Climate risk mitigation investment brings eightfold returns on average

Every dollar invested in physical climate risk mitigation brings US$8 in return on average, and up to US$21 for some firms, according to new research by CDP.

The cost of inaction in the face of intensifying climate disasters is projected to reach US$38 trillion annually by 2050 – but CDP analysis shows that investing in climate disclosures and acting on the collected data brings exponential returns.

The climate disclosure platform has found a median US$33.1 million worth of opportunities per company that takes environmental action, against just US$4.6 million in costs to realise them, based on the disclosures of nearly 25,000 companies.

Almost two-thirds of reporting companies (64%) have identified environmental opportunities – and of those, 12% unlocked US$4.4 trillion in opportunity value in 2024 alone, while the quantified opportunities yet to be realised represent another US$13.2 trillion.

‘The disclosure dividend is real’ - CDP CEO

“The economics behind disclosure are becoming clear – data driven decisions help to manage business risk and unlock opportunity” said Sherry Madera, CEO of CDP. “Disclosure is the foundation of action. Our data shows that companies that measure and manage their environmental impacts not only future-proof their operations but also unlock tangible financial and strategic gains. The disclosure dividend is real – and the business case for seizing it has never been stronger.” 

According to CDP, disclosures are key to unlocking financial opportunities from climate action: 90% of large firms disclosing through the platform already have a process for identifying and assessing their environmental dependencies, impacts, risks and opportunities or intend to do so within the next two years – and 43% have a climate transition plan in place. 

Japanese and Canadian firms stand to gain the most from climate action

The report also notes regional variations in opportunities from environmental action: companies in Japan and Canada are identifying the largest potential gains at a median US$73 million and US $72 million per company, respectively. In contrast, those in the US identified just US$15 million worth of opportunities, while Chinese firms perceived US$10 million worth of gains.  

These differences may be influenced by factors such as thresholds used to define a substantive opportunity, methodological choices and commercial sensitivity, but CDP’s analysis confirms that companies in nearly all sectors and regions stand to benefit from acting to mitigate climate risk.