The study

Morgan Stanley warns: heat and extreme weather fallout on more than half of businesses

For 57% of the monitored companies, climate events have had an effect on their operations over the past year. The growing financial impact is one of the reasons why some continue to reduce emissions

5 July 2025

3' min read

The effects are there, and heavy. Global warming is already having an economic impact on one half of businesses, according to a recent Morgan Stanley report, the results of which were reported by Bloomberg. These include increased costs, work stoppages and lost sales. The growing financial impact is one of the main reasons why some companies continue to pursue emissions reductions and adapt to a warming world, despite political turmoil, the survey found.

"57% of the companies surveyed," explains the Sustainable Signals Corporates 2025 report, "say that events such as extreme heat or storms have had an impact on operations in the past year, a percentage that rises to 73% in the Asia-Pacific (APAC) region. In Europe, the percentage is 46%, the lowest compared to other areas, while 51% believe the effects were 'nothing significant'.

"Extreme heat," the paper continues, "was the most common source of negative spillover, indicated by 55% of those who reported consequences (with the percentage rising to 65% in the Asia-Pacific region)".

In second place are extreme weather events or storms (53%), which are the most frequent impact in North America (57%). In Europe, in contrast to other areas, the third reason concerns droughts and water shortages, while fires or smoke on the one hand and floods and rising water on the other are less strongly felt themes than elsewhere.

The impact manifested itself mainly, and on a global scale, in increased operating costs, including insurance and supply issues. This was also followed by workforce issues (safety, absenteeism), and supply interruptions. In Europe, there was a strong focus on changes in consumer demand.

Expectations are worsening. "Over the next five years, more than two-thirds of companies believe that physical and transitional climate-related risks could affect demand, costs, investment needs, and investor relations, with these concerns particularly high in North America," the paper further explains. Interesting is the detail on the expected impact of climate-related events and that of warming risks. Everywhere, it is the risks that prevail, but the events themselves are likely to have a negative impact on costs (75 per cent of responses considered them very or somewhat likely), increased investment (70 per cent), increased investor vigilance (66 per cent) and lower revenues due to changes in demand (63 per cent).

On the cost front, it is significant that European companies are more concerned than others about possible litigation, as well as - but here the numbers are low - declining demand and equipment obsolescence. On the other hand, they seem calmer about the possible reduction of economies of scale and pricing power and the scarcity of raw materials.

Climate warming has therefore already changed business strategies and '80% of companies feel "very" or "fairly prepared" to increase their resilience'. The percentage is 83% in Europe, quite similar to the global result: 33% feel 'very prepared', 50% 'fairly prepared'.

For many companies, the sustainability challenge is nevertheless an opportunity. At least a quarter on a global scale (22% in Europe) believe it can increase profitability through increased efficiency. More than a third of companies, especially in Europe and Asia Pacific, thus point to technological improvements. Increasing demand, worker skills and collaboration with supply chain partners are other key elements, especially in the Old Continent. Among the obstacles to the development of a sustainable strategy, the survey points to the costs and risks of increased regulation, which are particularly felt in Europe. (R. Sor.).