The Cost of Inaction: Physical Risk & Adaptation
The cost of underestimating climate change is mounting. We examine the risks to agriculture, utilities, insurance and real estate through eroded asset values and increased volatility and consider how investors can react.
Authors
-
Kofi Mbuk, Ph.D.
- Henrietta Pacquement, CFA
9/18/2025
16 min read
Topic
Sustainable Investing
Key takeaways
- The direct cost of physical climate risks is accelerating, with disaster-related spending in the US and European Union (EU) surpassing US$2 trillion since 2010 and projected to climb by another US$1.4 trillion by 2030. For investors, this may highlight the compounding drag of inaction on infrastructure, supply chains and asset values.
- Climate inaction is steadily increasing systemic risk across agriculture, utilities, insurance and real estate and has the potential to erode asset values, widen credit spreads and amplify volatility.
- We believe embedding detailed climate risk analytics into valuations, credit models and portfolio strategies is increasingly crucial to deliver successful outcomes to investors and unlock opportunities in resilient assets.
Related insights
Insight
2024 Stewardship Annual ReportRead about Allspring’s stewardship efforts in this year’s annual report. We aim to advance the financial, operational, and sustainability performance and risk management of investee companies for years to come.
Insight
Eye on SI: 2025 OutlookOur sustainable investing outlook focuses on three themes: nuclear energy, extreme weather, and water dependency. What are the opportunities and challenges likely to affect firms’ competitiveness over the long term?
Insight
2023 Stewardship Annual ReportRead about Allspring’s stewardship efforts as we aim to advance the financial, operational, and sustainability performance along with the risk management of investee companies for years to come.