised to target support with the greatest impact in overcoming barriers. Governments can:
Make robust and relevant information accessible to help raise awareness and help shift mindsets from reactive to proactive resilience planning. Public authorities can disseminate information on extreme weather risk – such as high-resolution data, climate projections, and sector-specific impact assessments – and the economic implications of inaction to inform businesses’ own risk assessments and short-term and long-term decision-making.
Strengthen businesses’ awareness and technical capacity with targeted training programmes (e.g. for SMEs or in sectors most at risk), practical toolkits and guidance. Governments can also support research partnerships, innovation incubators, and pilot projects to lead by example in areas with growth potential. Professional and vocational education can also integrate adaptation competencies to ensure that the future workforce acquires the technical skills. For example, in Austria, a pilot training programme for business consultants was launched to strengthen their ability to advise companies on climate risks and practical adaptation measures, helping translate climate data and risk assessments into business-relevant guidance (Federal Environment Agency, 2025[50]).
Reduce costs and maximise benefits of adaptation by building an enabling and coherent policy and regulatory framework that:
Consider adaptation in environmental permitting, public procurement standards, and investment approval processes, thus incentivising businesses to consider long-term climate resilience into their operations and investment decisions. For instance, applying adaptation criteria to publicly funded infrastructure projects – as this was the case in the Netherlands, where mandatory resilient design standards (designed considering projected future climate scenarios) were made mandatory for all publicly commissioned flood-defence projects. Other good practice examples include the tagging of public expenditures and investments for adaptation (among other objectives) under the Green Budgeting framework in France and requirements for developers to include climate risk assessments and adaptation plans as mandatory components of environmental permit applications in the United Kingdom.
Increase transparency on businesses’ weather-related risks with tools such as taxonomies and disclosure arrangements to guide investment decisions towards effective adaptation and improve borrowing conditions. Clear and consistent regulatory frameworks can support alignment between corporate reporting and investment practices and national adaptation goals. Some frameworks already exist – for example, the EU Taxonomy includes provisions on adaptation – but these remain limited in scope.
Facilitate businesses’ access to adaptation finance with instruments such as blended finance, government guarantees, concessional loans that can be used to de-risk, and reduce the financial uncertainty of returns to investments of adaptation measures and encourage greater private investment in resilience. For instance, in New Zealand, the government supports the adaptation of farms by offering grant schemes and co-funding nature-based solutions that help reduce erosion from floods and drought.
Target appropriate public support to help when upfront costs or information gaps hinder action, and where proactive adaptation is more cost-effective than absorbing systemic losses, with well-designed subsidies, grant schemes, and tax incentives for companies that engage in specific resilience-building measures (e.g. tax breaks for adaptation investments or improved conditions for post-event compensation for businesses that had implemented adaptation measures). For instance, the Czech government introduced a subsidy programme for construction companies to incorporate rainwater harvesting systems into both new and existing buildings (OECD, 2025[19]).
Seize opportunities from public-private partnerships (PPPs) to combine the long-term strategic vision (and risk-sharing capacity) of the public sector with the technical know-how, innovation, and financial resources of private stakeholders in large-scale adaptation projects.
Align incentives and eliminate disincentives to adapt:
Review and update existing regulations and technical codes and standards to ensure they do not inadvertently undermine adaptation priorities (e.g. by permitting construction in high-risk zones or by failing to enforce building codes designed for climate resilience) and improve mainstreaming of adaptation to shift market signals and encourage a more systematic, forward-looking approach to climate risk management across sectors. A good practice example of regulatory requirements for enhancing business resilience comes from Canada, where large rail operators are required to reduce train speed during high wildfire risk periods, as well as to remove flammable materials from the tracks (OECD, 2023[13]).
Embed adaptation criteria into existing financial support schemes – such as agricultural subsidies or industrial development grants – to shift sectoral investment patterns, incentivise climate-resilient business decisions, and ensure that public funds do not inadvertently reinforce vulnerability. For example, linking access to agricultural subsidies to the adoption of soil conservation or water efficiency practices can promote long-term resilience while maintaining productivity goals.
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Contact
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