A new Barclays report finds UK businesses see adapting to a changing climate as critical to growth, but fewer than one in ten are fully resilient and well adapted to climate risks.
The research shows that flooding, drought and extreme heat are influencing where UK businesses invest. Businesses that are investing to protect themselves from extreme weather do report multiple benefits.
However, limited data and capability gaps are impacting businesses’ ability to assess interventions and demonstrate returns that allow adaptation to compete with other business priorities.
New Barclays research reveals there is a gulf between UK businesses’ awareness of climate risks and how they invest to improve resilience as the climate changes.
The survey of 700 UK business leaders and farmers found that 85% think investing to protect themselves from extreme weather patterns is critical to growth, while 83% believe underinvestment is constraining growth. However, fewer than one in ten businesses believe they are fully resilient and well adapted to a changing climate.
Only a quarter of those surveyed are currently investing to protect their business from climate change. Competing priorities, uncertain returns and data gaps are holding back investment. This is despite businesses reporting that a more proactive approach results in stronger assets, greater operational resilience, better decisions and improved access to insurance.
Barclays’ Business of Adaptation report also shows that more extreme weather is already impacting where UK businesses invest, with one in ten having closed or downsized sites due to climate risk.
Businesses see an urgent need to respond to climate risks but few are fully resilient
The businesses surveyed recognise the growing risks of extreme weather. More than four in five see protecting their business as an immediate priority, while 80% believe climate risks are moving faster than they can respond.
Concern is highest in sectors most exposed to weather impacts, with 95% of agricultural businesses, 90% of energy and utilities firms and 87% of property and housing organisations describing adapting to climate change as an immediate priority.
Yet action is not keeping pace and only a quarter of businesses are investing in measures to protect themselves. Three-quarters say climate resilience is one of the most undervalued investments, and most believe underinvestment holds back future growth.
Changing weather is reshaping where investment and growth take place
Flooding, drought and extreme heat are already influencing where businesses invest. More than a third say extreme weather has influenced where they locate new sites and facilities, and a similar number report it has influenced supply chain relocation or reshoring decisions.
Over the past five years, half of businesses surveyed have moved investment away from high-risk assets, with flood risk the biggest factor shaping a region’s attractiveness.
Real estate and housing businesses are leading the way in shifting investment towards climate resilience, including moving spending from net zero initiatives and other priorities. This suggests that businesses are shifting their focus from long-term climate risk to immediate resilience, although they will increasingly need to find a way to fund both.
Investing in adaptation typically meets or exceeds expected returns
Importantly, the report shows investments that protect against extreme weather deliver returns. Almost nine in ten businesses surveyed say these investments have met or exceeded expectations, rising further among larger firms with revenues above £100 million.
Over the past five years, 86% of businesses have faced challenges with the cost, availability or level of insurance cover due to extreme weather. However, almost half of those that have invested in resilience report better access to insurance or lower costs.
Farmers are seeing the greatest benefits, with over 60% saying that investments to prepare for more extreme weather have delivered greater value than expected. As the sector most directly exposed to climate impacts, agriculture also leads in the use of data and scenario analysis to manage risk and are more likely than any other sector to view adaptation as a strategic investment in future growth.
But businesses lack the data, evidence or capability to act
Despite the growing concern, investment in climate resilience remains low. This report finds that only three in ten businesses primarily use data, modelling and scenario analysis to assess physical climate risk, while 51% rely mainly on high-level assessments with limited data and 19% are using qualitative judgement or assumptions.
Businesses also highlight gaps in supply chain resilience planning (49%), climate adaptation planning and delivery (48%) and climate risk assessment, data and modelling (46%). Improving these capabilities will be critical because risks that cannot be measured are difficult to manage, and investments that cannot be evaluated are harder to justify.
Daniel Hanna, Group Head of Sustainable & Transition Finance, Barclays, said:
“Businesses understand the risk from a changing climate but the challenge is turning that recognition into practical investment. Our research shows that fewer than one in ten businesses feel fully prepared for a changing climate, even though businesses investing in adaptation overwhelmingly see the value."
“This is a growth and competitiveness issue for the UK, with climate risk already shaping where businesses invest. More than a third of businesses say climate has influenced where they locate new sites, half have redirected investment away from higher-risk assets, sites or regions, and 9% have closed or downsized assets due to a changing climate. Building resilience can protect assets and operations as well as attract investment to support long-term business growth.”
