IN BRIEF:
• Climate-related risks are causing significant disruptions across global markets, supply chains, and regulatory landscapes, forcing businesses to incorporate long-term risk assessments into their operational planning.
• Organizations leveraging climate-informed planning, such as climate risk assessment and scenario analysis, gain an advantage by uncovering new growth avenues.
• To enhance resilience, a Just Transition approach helps businesses recognize climate frameworks that promote consistent risk disclosure and long-term strategic alignment.
The global energy crisis, driven by disruptions in the Middle East, has exposed vulnerable fuel-dependent economies to price spikes and volatility, with the Philippines particularly affected due to its reliance on imported crude oil and petroleum products. This heavy dependence leaves the country with a limited safety net, as sudden global price increases quickly translating into higher domestic energy costs and broader economic pressure.
Simultaneously, recurring heat waves are compounding these risks. The government weather service, known as PAGASA, reported dangerous heat index levels of 42°C to 51°C in 2026, increasing health risks and straining daily life.
The energy crises and extreme heat are examples of a wider global pattern in recent years, where challenges are becoming increasingly complex and interconnected. One need only look at the news for a surge of developments on global tariffs, artificial intelligence, global pandemics, geopolitical conflict, and ongoing supply chain disruptions.
These realities were highlighted in the recent SGV thought leadership forum, “Transforming Risk into Strategic Advantage,” held on May 6, where industry leaders discussed how businesses can convert emerging risks into drivers of long-term value.
Climate change serves as one of the — if not the biggest — drivers of volatility, but it is not yet well-integrated into strategic planning. Just as geopolitical and supply chain disruption create uncertainty, climate change introduces volatility that is unsuitable for a predictable and stable investment environment.
By understanding emerging risks, companies can build resilience while creating long-term competitive advantages. Businesses that leverage climate insights to mitigate these risks and turn them into competitive advantages will be best positioned to thrive in an uncertain future.
HOW CLIMATE-RELATED RISKS SHAPE BUSINESS OUTCOMES
Climate-related risks disrupt global markets, supply chains, and regulations. They are most visible in extreme weather events, such as extreme flooding, droughts, and strong typhoons, which heavily affect local industries infrastructure and communities.
The Philippines has ranked among the most climate-vulnerable countries for 16 consecutive years, ranked by the Climate Risk Index as the 7th most affected country by storms, floods, and heatwaves. The projected cumulative damage of these events to Gross Domestic Product (GDP) will increase from 7.6% in 2030 to 13.6% in 2040.
There are also growing climate policy risks. Governments are introducing stricter rules on carbon reporting, emissions, and sustainability. These regulatory shifts increase compliance costs, risk of penalties, and potential misalignment in supply chains, particularly when sourcing from carbon-intensive countries.
The global value chain, which the Philippines relies on heavily for our primary and intermediate goods, is also highly exposed to these hazardous climate risks. These climate-induced challenges compound existing economic and geopolitical pressures, heightening overall operational risks. Current resilience frameworks often lack climate-specific metrics and targets, making it difficult to incorporate long-term risk assessments into short-term operational planning.
Climate change risk impact on the Filipino people cannot be ignored. Extreme exposure to flooding, heat waves, extreme typhoons, and economic vulnerability from changing labor and consumption demand due to the energy transition must be considered for businesses in their strategic decision making.
TURNING CLIMATE INSIGHTS INTO COMPETITIVE ADVANTAGE
While climate-related risks are deemed material to companies, the transition toward a low-carbon, resilient economy opens up valuable opportunities. Companies are recognizing climate transparency not just as a regulatory obligation but as a powerful strategic advantage.
Enhanced visibility across value chains enables organizations to identify operational vulnerabilities, assess risks, and respond quickly to emerging disruptions. By investing in climate data and disclosure, businesses can stay ahead of regulatory changes and meet rising investor expectations.
Demand for climate-aligned reporting is rising, signaling a shift toward using transparency as a measure of long-term resilience. The 2025 EY Global Climate Action Barometer reflects this momentum: nearly 80% of companies now link environmental metrics to executive incentives, and most have or are developing climate action plans.
However, 65% of firms with net-zero targets lack actionable transition plans, and fewer than half have validated targets through the Science Based Targets initiative (SBTi). These actionability gaps carry financial consequences: climate inaction can cost companies up to 15% of annual revenue, compared to 8% for those taking proactive measures. However, many organizations have yet to fully incorporate this perspective into decision-making. The report shows that climate-related disclosures are still not being fully leveraged to inform strategy and capital allocation.
Capital markets are increasingly pricing these risks. Research by MSCI shows that a company’s exposure to, and management of, financially material sustainability-related risks. directly affects its overall risk profile and influences access to equity and debt financing. Companies with higher resilience to sustainability-related risks (measured through stronger MSCI ESG Ratings) consistently exhibit lower costs of capital across equity and debt instruments. This negative correlation highlights that transparency, credible planning, and effective risk management are increasingly rewarded by investors and lenders.
As countries advance their low-carbon transitions, regulatory frameworks are encouraging businesses to invest in emissions reduction, renewable energy, and sustainable practices. Companies that align effectively with these frameworks can also gain competitive advantages through enhanced efficiency, lower energy costs, and reduced greenhouse gas emissions.
For instance, mapping the carbon intensity of supply chains helps firms avoid regulatory penalties and comply with emerging international policies such as the European Union (EU) carbon border adjustments mechanisms (CBAMs).
SEC Memorandum Circular No. 16, series of 2025, requires publicly-listed companies (PLCs) and large non-listed companies (LNLs) to adopt IFRS S1 and S2 through the Philippine Financial Reporting Standards (PFRS) on Sustainability Disclosures starting in FY2026, with limited extensions of transition reliefs.
This regulation includes the Sustainability Reporting Guidelines and Roadmap that encourage sustainable business practices and align company disclosures with international standards to attract environmental, social, and governance (ESG)-focused investors in the national capital market.
Organizations that integrate climate insights into strategy, through risk assessments, scenario analysis, and resilient operations, are better positioned to capture growth opportunities and strengthen long-term competitiveness.
In this dynamic environment, climate transparency transcends compliance to become a key driver of transformation and competitive differentiation.
TOWARDS A ‘JUST TRANSITION’ APPROACH
In building a resilient future, a “just transition” is slowly being integrated as the foundation of companies in their long-term business strategies. As a framework, a just transition prioritizes equity, fairness, and inclusion as businesses navigate the shift to a low-carbon economy. It ensures that this does not adversely impact stakeholders or communities, but instead generates social and economic benefits.
For companies, embracing a just transition means aligning climate readiness with responsible business practices, ensuring resilience efforts contribute to broader objectives.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.
EMBEDDING CLIMATE RISK ASSESSMENT INTO STRATEGY
To enhance resilience, businesses are increasingly adopting international standards and climate frameworks that promote consistent risk disclosure and long-term strategic alignment.
Key actions include leveraging scenario analysis to map supply chain vulnerabilities evaluating exposure to extreme physical climate and energy transition risks, integrating climate science data into planning and fostering cross-sector partnerships. These measures enable companies to align climate resilience with operational continuity and regulatory compliance, positioning themselves for sustained competitiveness.
Beyond reporting, organizations must embed climate considerations across enterprise-wide processes. This involves integrating climate data into strategic planning, capital allocation, and product innovation. In practice, climate metrics can guide site selection and business continuity planning, allowing climate insights to move from being siloed ESG initiatives into core business capabilities.
By integrating climate into strategy, companies can mitigate risk and capitalize on new opportunities. As climate risks become increasingly systemic and uncertain, climate assessment and scenario analysis tools become indispensable for insulating against an increasingly volatile business environment.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinions expressed above are those of the author and do not necessarily represent the views of SGV & Co.
Benjamin N. Villacorte is the sustainability services leader of SGV & Co.
