Climate resilience: the questions boards should ask now

This summer’s heatwaves turned climate risk into a visible operating cost. European extreme summer weather in 2025 and 2026 has been estimated to wipe around €180 billion from EU Gross Domestic Product (GDP)[1], as productivity fell and pressure spread through energy, transport and other sectors. And that number only covers one year and one kind of climate event: recent studies find that 1°C warming could reduce world GDP by over 20% in the long run[2].

For decision makers, climate has become a business resilience question. Heat, flood, drought, wildfire and transition pressures can affect workforce productivity, supply availability, asset performance, insurance availability, customer demand, credit quality and capital allocation.

To make informed decisions, boards need confidence that their organisations have the right skills, data and processes in place.

^{[1] Triodos Investment Management, Extreme heat could wipe out EU economic growth in 2026 (August 2026). Accessed at : https://www.triodos-im.com/articles/2026/extreme-heat-could-wipe-out-eu-economic-growth-in-2026}

^{[2] Adrien Bilal and Diego R. Känzig, "The Macroeconomic Impact of Climate Change: Global vs. Local Temperature," NBER Working Paper 32450 (2024), https://doi.org/10.3386/w32450. Accessed at: https://www.nber.org/papers/w32450}

Climate resilience starts in the boardroom

Climate resilience cannot sit solely with the sustainability function. It requires clear ownership across governance and the three lines of defence.

Management owns the analysis and response while Risk teams define and monitor the enterprise-wide view of concentrations and residual risk. Internal Audit provides independent assurance that the underlying governance, risk assessment, data, controls and reporting are robust enough to support those decisions. Together, they help ensure that climate considerations are embedded in strategy and business decisions rather than treated as a standalone reporting requirement.

At the top, boards validate the level of risk the organisation is prepared to accept. They must challenge whether climate risks are understood, reflected in strategy and capital allocation, and managed within the organisation's risk appetite. But while 90% of directors believe climate falls within the board's responsibilities[3], 88% call for new forms of boardroom leadership to address climate challenges and ensure appropriate resilience[4].

Boards’ sustainability and climate skills are now at an all-time high: the next step is to exercise their governance responsibility by actively challenging management information underpinning climate-related decisions.

Boards can structure that challenge around three core management claims.

^{[3] Kantar and Climate Governance Initiative, How can we advance climate action on boards? (2025), accessed at: https://hub.chapterzeroalliance.org/article/advancing_climate_action_on_boards}

^{[4] Kantar and Climate Governance Initiative, Empowering board directors to drive climate action (2026), accessed at: https://chapterzeroalliance.org/global-impact-report-2025/}

Three climate claims for boards to challenge

1. "We understand our exposure to climate risks."

Exposure is generally the starting point of any climate analysis. The Intergovernmental Panel on Climate Change (IPCC) defines climate risk through the interaction of hazards, exposure, and vulnerability. The contents and format of the risk assessment will vary by business, but to test its reliability boards should ask:

1. How were the climate risks applicable to the business identified, and how were acute physical, chronic physical, and transition risks differentiated?
2. Does the analysis cover the assets, counterparties, and markets that are financially or operationally critical?
3. How were the assessment horizons defined, and are they aligned with the relevant assets, contracts and strategic decisions?
4. Can management trace hazard, exposure and vulnerability through to revenue, cost, cash flow, asset value or capital?

If the understanding of climate exposure is flawed or simplistic, every decision built on that assessment, from strategy and capital allocation to risk management and financial planning, may be biased.

2. "We have a credible transition and adaptation plan."

Plans to address climate risks should respond directly to the risks identified and explain how the organisation intends to manage them. A recent University of Hamburg study estimates that over half of large companies have set climate targets. However, implementation remains less mature: among companies with climate targets, 41% said their transition plan was still “in the planning stage”[5]. Beyond stated ambitions, boards should ask:

1. How does the plan link climate risks to company risk appetite, and is the treatment of each material risk explicit (accept, mitigate, transfer, avoid)?
2. Are targets connected to funded initiatives, accountable owners, dependencies, milestones and decision triggers?
3. Do the identified metrics effectively measure the plan’s effectiveness, and are they reported at the appropriate level?
4. What event or threshold would cause management to accelerate, redesign, or stop the current response?

If the plan is not credible, climate commitments risk becoming both a business resilience failure and a regulatory liability under emerging anti-greenwashing requirements such as the EU’s Empowering Consumers for the Green Transition (EmpCo) Directive.

3. "We provide enough information to our investors and shareholders."

Climate effects may already be embedded in financial statements through revenue and margin trends or impairments and provisions. Sustainability reporting, if available, should also identify the main risks and mitigating measures. To assess the transparency and effectiveness of disclosures to their stakeholders, boards should ask:

1. Are quantitative data and narratives highlighted in the sustainability report consistent with the current and anticipated effects disclosed in the financial statements?
2. Can management reconcile climate-related assumptions used in risk analysis, budgets, forecasts, valuations, and narrative reporting?
3. Has the organisation reviewed the questions and answers given to key third parties? Is the information consistent between business partners and financiers?
4. Where quantification is not available, is qualitative information sufficiently specific?

If climate information is inconsistent or unreliable, investors and shareholders may make decisions based on a distorted view of the organisation’s financial position and future resilience.

^{[5] Hamburg University, Sustainability Transformation Monitoring 2026 (2026), accessed at: https://www.uni-hamburg.de/en/newsroom/presse/2026/pm5.html}

A practical starting point for boards and internal audit

Financial institutions will pay more and more attention to climate disclosures. As climate risk assessment becomes increasingly embedded in prudential regulation, supervisory expectations are rising. The European Insurance and Occupational Pensions Authority (EIOPA) named extreme heat as the key climate-related risk for life and health insurers and pensions providers[6]. The European Central Bank (ECB) identified climate and environmental risks as a key vulnerability for banks in the 2025-27 supervisory priorities[7]. In Luxembourg, the Commission de Surveillance du Secteur Financier (CSSF) applied in January 2026 the guidelines of the European Banking Authority (EBA) on the management of environmental, social and governance risks through circular CSSF 26/905[8].

In light of all these developments, start with one material claim, asset, portfolio, or decision. Trace the business pathway from hazard data to the financial effect. Challenge assumptions, proxies, overlays, and data quality. Test the response against risk appetite, funding, insurance, residual risk, and escalation triggers. Finally, connect the result to board information and to the decisions made by operational teams. Certainly, the clearest way to understand where your organisation stands today.

Ultimately, climate resilience depends less on predicting climate outcomes than on challenging the assumptions that underpin today's decisions.

^{[6] EIOPA, EIOPA Report on the impacts of climate change on life and health and potential emerging risks for the insurance and IORP sectors (2026), accessed at: https://www.eiopa.europa.eu/publications/eiopa-report-impacts-climate-change-life-and-health-and-potential-emerging-risks-insurance-and-iorp_en}

^{[7] ECB, Supervisory Priorities 2025-27 (2024), accessed at : https://www.bankingsupervision.europa.eu/framework/priorities/html/ssm.supervisory_priorities202412~6f69ad032f.en.html}

^{[8] CSSF, Circular CSSF 26/905 (2026), accessed at: https://www.cssf.lu/en/Document/circular-cssf-26-905/}