Resilience to environmental change: Risks and opportunities in our collective response

Written exclusively for Clyde & Co's Risk Quarterly, our digital publication on the ever-changing risk landscape and its implications for business, by Dr Mark Bernhofen , Roberto Spacey Martín and Professor Nicola Ranger.

We are living in a period of accelerating environmental change. With this change comes risks and opportunities. For businesses, the question is no longer whether to respond, but how. This article examines the evolving landscape of environmental resilience: from emerging physical risks to the shifting regulatory landscape, growth of resilience opportunities, and the evolving role of litigation, finance, and insurance. Organisations that take resilience seriously today will be best positioned to secure a competitive advantage as environmental risks intensify. 

Current climate science and emerging physical risk trends

• The risks from environmental change are becoming more apparent and businesses are increasingly feeling their effects.
• Climate and nature risks interact and reinforce each other, raising concerns about passing critical tipping thresholds that could have substantial financial implications. 
• Data is vital and increasingly plentiful. Building capacity to interpret and use data is a strategic imperative. 

2024 marked not just another record-breaking year, but a fundamental shift in the velocity of change – global temperatures exceeded 1.5°C above pre-industrial levels for the first time over a 12-month period. We are approaching the Paris Agreement’s lower temperature threshold, which will result in more severe climate impacts. These impacts are already being felt today. Last year saw global losses of USD 320 billion from natural disasters (Figure 1), USD 140 billion of which were insured: the third most expensive year for the insurance industry since 1980 (Munich RE, 2025). These impacts extend beyond insurance, touching every corner of the global economy. Last summer, floods in central Europe shut down retailers and factories and disrupted critical infrastructure, impacting businesses not even directly affected by flooding (Reuters, 2024). Climate attribution analysis found that climate change made these floods twice as likely (Kimutai et al, 2024). In 2023, a record drought disrupted millions of tonnes of goods passing through the Panama Canal, with global supply chain impacts felt as far as Asia (IMF, 2023). Climate-related maritime trade impacts are estimated to exceed USD 80 billion annually (Verschuur et al, 2023). Climate risks are increasingly material business risks for all companies, regardless of location, because disruptions ripple through supply chains and shared infrastructure networks. As these risks intensify, organisations that prioritise climate preparedness will be better positioned to manage future challenges.

Organisations that prioritise climate preparedness will be better positioned to manage future challenges.

Beyond these observable climate impacts, two categories of emerging risk demand attention: the compound and cascading effect of climate change and nature loss, and the potential threat of earth system tipping points. Global nature and biodiversity loss are at an all-time high. Habitat destruction, overexploitation, and climate change are some of the drivers that have caused a 73% decline in wildlife populations since 1970 (WWF, 2024). The relationship between business and nature is one of double materiality; companies both contribute to environmental degradation and rely on the ecosystem services that nature provides. Take agriculture, for example. This sector is highly dependent on nature: 75% of all global flood crops rely on pollination, valued at hundreds of billions of dollars annually (Potts et al, 2010), while soil health and water regulation underpin all crop production. Nature loss also increases vulnerability to climate shocks, and the combined impacts of nature loss and climate change are macro-critical. Under compound climate and nature shock scenarios, the costs to the global economy could be upwards of USD 5 trillion (Ranger et al, 2023). The price impacts and resulting cascading risks should also not be underestimated. For example, recent empirical research shows that food price spikes can trigger food insecurity, public health risks, inflation, and political upheaval (Kotz et al, 2025).

Earth system tipping points may exponentially exacerbate these threats: the potential for sudden, cascading system failures that could reshape entire regions and sectors. Unlike gradual environmental change, tipping points represent thresholds where systems shift abruptly into new states that may be irreversible on human timescales. Tipping points exist for both climate and nature, and they can often interact and reinforce one another. Over 25 earth system tipping points have been identified using historical evidence and computer simulations (Lenton et al, 2023). We are nearing certain limits; global warming above the lower Paris Agreement limit of 1.5°C1 risks triggering multiple global tipping thresholds (Armstrong McKay et al, 2022). A well-researched tipping point that reinforces the synergy between climate and nature is Amazon Forest dieback. Although the central estimate of the tipping threshold of this system is 3.5°C warming, deforestation amplifies these risks. Interactions between climate and deforestation could see the threshold passed at 20-25% deforestation, down from previous estimates of 40% (Lovejoy and Nobre, 2018), while impacts are estimated at USD 3.6 trillion (Lapola et al, 2018). However, other tipping points may materialise sooner with significant impact for finance. New research estimates USD 8 trillion of value at risk from water scarcity by 2050 for Global Systemically Important Banks alone, which would result in the collapse of some of these (Sabuco et al, forthcoming). 

Organisations cannot manage risks they do not measure. Effective risk management depends on robust data, and the landscape of available environmental data is expanding rapidly, with over 100 tools for assessing climate and nature risk detailed in UNEP FI’s latest Sustainability Risk Tool Dashboard (UNEP FI, 2025a). Yet this growth brings challenges: data divergence across providers, black-box methodologies, and limited quality oversight (Condon, 2023).

Model divergence is not inherently problematic; diversity in methodological approaches can illuminate uncertainty and reduce systemic risks (Heinrich et al, 2021). What is imperative is that organisations understand why models diverge and develop sufficient data literacy to integrate these data appropriately into decision-making. Initiatives such as the Climate Financial Risk Forum (CFRF) in the UK provide valuable guidance to support institutions in navigating the complexity of climate risk assessments. Recent guidance includes a scenario framework to assess risks and identify adaptation opportunities under uncertainty (CFRF, 2024).

Policy & regulatory developments - trajectories and business implications

• Multilateral policy efforts are often slow but offset by relatively rapid deployment of domestic or regional policy whose impact can span across jurisdictions. 
• International, regional and domestic environmental policy has slowed down in 2025; however, industry trends continue to show signs of progress, and appetite remains for further action from business. 

Attention is turning toward COP30 in Belém, Brazil, as the international community approaches a milestone moment: ten years since the Paris Agreement. 

Read the full article Issue 4 of Risk Quarterly to explore the evolving regulatory landscape around environmental change.

Nobody handles risk like we do. Our industry leaders are here to help you navigate today’s complex business environment with Risk Quarterly, our publication providing you with fresh perspectives on the ever-changing risk landscape and its implications for business. Issue 4, which leads on environmental risk, includes:

What's the state of play for multinationals today?: Written by Richard Power , Partner.

How can corporations with global footprints balance the retreat of ESG in some markets with rising regulatory and stakeholder expectations in others? In 2025, the rules and rhetoric around ESG are in flux. Having risen rapidly up the corporate agenda in recent years as companies came under pressure to show leadership on environmental protection, social responsibility and good governance, suddenly the outlook for multinationals has become much more uncertain. 

Environmental impact of AI: Written by Dr. Sven Förster Partner, Dr. Sophia Henrich , Counsel, and Jasmine Zamprogno , Associate.

AI has become an integral part of daily business operations in companies. While the most common risks of using AI, such as false information or hallucinations, are widely discussed, a more subtle yet equally important risk for businesses to consider is the impact of their usage of AI on the environment.  

Tariff turbulence: Facing up to headwinds by Leon Alexander, Partner, and Robbie Pilcher, Associate

2025 has certainly been a turbulent time for global trade, and with changes to tariff regimes around the world hitting the headlines with unprecedented regularity, maintaining stability amid the upheaval has become business-critical. As the year draws to a close, there’s a sense that the situation with regard to the introduction of retaliatory tariffs has calmed down somewhat compared to the frenetic activity of the spring, but that the era of volatility is far from over.

Navigating greenwashing risk in a shifting ESG landscape by Richard Power , Partner.

Companies are faced with varied signals regarding greenhouse gas (GHG) emissions reduction and the adoption of “clean” energy like renewables. In some jurisdictions, years of consumer pressure, government legislation and regulation to encourage or require companies to report on efforts to reduce emissions and net zero initiatives have been followed by changes in policy direction, such as reduced emphasis on emissions reduction measures.

As climate change and ESG reshape governance, regulation and insurance, how can global businesses stay resilient while responding to these calls to action? Visit our website to read the full publication.