The Cost of Climate Indifference: A Pragmatic Look at the Climate and Emergency Preparedness of US Companies

Key Insights:

• According to Sustainalytics Risk Rating, less than half of US companies have a strong physical climate risk management program and over 25% do not have an adequate physical climate risk management program in place.

• While almost 60% of US companies report robust emergency response programs, a worrying 19.5% disclose a weak program or no such program at all.

• Over 25% of US refiners and pipelines companies, as well as chemicals companies, were identified as having a weak physical climate risk management program.

• While the US may no longer position itself as a climate leader, companies can still play a critical role by acting now to build climate resilience, comply with global best practice, and prepare for the unavoidable realities of a changing planet.

The political reality of climate change dismissal is now evidenced by the US administration’s exit from the Paris Agreement and the reversal of US climate policy.¹ However, the materiality of climate change tells a different story. American companies are already experiencing the mounting financial, operational, and reputational impacts of extreme weather hazards  ̶  from devastating wildfires in California, to increasingly severe hurricanes, to prolonged heatwaves. Companies must not only acknowledge and mitigate the threats posed by climate change, but actively integrate climate resilience into their corporate strategies. This article explores the climate and emergency preparedness of US businesses, including some of its highest emitting sectors, and the readiness of US companies to mitigate the associated risks. 

The Growing Threat of Billion-Dollar Disasters

The past decade has seen a relentless rise in global temperatures, culminating in 2024 as the hottest year on record, surpassing the already unprecedented heat of 2023. With 2024 global averages climbing 1.46 C above pre-industrial levels (driven in part by the El Niño phenomenon), the world is entering a new era of warming.² For US companies, this will continue to translate into rising cooling costs and energy demands, operational disruptions, and stress on aging infrastructure.

A series of climate-related extreme weather events over the last two years alone have caused billions in damage across the US.^3,4,5 In late 2024, Hurricane Helene brought damage to Florida and the US southeast, with the strongest landfall and highest storm surge on record in Florida’s Big Bend. Helene also produced copious amounts of rain, causing flooding in the southern Appalachians, as well as inland winds that spawned several tornadoes. Also in 2024, the US southwest was ravaged by heatwaves, with Phoenix, Arizona enduring over 100 days of temperatures above 100 F (37 C).^6,7

Already in 2025, climate-fueled wildfires have swept through Pacific Palisades and other areas of Los Angeles, California. These fires have inflicted unparalleled damage, leading to substantial loss of life, extensive destruction of structures, and widespread evacuations.⁸ With economic losses estimated to be between USD 250 billion and USD 275 billion,⁹ the fallout from these fires impacts both local and state economies, affecting key areas such as housing prices, job markets, and insurance availability. 

These extreme events interrupt operations, damage physical infrastructure, disrupt supply chains, and pose direct health risks to employees and contractors — all of which affect business continuity. Insurers are beginning to retreat from high-risk areas like California and Florida, making it more difficult and expensive for businesses to protect their assets.^10,11 The road to recovery will be lengthy and expensive, highlighting the critical need for resilience and preparedness as climate-related disasters intensify.

The State of US Preparedness for Physical  Climate Risks and Emergencies 

In 2024, the US Environmental Protection Agency (EPA) released its 2024-2027 Climate Adaptation Action Plan.¹² The plan emphasized critical strategies such as fostering a climate-ready workforce, conducting facility resilience assessments, and developing climate-resilient supply chains. This included integrating climate considerations into federal funding opportunities and rulemaking processes to ensure effective responses to climate-related risks, such as extreme weather events and rising temperatures. However, the reversal of such US climate policies could leave investors and asset owners exposed to the reality of increasing risks and hazards associated with the physical impacts of climate change. 

With the US now trailing in terms of its climate goals and resilience planning, investors must seek to understand how companies are responding to the reality of climate change-based extreme weather events and hazards. We evaluated data from Sustainalytics ESG Risk Ratings to gain insight into the readiness of US companies in terms of their physical climate risk management and their emergency preparedness. 

According to Sustainalytics Risk Rating data, less than half of US companies have a strong physical climate risk management program¹³ and over 25% of US companies analyzed do not have an adequate physical climate risk management program in place (see Figure 1).

Figure 1. Assessment of US Companies' Physical Climate Risk Management Program Strength

_{Source: Morningstar Sustainalytics. For informational purposes only.
Note: Data is for 428 publicly traded US headquartered companies most recent Sustainalytics Risk Rating assessments as of September 27, 2024.} 

Emergency response programs are another critical area where companies cannot afford to fall short in the face of increasing weather-related events.¹⁴ Once companies understand the physical climate hazards their operations are exposed to, emergency response and preparedness programs should be developed or enhanced to address these hazards. While almost 60% of US companies report robust emergency response programs, a worrying 19.5% disclose a weak program or no such program at all (see Figure 2). 

Figure 2. Assessment of US Companies' Emergency Response Program Strength

_{Source: Morningstar Sustainalytics. For informational purposes only.
Note: Data is for 145 publicly traded US headquartered companies’ most recent Sustainalytics Risk Rating assessments as of September 30, 2024.}

Preparedness for Climate Risks and Emergencies in High Emitting Sectors

From the Risk Rating data insights, we also learned that the level of a company’s climate preparedness can vary widely across industries. We analyzed some of the highest emitting sectors in the US, including utilities, chemicals, refiners and pipelines, and oil and gas (O&G) producers, and determined that US utilities and O&G producer companies generally perform strongest among these sectors in terms of their physical climate risk management programs. Other high-emitting sectors, such as chemicals, and refiners and pipelines, are lagging. Our analysis revealed that over 25% of refiners and pipelines companies, as well as chemicals companies, were identified as having a weak physical climate risk management program (see Figure 3). 

Figure 3. Sectoral Assessment of US Companies' Physical Climate Risk Management Program Strength

_{Source: Morningstar Sustainalytics. For informational purposes only.
Note: Data analyzed for publicly traded companies assessed using the most recent Morningstar Sustainalytics Risk Rating as of September 29, 2024. Analysis includes 44 US utility companies, 27 US chemical companies, 17 US refiner and pipeline companies, and 21 US O&G producer companies.} 

Data analyzed from Sustainalytics Risk Ratings demonstrates that US O&G producers perform the strongest among the sectors analyzed, with approximately 90% of O&G producers having at least an adequate emergency response program. Furthermore, 67% of O&G producers have a strong or very strong rated emergency response program. All chemicals companies have disclosed an emergency response program, with about 88% having at least an adequate program in place. Eighty-eight percent of US utilities companies also have at least an adequate program, but roughly 12% have a weak or no emergency response program in place. Disappointingly, our research shows that almost 25% of refiners and pipelines companies have a weak or no emergency response program disclosed (see Figure 4). 

Figure 4. Sectoral Assessment of US Companies' Emergency Response Program Strength

_{Source: Morningstar Sustainalytics. For informational purposes only.
Note: Data analyzed for publicly traded companies assessed using the most recent Sustainalytics Risk Rating as of October 19, 2024. Analysis includes 41 US Utilities companies, 26 US Chemical companies, 17 US refiner and pipeline companies, and 21 US O&G Producer companies.}

The Business Case for Climate Action

While the political landscape may have shifted, the financial and operational risks associated with climate change remain the same. Businesses must recognize that climate risks are financial risks, and inaction could lead to significant repercussions. In this evolving environment, companies should focus on three key recommendations to build resilience and ensure long-term viability: 

1. Adopt Resilience Frameworks

Businesses must embed climate risk management into their governance and operational strategies. Using guidance, like that published by the Task Force for Climate Related Financial Disclosures (TCFD), companies can align their climate risk management practices with investor expectations while also preparing for regulatory demands. This approach helps businesses navigate the complexities of a changing political landscape while safeguarding their operations. 

2. Conduct Robust Scenario Analyses 

Incorporating low-, mid- and high-degree warming scenarios into climate scenario analysis activities allow companies to anticipate the full spectrum of risks and quantitative impacts (such as asset damage or productive capacity loss) specific to the locations of their operations and assets. Scenario planning is not just about surviving worst-case scenarios; it is about thriving despite them, so companies should be reminded to also determine opportunities under each scenario.

3. Disclose Transparently

Transparent reporting builds trust among stakeholders. Companies should proactively share quantitative data on climate risks and mitigation efforts. Improving disclosure practices demonstrates preparedness and resilience against physical climate hazards, which is crucial for maintaining investor confidence and complying with evolving regulations. 

The era of US leadership on climate is over — climate risks are real and escalating. Rising temperatures, extreme weather, and shifting industry practices underscore the need for businesses to integrate climate resilience into their operations. While the US may no longer position itself as a climate leader, companies can still play a critical role by acting now to build climate resilience, comply with global best practice, and prepare for the unavoidable realities of a changing planet.

Integrating climate risks into governance and strategy is not just good business, but a fundamental aspect of fiduciary duty. Companies owe it to their shareholders to address material risks, and failure to act responsibly could lead to significant financial repercussions and erosion of investor confidence. The question is no longer if businesses will be impacted, but whether they will adapt in time to survive, or even thrive.

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References

1. Nilsen, E., Egan, M., & Isidore, C. 2025. “Trump signs actions to pull US out of Paris climate agreement, intends to promote fossil fuels and mineral mining.” CNN. January 20, 2025. https://www.cnn.com/2025/01/20/climate/trump-paris-agreement-energy-orders/index.html.
2. National Oceanic and Atmospheric Administration, U.S. Department of Commerce. 2025. “2024 was the world’s warmest year on record.” January 10, 2025. https://www.noaa.gov/news/2024-was-worlds-warmest-year-on-record
3. Cohn, C. & Hussain, N.Z. 2024. “Hurricane Milton could cost insurers up to $100 billion, analysts say.” Reuters. October 9, 2024. https://www.reuters.com/business/finance/hurricane-milton-could-cost-insurers-60-bln-raise-reinsurance-rates-rbc-says-2024-10-09/.
4. Erdman, J. & Dolce, C. 2024. “Hurricane Helene Recap: Catastrophic Surge, Inland Flooding from Florida to the Appalachians.” September 30, 2024. https://weather.com/safety/hurricane/news/2024-09-27-hurricane-helene-recap-surge-rainfall-flood-florida-southeast.
5. Smith, A. 2024. “2023: A historic year of U.S. billion-dollar weather and climate disasters.” The NOAA National Centers for Environmental Information. January 8, 2024. https://www.climate.gov/news-features/blogs/beyond-data/2023-historic-year-us-billion-dollar-weather-and-climate-disasters.
6. Golembo, M. & ElBawab, N. 2024. “Phoenix set to break record for 110-degree days as extreme heat plagues West Coast.” ABC News. September 5, 2024. https://abcnews.go.com/US/phoenix-set-break-record-110-degree-days-extreme/story?id=113417174.
7. Sarnoff, L. 2024. “Phoenix’s streak of over 100-degree temperatures reaches 100^th day.” ABC News. September 3, 2024. https://abcnews.go.com/US/phoenix-arizonas-streak-100-degree-temperatures-reaches-100th/story?id=113359196.
8. Linnane, C. 2025. “L.A. wildfires have caused more than $135 billion in economic losses – and counting.” MarketWatch. January 9, 2025. https://www.marketwatch.com/story/la-wildfires-have-caused-more-than-50-billion-of-economic-loss-and-counting-f57662eb.
9. Semancik, A. 2025. “The economics of a disaster: How the LA wildfires may impact the economy.” Ohio Today. February 6, 2025. https://www.ohio.edu/news/2025/02/economics-disaster-how-la-wildfires-may-impact-economy.
10. Shingler, B. 2023. “As Climate changes, insurance is becoming more complex – and pricey.” CBC News. June 6, 2023.  https://www.cbc.ca/news/canada/climate-change-insurance-fires-1.6863796.
11. Deloitte. “How insurance companies can prepare for risk from climate change – Industry regulators sharpen their focus.” January 3, 2024. https://www2.deloitte.com/us/en/pages/financial-services/articles/insurance-companies-climate-change-risk.html.
12. United States Environmental Protection Agency. 2024. “EPA Publishes its 2024-2027 Climate Adaptation Plan.” June 20, 2024. https://www.epa.gov/newsreleases/epa-publishes-its-2024-2027-climate-adaptation-plan-0.
13. The Physical Climate Risk Management indicator assesses a company's recognition of the physical risks related to climate change, as well as whether managerial or executive responsibility are assigned for this issue. The assessment also focuses on whether the company provides detailed reporting on physical climate change risk drivers relevant to its operations (e.g. changes in precipitation, cyclones, etc.). Disclosure of initiatives to prepare for withstanding extreme weather events is also taken into consideration, but the highest weighting is allocated to companies that integrate physical climate-related risks into their regular risk assessments and business strategy.
14. The emergency response program indicator assesses a company’s ability to respond to and mitigate risks relating to the occurrence of emergencies. The identification of potential risks requiring emergency protocols (including through a formal risk assessment process) is weighted most heavily under this indicator, along with the presence of regional or site-specific response teams. Other considerations include the presence of regular emergency training, communication protocols, and company-wide emergency guidelines.