Foreword

Sherry Madera, CEO of CDP, states that true leadership requires the humility to recognise unknown gaps and encourage alternative thinking. High-quality disclosure enables better identification of risks and surfacing of new opportunities, which is no longer optional. The environmental crisis is a direct business reality; the World Economic Forum reports that climate-hazard-driven fixed-asset losses for listed companies could reach US $560–610 billion per year by 2035, representing a 6–7% drop in earnings for the average company. Nick Studer, CEO of Oliver Wyman, notes that investment in the energy transition now exceeds $2 trillion per year, even as the planet passed 1.5°C of warming in 2024. Transparent and pragmatic disclosure is essential for business leaders to navigate macroeconomic uncertainty and build resilience into their operations.

Introduction

Acting early to adapt and build resilience does not just protect value; it creates it. Drawing on data from 10,397 companies, this second annual report shows that Leadership level companies realised a total of US$218 billion in environmental opportunities over the last 12 months. The analysis identifies a 15% leader cohort that is implementing robust environmental strategies and cutting emissions at an average compound annual growth rate (CAGR) of 4%, compared to 1% for companies at other levels. Yearly progress remains uneven across the globe; Japan has emerged as a leader with 74% of companies achieving the highest two performance levels, while only 31% of US companies reached the same standard, falling behind China at 54% and the European Union at 52%.

Chapter 1: Environmental Action Is Paying Off

Leading global businesses are proving that addressing environmental impact is beneficial for the bottom line. Climate leadership and strong financial performance are not mutually exclusive; in seven out of 13 sectors, climate leaders show similar or higher market growth compared to those at the lowest performance level. For example, the financial services sector saw a 30% CAGR for Leadership companies compared to 19% for those at Disclosure level. Leaders in the top 20% for financial performance realised a median of US$145m in environmental opportunities, significantly higher than the US$9.5m median for all leaders. Furthermore, nature-related disclosures for water security and forests increased by 12%, indicating that organisations recognise the enduring importance of natural ecosystems.

Chapter 2: How To Measure Environmental Performance

The stewardship journey is assessed across four stages: putting governance structures in place, establishing robust processes to manage dependencies, impacts, risks and opportunities (DIROs), setting ambitious targets, and integrating issues into strategic planning. While 35% of companies show strong performance in governance, only 20% demonstrate best practices in target setting and strategic planning. The report identifies four meaningful levers to ensure long-term benefits: linking executive pay to environmental performance, maintaining robust DIRO processes, developing 1.5°C aligned transition plans, and engaging with the value chain. Notably, 100% of climate leaders have linked executive pay to performance, compared to only 32% of companies that failed to achieve leadership status. Internal water pricing is also emerging as a lever, with 32% of leaders already pricing water internally.

Chapter 3: Barriers To Corporate Environmental Progress

Regional policies and regulations significantly impact corporate performance. While China has positioned itself as a global leader in renewable energy and electric vehicles through state support, the US has reversed key policies, including its withdrawal from the Paris Agreement. Consequently, only 31% of US companies achieved Management or Leadership levels on climate-related issues. Sector-specific challenges also act as barriers; the materials sector faces high energy costs and requires heavy investment to transition to low-carbon technologies. Similarly, the transport sector is impacted by slowing consumer demand for electric vehicles and high production costs. Policy support and incentives remain essential to tip the balance in favour of large-scale, low-carbon solutions.

Chapter 4: Adapting To A Changing World

Most businesses are only scratching the surface of resilience investment despite facing $1.47 trillion in reported physical environmental risks, with 26% of that risk found in the short term. Only 9% of assessed companies disclosed physical adaptation investments last year, totalling $84.5 billion. While companies disclosing through CDP reported a total of more than US$200 billion invested in building resilience to physical risks, this investment comes from only 20% of the disclosing companies. Accelerating adaptation investment is a strategic growth opportunity; research suggests every US $1 invested in climate adaptation can yield over US $10.50 in benefits over a decade, with average annual returns between 20% and 27%. Forward-looking companies must move early and decisively to align economic development with climate action.