Climate risks deliver outsized returns for investors

CDP reports companies can earn up to $21 for every $1 spent reducing climate risks.

Companies in Asia Pacific stand to gain substantial financial benefits by investing in climate risk mitigation and transparent environmental reporting, according to CDP. Its latest analysis shows that every dollar invested in mitigating physical climate risks can return as much as $21, underscoring what CDP calls the “disclosure dividend.”

Dennis Wan, Market Director APAC ex CJ at CDP, said the strong returns reflect the growing financial exposure to climate-related hazards and the uneven distribution of information across markets.

Wan noted that environmental risk has become a direct financial risk for companies operating in Asia Pacific, where extreme weather events are escalating. “We have had an average of five to eight typhoons per year in the decades leading up to now, but this year, we've reached possibly 14 typhoons already,” he said, adding that the wider region has absorbed “US$2 trillion in economic losses from environmental extreme weather” over the last three decades.

While data on environmental risks is increasingly available, many firms still fail to use it effectively. CDP’s report shows that in Asia, “every $1 spent on addressing physical risk could yield up to $11 in return,” while broader environmental actions can deliver even more compelling gains. “For every $4.5 million invested in that kind of opportunity, you could receive a return of up to 8.1 times or $36.5 million,” Wan said.

According to CDP, leading companies are already converting disclosure into value by applying four strategic levers. “They are developing 1.5 degree transition plans, engaging across their value chains, setting an internal carbon price and linking executive pay to climate goals,” Wan said. He added that firms with climate oversight at the board level are “five times more likely to set scope three targets or decarbonisation targets,” emphasising that “when boards engage, action accelerates and value is realised.”

With 13 Asian jurisdictions preparing to adopt ISSB-aligned mandatory reporting, Wan said that early disclosure “builds the readiness of companies to deal with mandatory reporting,” reinforcing the financial and strategic value of transparency.