The Sustainable Markets Initiative is a private sector organization founded by King Charles III in 2020 in order to mobilise private investment and facilitate sustainable action in business. The March 2026 report on behalf of the SMI Asset Manager Asset Owner Hub has found that climate risks pose significant financial threat to listed companies. The report suggests that previous studies have severely underestimated the impact across financial markets, despite investors increasingly factoring weather risks into investment decisions.
The SMI Study on Climate Risks
A recent SMI report has indicated that listed companies are at risk of $1.3 trillion in losses in the next year due to climate change. It suggests that extreme weather events caused by an unstable climate are putting private companies at risk of significant financial losses due to business interruption and physical asset damage.The report reflects discussions held at the March 2026 SMI roundtables, featuring input from over 20 senior executives representing cumulative assets of over $20 trillion. The outcome of this report indicates that markets may be systematically mispricing risk severity.
Callum Ellis, Head of Climate Resilience at Marsh Risk, commented on the increasing financial impact of a turbulent climate on the private sector: ‘Extreme weather events are already generating significant economic losses, and the scale and complexity of these risks is increasing. Continued advances in risk analytics, modelling and data will be essential to help investors, insurers and businesses better understand their exposure and make more informed decisions about managing physical climate risk.’
Prior Underestimation of Climate Risks
Investors are increasingly integrating weather risks into investment decisions, however it is likely that they have so far underestimated the full financial impact. This may be due to the broader impact of climate events beyond damage to physical assets. This was particularly demonstrated during Hurricanes Sandy and Harvey, where losses from business interruption were 800-900% higher than losses from property damage. The report suggests that underestimation results from modelling limitations and incomplete asset-level exposure data.
Ian Simm, Founder & CEO of Impax Asset Management, highlights the increasing need for investors to more reliably account for climate impact on financial assets: ‘Extreme weather is increasingly becoming a material financial issue for investors. As physical climate risks intensify, understanding how these risks translate into portfolio impacts will be essential for long-term investment decision making. This report highlights the growing recognition among asset owners that climate-driven weather events could have meaningful implications for asset prices in the years ahead.’
Report Recommendations for Asset Owners
The report suggests investors ought to better assess climate risks to asset portfolios, requiring analysis of multiple climate scenarios to create a fuller picture of vulnerabilities. The SMI report highlights five key recommendations for asset owners and managers going forward:
Act immediately to take better account of extreme weather risk – waiting for better tools or data will only delay decision making and worsen potential impact
Access or develop appropriate modelling and financial loss tools – while recognising that traditional methods may underestimate risk
Integrate resilience, diversification and flexibility into decision making – particularly in strategic asset allocation and investment mandates, and acknowledge a degree of uncertainty
Leverage engagement to assess vulnerability – preparedness and response speed will differentiate the business that are least and worst effected
Work on reducing portfolio and systematic risks to maximise long term value for clients – by collaborating to address gaps in information and analytical tools
Climate Risks Can No Longer Be Ignored
The significant financial losses predicted in this report are an eye-opening reminder that no one is above the impact of climate risk, including multi-million dollar companies. In fact it is these private companies that may see the greatest objective financial losses. The report findings also highlight why an organisation such as the SMI is so important. The private sector is not above climate change. It has a lot to lose, and these corporations also have the sway and finances necessary to drive real action in global mitigation and adaption.
Jennifer Jordan Saifi, CEO at the Sustainable Markets Initiative, said of the roundtable discussions: ‘Addressing the financial implications of extreme weather patterns requires collaboration and action across the investment ecosystem. Through the SMI Asset Manager Asset Owner Hub, investors and industry partners are working together to deepen understanding of physical climate risks and support the development of more resilient financial markets.’
Increasing Risk Awareness
A recent SMI report has suggested that listed companies are at risk of financial losses due to adverse climate events of $1.3 trillion in the next year. Asset managers gathered at the SMI roundtable discussions to collaborate and examine how investors can better understand and manage the financial impact on asset portfolios. The report recommends five key areas for asset owners and managers to work on to ensure portfolio resilience. These include accessing appropriate modelling tools to estimate financial losses, and incorporating resilience and diversification into all decisions regarding strategic asset allocation. Ultimately, investors should be aware of a degree of uncertainty in the financial impact on portfolios, due to the unpredictable nature of adverse weather events.
