Investing in an Era of Extreme Weather
Extreme weather events have the potential to erode company value, disrupt supply chains and drive losses in portfolios. Studies have estimated that companies around the world face US$1.3 trillion in near-term losses driven by direct damages and operational disruption.1
Despite these effects already being observable, there is a growing recognition among asset owners that physical climate risks remain systematically underpriced.2 Investors face incomplete asset-level data and information on adaptive actions taken, as well as large discrepancies across physical risk vendor outputs. Existing climate models often lack the spatial granularity required for investment decisions, and uncertainty around tail events and tipping points can lead to paralysis in decision making over investment time horizons.
In Autumn 2025, the Sustainable Market Initiative’s Asset Manager Asset Owner Hub, led by Impax and with input from Marsh, convened two roundtables to examine how investors can more effectively understand and manage the financial impacts of extreme weather.3
This report reflects a summary of those closed-door discussions, distilling insights on actions being taken, challenges to effective risk management and practical steps to make investment strategies more resilient.
1 MSCI Institute, 2025: Transition Finance Tracker Q3 2025
2 MSCI, 2024: What the Market Thinks: A Climate Risk Survey / EDHEC Climate Institute, 2024: Physical climate risk survey
3 Institutions represented had cumulative assets under management or advisement of over US$20tn