Climate risk is moving to the boardroom as companies rethink resilience

Climate resilience is moving from the sustainability function to the boardroom as companies confront rising costs from extreme weather, forcing them to rethink capital allocation, supply chains and infrastructure rather than treat climate action as a compliance exercise.

At the Mint Sustainability Summit held on Wednesday, executives from manufacturing, renewable energy and insurance argued that the financial cost of preparing for climate disruptions is now demonstrably lower than the economic damage caused by inaction. The shift, they said, is making climate resilience a business imperative rather than an environmental, social and governance (ESG) objective.

“Sustainability is no longer something which is good to do, but now becoming a must to do because if not done, it has become a business risk,” said Tejashree Joshi, head-environmental sustainability, Godrej Enterprises Group.

She said the company has “identified climate risk as one of the top 10 enterprise level risks”, ensuring it is embedded across procurement, production and project execution.

Joshi said climate disruptions are already affecting factories and supply chains, particularly because many of Godrej’s suppliers are MSMEs vulnerable to extreme weather. Climate risk is now factored into annual business planning by analysing changing weather patterns, worker availability and physical risks to assets.

“Corrective actions… is a lesser price than inaction because the amount of disruption it creates and disruption in the business continuity amounts to much larger business pressures and non-revenue generation,” she said, adding that companies now evaluate both the “cost of inaction” and the “cost of corrective or preventive actions” while planning investments.

From mitigation to resilience

For renewable energy companies, the challenge is increasingly paradoxical: the assets built to combat climate change are themselves becoming more vulnerable to extreme weather.

Vinay Rustagi, chief business officer at Premier Energies, said climate risk differs fundamentally from conventional business risks because it cannot be assessed using historical data alone.

“The challenge with climate risk is we are dealing with something that we have not experienced before,” he said. “Climate risk is a completely non-linear risk, and things are actually expected to get worse.”

That uncertainty is forcing companies to reassess risks more frequently than traditional operational reviews, Rustagi said.

“We have a pretty comprehensive risk assessment and a business continuity plan in place. But I think we have to revisit this every year, maybe even more frequently than that,” he said.

He cited one of the company’s construction sites near Chennai, where exceptionally heavy monsoon rains delayed work by nearly three months, illustrating how climate events can quickly translate into project delays and higher costs.

“The risk is very real… and we have to be really on top of our game to make sure that we prepare ourselves and we are protected from it,” Rustagi said.

Avinash Rao, managing director and chief executive of Mahindra Susten, said resilience must be engineered into projects from the outset rather than addressed after construction. “Anything that you build has to make a business case, and it has to last its useful life,” Rao said.

Renewable energy projects, he noted, are designed to operate for 25-30 years and should be engineered to withstand “one in a 50-year climate event” through rigorous assessments of hydrology, drainage, wind, earthquakes and other site-specific risks.

“When you design it with all these considerations, there is no reason why these projects cannot operate over their useful life, notwithstanding temporary disruptions,” Rao said, adding that insurance should protect against exceptional events rather than compensate for weak project design.

Insurance gap widens

The insurance industry warned that climate resilience also requires a significant expansion in risk coverage, with most climate-related losses in India still uninsured.

Ajey Hegde, head-commercial insurance at Zurich Kotak General Insurance, said insurers are increasingly pricing risk based on future climate vulnerability rather than historical loss experience.

“The pricing of the risk will depend on where the project or the operational risk is and how vulnerable it is to future losses, and not typically dependent on what was the scenario 10 years back because the risks are changing,” he said.

Hegde said “93% of Indian climate losses are uninsured”, pointing to a substantial protection gap among households and smaller businesses.

He also argued that resilience is most effective—and least expensive—when incorporated into project design.

“When you embed data early, in the design, in the construction… you can drastically reduce the cost of climate risks to your balance sheet,” he said.

Citing a recent research by Zurich Kotak General Insurance on India’s renewable energy expansion, Hegde said making projects more resilient would increase capital costs by only around 2% but “save about $28 billion, which effectively is a six-times return on investment.”

The panellists also called for stronger grid infrastructure, wider insurance penetration and closer public-private collaboration. But their broader message was that as climate events become more frequent and less predictable, resilience is no longer a sustainability initiative sitting alongside the business. It is increasingly becoming fundamental to business continuity, competitiveness and long-term value creation.