In today’s post, ClimaTwin builds on our recent series about the advantages of adaptation for businesses. In this fast-paced, climate-challenged world, enterprises face increasing threats from extreme weather events and ongoing climate changes. With significant hurricanes, devastating floods, wildfires, and record-breaking temperatures becoming the new normal, forward-thinking organizations recognize that climate adaptation is no longer optional but a strategic necessity.
The Growing Imperative of Climate Adaptation for Business
According to recent research from the Boston Consulting Group (BCG) and Quantis, climate-related physical risks have tripled in economic impact over the past 25 years, surpassing $200 billion annually. This trend is expected to accelerate, with potential EBITDA losses ranging from 5% to 25% for companies that fail to adapt. These impacts are seen across four key areas:
- Decreased revenue (approximately 40% of impact) through production stoppages and reduced demand;
- Asset damage (20-25% of impact) requiring capital expenditure or early depreciation;
- Increased direct and indirect costs (20-25% of impact) for resources, energy, and operations;
- Higher financing costs (around 10% impact) through elevated interest rates and insurance premiums.
The financial sector is particularly vulnerable, with about 80% of European bank loan portfolios ($2.9 trillion) at risk from current and expected physical climate hazards. This leads to significant credit risk exposure for banks, with the likelihood of default potentially increasing by 4-5% for counterparties in high-risk areas.
How ClimaTwin Transforms Climate Risk into Opportunity
ClimaTwin offers an advanced climate intelligence platform that enables businesses to quantify, visualize, and strategically manage their physical climate risk exposure. Unlike methods that rely on vague methodologies or limited data, ClimaTwin provides clear, asset-specific insights that enhance risk management and support business development.
Our solution bridges the gap between high-level risk awareness and actionable intelligence by providing:
- Comprehensive Risk Assessment: Assess exposure to acute hazards (floods, storms, wildfires) and chronic stressors (water scarcity, rising temperatures) across different time horizons and climate scenarios;
- Asset-Level Granularity: Transition from sector-based estimates to understand how climate hazards affect specific assets, considering location-specific vulnerabilities;
- Financial Impact Quantification: Convert climate hazard data into projected financial impacts across capital expenditures, revenues, and operational costs;
- Adaptation Planning Support: Identify and prioritize adaptation strategies using cost-benefit analysis while considering insurance coverage and physical interventions.
Real-World Applications: Learning from Market Leaders
The BCG report highlights several cases illustrating how climate intelligence converts risk into resilience. Below, we summarize some of these findings. However, we believe this is not exhaustive. Their analysis concentrates on owned and operated assets. ClimaTwin’s platform identifies risks and opportunities for these assets and critical dependencies (e.g., roads, rail, ports, telecom, utilities, etc.) on which businesses depend.
Case Study 1: Power Generation Portfolio Risk Assessment
An initial climate risk assessment for a major power company revealed that facilities could incur annual impacts of €40 million by 2030, potentially escalating to €100 million by 2050 under severe climate scenarios. Through a detailed analysis, the assessment identified specific hazards according to asset type:
- Solar assets faced critical vulnerability to hail (73% of potential impact) and wildfire;
- Wind turbines exhibited moderate vulnerability to storms and winds;
- Thermal plants demonstrated high sensitivity to flooding.
Leveraging this knowledge, the company implemented targeted resilience measures tailored to the unique vulnerabilities of each facility type, safeguarding its most critical assets while optimizing adaptation investments.
Case Study 2: Commercial Real Estate Climate Resilience
A commercial real estate organization collaborated with their bank to assess how climate risks could affect their property portfolio. Through a comprehensive analysis of building features (roof materials, building height, underground floors) and insurance coverage, they concluded that:
- Insurance adequately covers risks from hail, wind, flood, and fire;
- Drought posed an uninsured risk, particularly to landscaping and vegetation.
This intelligence allowed the real estate company to improve insurance coverage for the most vulnerable properties while implementing physical resilience measures for uninsured risks, enhancing its risk profile with lenders.
The ClimaTwin Advantage for Financial Institutions and Asset Owners
ClimaTwin’s climate intelligence platform provides distinct advantages for various market segments:
For Banks and Financial Institutions:
- Enhanced Risk Management: Incorporate physical climate risk into credit risk evaluation and portfolio management.
- Client Engagement: Leverage climate risk insights to create adaptation financing products and advisory services.
- Regulatory Compliance: Meet growing regulatory expectations for climate risk disclosure and management.
- Market Differentiation: Establish a leadership role in climate resilience while expanding into adaptation financing.
For Large Asset Owners and Operators:
- Investment Protection: Protect essential infrastructure and operations from climate disruptions.
- Capital Planning Optimization: Prioritize investment in adjustments based on assessed risk exposure.
- Supply Chain Resilience: Identify and mitigate vulnerabilities across supplier and distribution networks.
- Strategic Advantage: Turn climate challenges into opportunities for innovation and competitive differentiation.
Moving Forward: From Risk Awareness to Resilience Action
The divide between climate leaders and laggards will grow as climate impacts intensify. Organizations that actively manage physical climate risks will safeguard their assets and operations while acquiring competitive advantages through improved resilience, innovation, and stakeholder trust.
ClimaTwin empowers organizations to move beyond acknowledging climate risk and actively implement effective adaptation strategies. By offering transparent, quantifiable insights at the asset level, we enable businesses to turn climate challenges into growth, innovation, and long-term resilience opportunities.
ClimaTwin® is a B2B SaaS solution that empowers stakeholders to assess the physical and financial impacts of future weather and climate extremes on infrastructure assets and the built environment.
Ready to get started? To learn more about how ClimaTwin can help you assess the physical and financial impacts of future weather and climate extremes on your infrastructure assets and investment portfolios, please visit www.climatwin.com today.
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