The Sustainable Bottom Line: Even as severe climate events multiply, several factors help explain why climate risks remain at the bottom of CFOs risk concerns.
Notes of Explanation: Source: NOAA NCEI / Climate Central U.S. Billion-Dollar Weather & Climate Disasters database. All costs inflation-adjusted to 2024 US Dollars. Note: event counts reflect only disasters exceeding $1billion threshold; actual count of all adverse climate events is substantially higher.
Observations:
• In McKinsey’s latest and just released CFO Pulse Survey*, conducted in late 2025 following the bombing of Iran’s nuclear facilities but before the start of the fighting in the Middle East that is now projected to produce higher inflation and slower global growth, finance leaders identify geopolitical issues as one of the biggest risks to their company’s growth. During the time that the survey was conducted, CFOs expressed more concern about geopolitical issues than they did in a survey conducted in early 2025.
• During the time that the survey was conducted, CFOs also reported a more optimistic view of industry growth than they did in early 2025. Nearly nine in ten expect their industries’ growth rates to be similar to or better than they were over the past 12 months, and almost two-thirds anticipate higher company investment levels over the next year (across capital expenditures, R&D, and marketing).
• Geopolitical instability has become an even greater concern for CFO respondents than it has over the past three years. In this survey, 37% identify geopolitical instability and/or conflicts, and 32% cite changes in trade policy and/or relationships as the biggest risks to their companies’ growth over the next 12 months. Many respondents also say their top concerns include inflation (31%) and weak demand (29%). More than a quarter of respondents list technology disruption or cyber risk as top potential risks.
• At the same time, energy transition or price volume and climate change and environmental risks, although a bit higher since 2022, reflect the least risk sensitive issues–with just about 10% expressing concerns about these factors. This, given that the frequency of weather and climate disasters doubled between the 1980s–2000s and the 2010s, then nearly doubled again in the 2020s. Annual average losses went from about $22 billion in the 1980s to $149 billion in the 2020–2024 window, nearly a 7x increase in real (inflation-adjusted) terms. 2017 stands out as the costliest single year on record ($322 billion due to hurricanes Harvey, Irma, and Maria combined), and 2023 as the record for an events count at 28.
• At least seven factors may help explain why, even as severe climate events multiply, these issues remain at the bottom of the CFO risk concern hierarchy:
(1) The horizon mismatch problem. CFOs are fundamentally focused on the short-to-medium-term time horizon. Climate risks, even when intellectually acknowledged as serious, tend to manifest over decades, while tariffs, wars, and interest rates hit next quarter’s earnings. When survey respondents are asked about risks to company growth, they instinctively weight immediacy. A hurricane is catastrophic when it happens; a warming trend over 30 years is harder to model into next year’s capital allocation plan.
(2) Political and regulatory retreat has reduced the near-term pressure. In January 2025, the United States initiated its withdrawal from the Paris Agreement (taking effect January 27, 2026) and any related UN climate commitments. When the regulatory environment becomes less stringent — not more — finance leaders rationally reduce their assessed exposure to compliance-driven climate risk. ESG mandates that once looked inevitable are now politically contested in many markets, reducing the near-term cost of non-action.
(3) Geopolitics is crowding out the bandwidth for climate. Geopolitical instability outranked macroeconomic volatility, cybersecurity, and even technological disruption as the chief risk to growth. In a world of simultaneous, acute disruptions, such as conflicts, tariff wars, and sanctions escalations, climate tends to get deprioritized not because leaders think it’s unimportant, but because the more proximate fires demand attention first.
(4) Insurance and government absorption of acute climate costs. When severe weather events do strike, a significant portion of the financial impact is absorbed by insurers, government disaster programs, and supply chain buffers, not always by the companies themselves in a direct, balance-sheet-visible way. This creates a degree of “moral hazard” in risk perception: companies don’t always internalize the full cost of climate events, which in turn depresses how urgently they register the underlying driver.
(5) The energy transition is being reframed as an opportunity, not a risk. Energy affordability, reliability, and emission reduction form a trio of priorities that drive energy decision-making, though without affordability and bankability, widespread adoption of new low-carbon technologies will not happen. Many CFOs may be tracking energy transition as a strategic investment theme, in solar, grid modernization, or EVs, rather than as a risk to be managed, which would cause it to register differently in a survey asking about threats.
(6) Difficulty of attribution and quantification. Unlike a tariff, which has an immediate percentage impact on import costs, or a conflict that closes a shipping lane, climate risk is diffuse, probabilistic, and hard to assign to a specific business unit or revenue line. CFOs deal in numbers; risks that resist clean financial modeling tend to be mentally downweighed, even if the underlying exposure is large.
(7) Anti-ESG sentiment and its impact on corporate posture. The impact seems to be in the form of a strategic retreat from visibility on climate commitments, not from the commitments themselves. Companies are doing the work with less fanfare, partly to avoid politicization and partly to reduce exposure to greenwashing litigation if targets slip. The language has changed dramatically while the underlying behavior appears to have changed much less. For the broad population of companies, the commitments themselves are largely holding even as the language has been scrubbed.
*The online survey was in the field from November 20 to December 4, 2025, and garnered responses from 152 financial leaders of companies in 22 countries, including 109 CFOs of companies and 31 CFOs of business units or regions. To adjust for differences in response rates, the data are weighted by the contribution of each respondent’s nation to global GDP.
