The world order is currently undergoing a tectonic shift due to the climate change crisis, which is having a debilitating effect on the economy, ecology, businesses, and humans at an unprecedented rate. The climate crisis has left everyone in the lurch. Unfortunately, most governments and institutions across the world are reacting and not responding to climate change and how it impacts them.

A recent study by the World Economic Forum’s Global Risks Report 2025 revealed that weather and climate change events are the second-most difficult security threats after armed conflicts and war in the world. Financial institutions, government bodies, communities, migrants, well-established firms, and emerging start-ups are all facing the brunt.

There are multiple reasons why climate change is destroying established orders: lack of credible climate risk data, lack of subject-matter expertise or depth, and patchy or fragmented pieces of information regarding how climate change is posing existential risks. Moreover, there is no centralised climate data repository and much-needed methods to minimise or avert climate risk with a timely diagnosis of climate risk hotspots and climate action.

The Reserve Bank of India has published a financial climate risk disclosure rules draft and is planning to come up soon with its data repository, which could only focus on financial aspects in a limited fashion. The RBI is in the process of finalising the disclosure norms for regulated entities to outline their climate risk management plan. India’s premier financial body recently announced that Indian banks and Non-banking Financial Companies (NBFCs) should consider establishing a common pool of bankable projects for climate-related financing. This comes after the Reserve Bank of India earlier recognised climate change as a significant risk to the financial ecosystem. It had also released a draft standard disclosure framework in 2024 on managing climate-related financial risks for the regulated entities. The RBI Governor Sanjay Malhotra believes “the impact of climate change risks is not limited to the financial system alone but extends to the real economy."

Increasing climate risk poses a danger to the world:

Thousands of lives are lost due to climate change and its chilling effects on the international and local economies. For instance, the Climate Risk Index Report 2025 revealed that from 1993 to 2022, 765,000+ people died worldwide and direct losses of nearly USD 4.2 trillion (inflation-adjusted) directly resulted from more than 9,400 extreme weather events.

International trade dynamics, patterns, and revenue models are rapidly changing due to the climate change crisis. The global economic order is under escalating pressure and domestic economies are also feeling the pain. For example, the loss of GDP in the global economy and domestic economies of major powers, including India and China, are witnessing an alarming surge. This results in cascading cataclysmic effects on the corporates, investors, shareholders, and all other stakeholders.

According to the EDHEC Infrastructure & Private Assets Research Institute findings published in 2024, 97 per cent of the investors surveyed said they believe climate risk is significant. In the same survey, around 76 per cent of investors revealed climate risk will have a medium to high-risk impact on their infrastructure. Most importantly, about 76 per cent of the investors agreed that financial institutes don’t have adequate climate data and climate scenarios to evaluate physical climate risk in infrastructure investments. A study by the same research institute in 2023 revealed, “a disorderly scenario could result in a substantial loss of value to infrastructure investments of nearly USD 600 billion. Moreover, the negative effects of transition risk will be felt across all sectors, including low-carbon ones such as Renewables and Social Infrastructure.”

The cost on the global economy is exponential. The world GDP would be more than 37% higher today if no global warming had taken place between 1960 and 2019, as per the US’s National Bureau of Economic Research (NBER). Researchers of the same paper revealed that the economic costs of a hotter planet most likely will be at least six times more than all the current estimates.

A similar study by the Journal Nature pointed out that average global incomes could drop additionally by around a fifth (19% decline) in the next 26 years due to the climate change crisis. So then, how can the world deal with this impending crisis? This can be done by mitigation and adaptation strategies besides building people’s resilience against climate change.

Climate change-induced disasters have led to unprecedented economic losses for China. Extreme weather events caused an economic loss of more than $32 billion for China in the third quarter of the year. The world’s second-largest economy witnessed multiple typhoons and floods from record-breaking rainfall in 2024. The unprecedented economic loss for China doubled during the first half of 2024. This speaks volumes about China’s increasing vulnerability to the climate change crisis.

Climate threats to India and its businesses:

India too could suffer a staggering 24.7% loss of its GDP by 2070, as per a Asian Development Bank Report. Rising sea levels and extreme weather events will drive these losses further in the coming years. Every aspect of life, from agriculture to labor, will feel the pain. The report warned that around 300 million people living in the coastal regions could be at high inundation risk due to the climate change crisis. This could also mean damage to trillions of dollars worth of coastal assets annually by 2070.

In the most recent study by the Germanwatch Global Climate Risk Index 2025 report, India was ranked sixth amongst the most affected countries due to extreme climate change conditions and weather events between 1993 to 2022. India witnessed more than 400 extreme weather events reported in 30 years with over 80,000 deaths. The country also suffered a massive loss of $180 billion due to climate disasters.

What we need therefore is urgent and coordinated climate action with a special focus on data to minimise climate risk or at least manage it well, with government and businesses coming together for a timely response to the looming crisis.

Climate risk management with accurate data repository:

The lack of accurate, specific, clear, and centralised climate risk data can destroy economies as explained earlier. It is the most important factor that can make your firm, businesses, operations, and revenue climate-resilient. We need centralised, credible, and tailored climate risk data solutions to help companies, investors, and shareholders in both physical climate risk management and transition risk management to ensure the climate-proofing of corporates across the world. It is a well-established fact that climate risk is affecting asset valuations through transition risk and physical risk methods.

For example, a paper titled How Does Climate Risk Affect Global Equity Valuations? A Novel Approach, the EDHEC-Risk Climate Impact Institute revealed that transition risk has been gaining more attention when it comes to assessing climate risk and its effects on valuations. The report further said, “physical and transition costs are two sides of the same valuation coin: the greater the transition effort, the smaller the expected physical damages, and vice versa”.

India, in particular, requires these solutions to protect its businesses from climate risk as it is a growing market and also because it is the 7th most climate-vulnerable country in the world. Moreover, there is a pressing need for solid decision-making to stay ahead in sustainable financial management in a rapidly climate-induced volatile market landscape. Climate risk management is not just about gathering data and understanding them but also about converting them into actionable insights to strengthen financial strategies and implement them.

Here is a look at some practical scenarios to consider:

Climate risk management: Most businesses and financial institutions are under mounting pressure of climate risk, which is causing economic ripples for almost all stakeholders. Banks are asking for climate risk disclosures and accurate assessment reports with third-party (independent) authenticity verification about the project and company before pumping more money into it. Moreover, the climate change crisis is a multi-dimensional challenge with several layers of problems. In a scenario where the core functioning of the company operations depends on factors controlled or impacted by the climate change crisis, it becomes critical to ensure timely, accurate, and efficient climate risk management.

Investors believe climate change risk is already affecting portfolios, equity valuations, and all economic output, especially in climate-vulnerable sectors but not being limited to just them. The changing climate landscape is also causing equity revaluation consistently. The London Stock Exchange Group’s (LSEG) COP 29 NetZero Atlas report highlights escalating climate risk for investors and how to mitigate that. It said, “These impacts are asserting themselves faster than expected, with recent forecasts suggesting that annual damages attributed to climate change are likely to reach US$38 trillion by the mid-century under a 2°C warming scenario.”

Climate-proof investment: Having credible and practical climate data can greatly assist in minimising investment-related risks. Climate-conscious investments can be made and any potential risk related to climate change can easily be assessed and to an extent be predicted. Investors will be better positioned to assess the long-term viability of investments in industries or regions that might be vulnerable to climate change. This will help investors leverage data to make informed decisions regarding climate change, especially in the context of investments and environmental management. For instance, the European Central Bank research in 2018 found that weather-related catastrophic losses accounted for more than 80 per cent of all insured catastrophe losses that were driven by increasing frequency of weather-related events. With prior use of climate risk data and effective deployment of advanced technology, this loss could have been either minimised or avoided to a great extent.

Managing company or project resources: Multiple types of climate risk are associated with any company, sector, or project. For example, developing a particular type of infrastructure at a climate change-induced risk zone could be a big challenge for any company. Moreover, managing migrant laborers to work on a project for any organisation in a climate disaster risk zone worsens economic hardships and delays the work. Studies suggest India incurred an income loss of $159 billion (5.4% of its GDP value) due to extreme heat in 2021 in areas such as manufacturing, agriculture, and construction. The latest Reserve Bank of India report highlighted that up to 4.5 per cent of India’s GDP could be at risk by 2030 due to lost labor hours and due to loss in laborers not wanting to work due to extreme heat caused by the climate change crisis. This increases the economic costs for the laborers and means trouble in managing company resources. Hence, accurate data and timely climate risk management will enable businesses in understanding how these risks could impact their operations, supply chains, and assets.

Minimising loss of revenue due to future climate catastrophe: As explained earlier, disasters induced due to climate change could mean immense loss of money and even shut down for existing businesses. This could happen if the stakeholders in any project are not aware of climate risks and how it impacts them negatively. For instance, a company could most likely halt its operations due to water scarcity or if its equipment gets damaged due to climate change and temperature rise 5 years after establishing a business operation in a particular region.

Maintaining a competitive edge in the climate-conscious economy: The world is increasingly becoming climate-conscious. Gone are the days when just the political atmosphere and the economic prospects used to decide the future of any business and its profitability. In today’s day and age, environment and climate change are deciding which way your business could go. Clients, investors, the economy of businesses, and even employees are focusing on being extremely climate-conscious and feel that climate change has already started affecting them in their lives. Stakeholders can use climate risk data which can be converted into actionable insights for better decision-making and developing tailored strategies.

Infrastructure planning: Climate risk management plays a very significant role in climate-resilient infrastructure planning. For instance, any building that aims to withstand future climate risks such as droughts, heatwaves, floods, alkalisation of buildings, etc, must get a timely climate risk assessment done. Not just in terms of climate risk associated with the project but also in the area where the builders are going ahead with the construction.

Community resilience and climate adaptation: Local communities can utilise climate data to understand local vulnerabilities and develop adaptation plans to address climate change impacts. Identification of climate hotspots with the help of emissions data will also immensely assist in facilitating climate adaptation at hyper-local, local, national, and international levels for both the corporate businesses and communities facing the brunt of climate change.

How should climate risk management be done?

The effective climate risk management primarily depends on developing a context-specific methodology to assess the scenario, risk identification, and evaluation and subsequently prepare tailored responses to the risk and not just react.

Identify the scope of risk management: It is very pertinent to identify the scope of climate risk assessment and management with a clear aim to achieve the desired objectives. Establishing clear parameters and high-standard methodologies to track, gather, study, and analyse the climate risk data associated with the project augurs well for businesses. Once the climate risk assessment boundaries are set, specific, credible, and highly accurate data can be prepared for tailored solutions. Most investors need both physical and transition climate risk data to make impactful decisions.

Track short-term and long-term climate risks: The second-most important step is to bifurcate the data study into assessing and evaluating short-term and long-term climate risks pertaining to the organisation or any project development. Doing this will not just make the company climate-proof at present but also climate-resilient for any potential climate risks in the future.

Tailored solutions for multiple climate risk scenarios: The final stage includes preparing tailored solutions for multiple cases, including climate risk mitigation strategies and a roadmap with the gathered data keeping in mind the business nature and economic interests in the context of a rapidly changing climate.

Climate risk management with the help of a credible, highly authentic, and centralised data repository will not only help in facilitating the green transition for businesses but also mean benefits for the overall economic growth of the organisation and the GDP of any country. It would not be wrong to say efficient climate risk management will help save jobs, generate more work, help in companies' growth, and maintain the competitive edge at the international level besides taking into consideration climate change.