The Importance of Building Climate Resilience in a Time of Uncertainty
Climate-related disclosure rules are rapidly evolving across major markets, creating both uncertainty and opportunity for global companies. Jurisdictions continue to introduce new regulations or revise existing ones. In the United States, enforcement of California’s Climate-related Financial Risk Act (SB 261) was paused by the Ninth Circuit in November 2025, just weeks before its first compliance deadline. In the European Union (EU), the Corporate Sustainability Reporting Directive (CSRD) was significantly restructured under the 2026 Omnibus I update, raising scope thresholds to 1,000 employees and €450 million turnover, reducing reporting obligations for many companies.
Although these developments may have created temporary uncertainty, the global direction is clear: expectations for climate risk and resilience are expanding, and proactive companies are already turning that into competitive advantage. Over 30 jurisdictions, including Mexico, Australia, Canada, Brazil, and the UK, are advancing requirements that are largely aligned or interoperable with IFRS S2.
Underlying climate risks are intensifying on a global scale. For the fourth year in a row, The World Economic Forum's 2026 Global Risks Report confirmed extreme weather events as the #1 long-term risk facing the global economy through 2036. Critical infrastructure faces growing exposure to both chronic and acute climate hazards, and the resulting economic losses continue to rise. Global transition pressures continue to reshape industries as well. For instance, the EU's Carbon Border Adjustment Mechanism (CBAM) officially began on January 1, 2026, altering the cost structure of carbon-intensive imports. Investor expectations are also strengthening, as coalitions representing trillions in assets continue to demand reporting and action aligned with the Paris Agreement’s “well below 2°C” objective.
For companies, the question is no longer which policy requirements should I anticipate? Instead, it’s how do I future-proof the business and act decisively while competitors hesitate?
Resilience Starts with Understanding the Two Sides of Climate Risks and Opportunities
Long-term resilience requires managing the full climate risk and opportunity landscape.
Physical risks threaten to damage your assets, disrupt your business model, operations, and supply chains, and impact your customers. In 2026, companies reported $1.47 trillion in environmental physical risks, with more than a quarter of that risk expected in the short term. These risks include flooding, water stress, extreme heat and tropical cyclones, among others, and they pose near-term threats to assets and operations.
Transition risks threaten your business model, product portfolios, market position, and cost of capital. Regulatory fragmentation, carbon pricing, and shifting consumer preferences are reshaping competition across sectors. Companies that fail to adapt face stranded assets, declining market share, and higher borrowing costs.
The Action Gap is Still Too Wide
Despite exposure to both risk types, only 9% of companies disclosed physical adaptation investments last year, according to CDP. Robust climate transition plans also remain the exception, not the norm. This reflects a widening gap between awareness and action, and a growing risk for businesses that delay investing in resilience. Failing to act both increases vulnerability and signals a lack of preparedness to investors.
The Upside of Acting Now
Companies that have already acted are reaping financial benefits now. CDP's Leadership level companies (i.e., those scoring highest on climate performance), realized a total of $218 billion in environmental opportunities over the last 12 months. The World Economic Forum also estimates that for every dollar invested in climate adaptation, resilience, and decarbonization, there is between $2 and $19 in avoided losses.
Resilience isn’t a cost, it’s an investment in strategic advantage.
What Long-Term Resilience Actually Looks Like
Building resilience requires three interconnected steps that align with IFRS S2.
1. Use scenario analysis to evaluate priority risks. Many companies have identified climate risks, but few have quantified the financial implications of physical and transition risks under multiple scenarios.
It is essential that companies answer key questions such as “How exposed are your coastal facilities under 3°C of warming?” or “What happens to your revenue under a 1.5°C-aligned transition scenario?” The insights from these assessments should directly support decision-making and strategic planning in the short, medium, and long term, given the significant risks that climate change poses to business operations and financial performance.
This is precisely why investors expect companies to disclose this information, and why international frameworks and regulations, such as IFRS S2 and the CSRD, require a scenario-based evaluation of climate resilience and financial impacts.
2. Shift from identifying risks to planning resilience. As noted earlier, CDP data shows that only 9% of companies disclose climate-related adaptation investments. Resilient organizations go beyond mapping flood zones or setting emission reduction targets. They use scenario analysis to guide adaptive climate strategy in their business models including strengthening facilities, reallocating capital, reducing emissions, and developing low-carbon products.
The most resilient companies also understand when to act. They have developed credible climate transition plans that define meaningful signposts such as carbon prices, water scarcity thresholds, or technology cost shifts to determine the right timing for adaptation and mitigation strategies.
Companies that act early gain investment, stay ahead of regulation, and build customer trust.
3. Integrate resilience across the business. IFRS S2 makes it clear that climate risk should be integrated into enterprise risk management processes and the business model at its core, not isolated in the sustainability department.
Resilience should be owned by all the following:
- Operations / Supply Chain – strengthen facilities and diversify sourcing
- Finance – plan capital and manage financial exposure
- Strategy – pursue and capture opportunities while avoiding risks to core products and services
A Clear Direction Forward in a Changing Regulatory Environment
Despite the pace of regulatory change, one thing remains clear: resilience is more than compliance - it's a valuable asset to remain competitive.
Now is the moment to act. While other companies wait for clarity, you can move ahead, strengthen your position, and unlock the benefits of long-term climate resilience.
Schneider Electric Advisory Service's Climate Risk team empowers companies to transform compliance into strategic advantage. Our experts deliver end-to-end climate risk support from identifying and prioritizing risks / opportunities to conducting scenario analysis and quantifying impact, assessing climate resilience of your business model, and developing adaptation / mitigation actions along with a climate transition plan tailored to your business.
Contributor:
Mason Janse, Senior Sustainability Associate
