The world may soon be spending $200bn each year to combat losses from climate impacts, driving huge opportunities for a wide range of businesses.
That is the conclusion of a new report by Mott MacDonald and Anglia Ruskin University's Global Sustainability Institute (GSI), which calculates annual losses from climate impacts could rise from around $100bn today to hit $1 trillion in 20 years' time.
If rising emissions increase the rate of climate change as most scientists expect, the world is likely to face more frequent storms, droughts and other extreme weather. Without investment in climate resilience, the cumulative loss over the next two decades will "well exceed $5 trillion", the report warns.
But it adds that while businesses will need to invest in schemes to protect their operations and supply chains from climate-related disruption, they will also be able to realise significant returns from doing so.
The report states that a third of the $200bn of investment that is needed is likely to offer returns on investment. Investing in improved protection and better emergency planning will also enable businesses to rebound swiftly from climate impacts, outcompeting less resilient rivals, the report argues.
However, it warns that while businesses will fund climate resilience measures where there is a clear return on investments, two thirds of the money needed does not offer much of a direct commercial return. It also predicts the gap between what is spent and what is required will steadily increase over the next 20 years to reach $130bn a year.
This shortfall will require new financial mechanisms that allows the public sector to mobilise investment in resilience measures by businesses, which the authors say could be addressed at the UN climate summit in Paris at the end of this year.
"It is important that the international community takes action to further mitigate temperature rises below a catastrophic level," said Ian Allison, global head of climate resilience at Mott MacDonald. "Even with this unprecedented rate of change society will need to be resilient to the increasing shock that arises from extreme weather and climate impacts."