Rising Climate Costs: How Businesses Are Investing in Adaptation Strategies – Insights from the Latest Report

TORONTO — A recent RBC report highlights a shift in how businesses are approaching climate change. Instead of just focusing on prevention, companies are now considering how to adapt and prepare for the costs tied to climate disasters.

Last year, extreme weather events and natural disasters cost a staggering US$368 billion—14% above the long-term average. This year’s costs may be just as high, if not higher. The report warns that if current global policies remain unchanged, average temperatures could rise by 2.7 degrees Celsius by 2100.

As these expenses grow, companies are discussing climate change more in boardrooms. Sara Mahaffy, RBC’s head of global sustainability strategy research, noted that mentions of extreme weather during earnings calls have surged this year. However, in Canada, the frequency of those mentions has dropped recently.

Industries like utilities, insurance, and industrial services, which face the most significant risks, are leading these conversations. Companies are not just talking about the financial burdens; they also see new opportunities. Many are developing products and services to help customers recover from natural disasters.

Yet, funding these long-term adaptation projects remains a challenge. For example, initiatives like burying power lines or building floodways require significant investment. A study found that every dollar spent on adaptation and resilience could yield over ten dollars in benefits within a decade.

Currently, public funding covers about two-thirds of adaptation spending, but this is especially lacking in developing nations. Lower-income countries need US$387 billion annually for adaptation, but international funding only reaches about US$28 billion. Investing in these regions is crucial because, according to the World Bank, 70% of the infrastructure needed there by 2050 has yet to be built, presenting a chance to incorporate adaptive solutions from the start.

Companies are also finding innovative ways to adapt. Insurers are offering sustainability-linked policies that reward resilience measures, and there’s a growing trend in issuing catastrophe bonds. This market has expanded by 7% annually since 2015 and is poised to exceed US$50 billion this year.

There are notable Canadian companies in a strong position to benefit from these trends. Fertilizer company Nutrien offers products that help farmers manage their crops, while satellite provider MDA Space is likely to see increased demand for weather forecasting services. Waste management firms and construction companies are also expected to thrive as disaster response needs grow.

As businesses face the reality of climate change, their focus is shifting from merely reacting to incorporating adaptation strategies. This evolution could help not only in managing risks but also in seizing new opportunities.

For more insights into climate finance and adaptation strategies, you can check out recent reports by the World Bank and RBC.

This article was originally published on June 23, 2025.

Ian Bickis, The Canadian Press

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