Nearly two-thirds of cities hit by extreme weather risk

Although the price tag of environmental risks is high, the cost of mitigating them is much lower. CDP’s 2025 Disclosure Dividend report showed that the median cost of risks per company stood at $39.4m, compared to only $3.1m to mitigate them, nearly 13 times lower.

Of the 1,005 cities, states and regions across 80 countries reporting data through CDP-ICLEI Track and CDP’s States and Regions questionnaire in 2025, 62 per cent identify already being significantly impacted by extreme weather events. Over 60 per cent expect these hazards – especially extreme heat, urban flooding and drought – to increase in intensity, frequency, or both, in the future.

Subnational governments increasingly recognise extreme weather events as a financial and economic risk, with close to a quarter (23 per cent) specifically highlighting financial and insurance activities as highly exposed to intensifying climate hazards. In response to these hazards, cities around the world are moving beyond pledges to concrete solutions, steadily designing new climate infrastructure projects that protect people and businesses.

“This is a systemic challenge that no single actor can manage alone”

Over 60 per cent have at least one adaptation project for which additional funding is needed, highlighting a global investment gap of at least $34bn, and almost half (46 per cent) report budget constraints limiting their ability to adapt to the effects of climate change. But when risks are made visible and actions implemented, all stakeholders are able to harness the social and economic benefits. 

“Extreme weather is already a financial risk. It has a dangerous domino effect, disrupting operations, reducing production and driving losses today, with far greater impacts lying ahead,” said Amir Sokolowski, global director of climate at CDP.

“This is a systemic challenge that no single actor can manage alone. Our report highlights that efforts to address this risk coherently are not sufficiently coordinated and that the gaps in collaboration are significant risk in their own right. By aligning investment, strengthening shared systems and scaling adaptation – with disclosure as a guide to enable better decisions – businesses and governments can not only reduce risk, but accelerate the transition to an earth-positive, resilient economy.”

CDP said companies and financial institutions are best positioned to absorb or reduce environmental risk when operating within systems that are managed collectively and supported by adequate financing. Among other measures to safeguard against the effects of extreme weather, CDP is calling: 

• For companies to treat extreme weather as a system-exposed business risk – recognising dependence on shared systems, such as infrastructure, utilities and logistics networks, rather than focusing solely on asset-level exposure
• For subnational governments to clarify – through public disclosure – where hazard exposure, infrastructure risks, and service disruption intersect, helping to reduce uncertainty and unlock private investment
• For national governments to align fiscal, adaptation, and risk-management policies around shared economic exposure for the public and private sectors, reducing economy-wide vulnerability to physical climate risks
• For regulators and central banks to use supervisory tools to address systemic financial risks, like uninsured physical risk.