Allianz Risk Barometer 2023 -
Rank 7: Climate change

Climate change and global warming threaten companies in a number of different ways. First and foremost, higher property damage and business interruption risks as a result of natural hazards and extreme weather events such as floods, storms, thunderstorms or droughts. Then there is the threat of legal and liability risks due to the comprehensive regulatory framework around the world, increasing disclosure requirements, and the threat of greenwashing accusations or climate lawsuits.

Last, but not least, companies are confronted with a wide range of transformation risks resulting from new market conditions or product requirements, or from changes in business strategy. All these effects of climate change are increasingly felt by companies. Nevertheless, those risks which are more immediately experienced such as cyber, high inflation or the energy crisis in the wake of the Russian invasion of Ukraine ultimately determine the risk perception of companies in 2023, whether it is multinational corporations or small enterprises. Climate change remains in the top 10 global risks but slips from #6 in 2022 to #7.

There are some differences regionally. In Europe, it drops further (from #4 to #7), while in the Americas it remains at #7. However, elsewhere it is a different picture. Across Africa and Middle East, climate change rises to #4 from #10 year-on-year. In Asia Pacific it climbs to #5 from #6.

The Allianz Risk Barometer results also show that companies are still taking action when it comes to risk mitigation. According to respondents, the top three actions firms are taking to combat the direct impact of climate change are: adopting carbon-reducing business models (e.g. switching to renewable energy sources); developing a dedicated risk management strategy for climate risks; and creating contingency plans for climate change-related eventualities, such as assessing critical systems and resources.

“Companies have an important role to play in the transition to a low-carbon economy and the speed of global warming doesn’t allow for any pausing,” says Line Hestvik, Chief Sustainability Officer at Allianz. “Against this backdrop this year’s Allianz Risk Barometer’s findings provide a mixed picture. On the one hand, climate change is somewhat pushed into the background by more pressing crises. This must be seen in the context of double-digit inflation rates, surging energy costs and the risk of power outages and blackouts, especially in Europe, which call for immediate action from companies, such as adjusting their production or implementing austerity measures.

“However, companies are still taking action and are continuing the net-zero transition journeys they have embarked on. From what I see at Allianz, as well as at our customers and partners, I am confident that we will manage to address the current issues without compromising on pathways to limit global warming to 1.5°C.”