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1 PwC|ASSOCHAMAugmenting the role of gas in Indias 2030 energy mix and beyond September 2025 2 PwC|ASSOCHAM Manish Singhal Secretary General ASSOCHAM Foreword from ASSOCHAM Indias growing energy demand requires new solutions for production,transportation and energy usage.Considering this,the growth of the natural gas sector is crucial for the countrys shift to a cleaner and more sustainable energy future.India wants to diversify its energy mix,cut carbon emissions and improve energy access.This goal is supported by the increasing significance of natural gas.With the governments push to boost the share of natural gas in Indias energy portfolio,the need for top-notch infrastructure is more urgent than ever.Indias gas pipeline infrastructure has expanded considerably in recent decades,with over 24,945 km of working pipes.1 The National Gas Grid,with the objective of increasing inter-regional connectivity and the smooth transport of gas all over the nation along with the development of regional pipelines,is central to facilitating the increased consumption of gas especially in the power,industrial and transportation sectors.The governments efforts to expand the number of City Gas Distribution(CGD)geographical areas have resulted in the fast-paced growth of piped natural gas(PNG)for homes and compressed natural gas(CNG)for automobiles in urban and semi-urban towns.This expansion is a part of Indias overall vision to bring the percentage of natural gas in its energy basket from 6.2%to 15%by 2030.2 Indias gas infrastructure is undergoing significant transformation which will be instrumental in its energy future,but several success factors,enablers and building blocks are required for it to grow.Impact of united tariffs on CGD and gas markets,pipeline and LNG terminal bottlenecks,development and maintenance challenges,domestic production and import dependency will all play their specific roles in achieving this vision.With the nations transition towards cleaner fuels,an integrated gas network will be crucial in providing a secure and affordable source of energy and supporting a gas-based economy.The India Gas Infrastructure Conference aims to gather leaders from the industry,government and academia to discuss the future of gas infrastructure in India.I hope this report gives stakeholders a chance to discuss new ideas,investments,regulations and the technology that will shape the gas infrastructure in the coming years.I wish the conference a grand success.1 https:/www.pib.gov.in/PressReleasePage.aspx?PRID=2090844#:text=The length of operational Natural,and operated by entities viz.2 https:/ppac.gov.in/download.php?file=rep_studies/1751629660_Readt _Reckoner_FY_2024_25.pdf 3 PwC|ASSOCHAM Manas Majumdar Partner,Oil and Gas Sector Leader PwC India Foreword from PwC At present,India is at a crucial juncture faced with the challenge of meeting the surging energy demands of a booming economy while advancing towards its net-zero goals.With more than 80%3 of the current energy demand derived from coal and oil,the transition to cleaner fuels is not only an environmental need but also a strategic requirement for energy security and affordability.In this situation,natural gas becomes an essential fuel to power the ongoing transition sustainably.This knowledge paper delivers a perspective on achieving the governments vision of creating a gas-based economy by raising the share of natural gas in the primary energy mix from the current 6.2%to 15%by 2030.4 It delves into the important growth engines for gas,such as expansion of the CGD networks,emerging market for liquified natural gas in the transport segment and arising role of gas-fired power in stabilising the grid going forward.However,the path to achieving this vision is filled with obstacles,which include infrastructure bottlenecks,complexities in pricing and geopolitical supply risks.This knowledge paper elucidates these roadblocks and provides a set of strategic policy interventions designed to quicken gas adoption.It scrutinises the need for integrating gas into the GST framework,promoting transparent price discovery,assuring equitable third-party access to the infrastructure and developing strategic gas reserves.Additionally,this paper explores the impact of decarbonisation on gas itself,along with the role of compressed biogas and the long-term potential of green hydrogen.We hope you find this report insightful and that it sparks conversations that translate into empowered action.3 https:/ppac.gov.in/download.php?file=rep_studies/1751629660_Readt _Reckoner_FY_2024_25.pdf 4 Ibid.Contents 01 Introduction:Importance 02 Whats next for the gas sector in of gas in the energy basket India:Potential for growth and of India need for policy intervention 03 Infrastructure as a sector 04 Implications of decarbonisation enabler for increased gas and energy transition on the gas penetration sector 05 Way forward 5 PwC|ASSOCHAMFigure 1:Total energy consumption absolute and per capita level 0 5,000 10,000 15,000 20,000 25,000 30,000 0 5 10 15 20 25 30 35 40 45 Per capita energy consumption(MJ/capita)Total energy consumption(EJ)50 35,000 200020102011201220132014201520162017201820192020202120222023 Year Total energy consumption(EJ)Per capita energy consumption(MJ/capita)Source:https:/www.iea.org/data-and-statistics/data-tools/energy-statistics-data-browser?country=INDIA&fuel=Energy supply&indicator=TESbySource Augmenting the role of gas in Indias 2030 energy mix and beyond 01 Introduction:Importance of gas in the energy basket of India India is the worlds third-largest energy consuming economy after China and the US,owing to improving standards of living,increased urbanisation,growing industrialisation and emerging end-use applications like data centres.Energy usage has doubled since 2000,with over 80%of energy demand still being met by coal,oil and solid biomass.5 5 https:/www.iea.org/data-and-statistics/data-tools/energy-statistics-data-browser?country=INDIA&fuel=Energy supply&indicator=TESbySource 6 PwC|ASSOCHAM Augmenting the role of gas in Indias 2030 energy mix and beyond At present,the share of natural gas in Indias energy mix is 6.2%.6,7 Recognising its role as a critical bridge fuel in the countrys energy transition journey and decarbonisation,the Government of India(GoI)has stated its intent to move towards a gas-based economy by increasing the share of natural gas in Indias primary energy basket from the current 6.2%to 15%by 2030.8 To aid penetration,GoI has introduced a series of reforms and initiatives like priority allocation of domestically produced gas to homes and transport in city gas distribution(CGD).This will help accelerate the cross-country gas grid set up,pricing and tariff reforms to improve consumption while encouraging infrastructure build up and upstream investments and biogas blending,to name a few.As the Government pushes through for the next big leap of consumption growth for natural gas in the country,multiple headwinds challenge this ambition.Trade wars and fragmented geopolitics,stalling penetration and slow downstream infrastructure growth,limited to no growth in emerging applications like liquified natural gas(LNG)in transport and bunkering,long pending tax reforms,and underutilised infrastructure pose challenges in the envisaged growth trajectory.The Government and the regulator,Petroleum and Natural Gas Regulatory Board(PNGRB),have done a commendable job so far of creating the right base.However,the rapid evolution of the business environment and stalling consumption necessitates a relook at the current policy set and strategic targeted steps and trade strategy to weather the unpredictable externalities.By targeting the right growth opportunities and introducing smart policies,the Government can further boost gas consumption beyond its expected trajectory by 2030.In this paper,we explore growth areas such as the potential of LNG for long-haul trucking,greater utilisation of gas-power generation fleet,and accelerated infrastructure development in residential,commercial and transport sectors to drive the additional demand.We also examine the untapped potential of Indias compressed biogas(CBG)production in reducing LNG imports by bridging the gap between increasing consumption and marginal domestic production.Finally,we outline policy options to enhance the role of natural gas within the national energy mix in the coming years.6 https:/ppac.gov.in/download.php?file=rep_studies/1751629660_Readt _Reckoner_FY_2024_25.pdf 7 https:/www.energyinst.org/statistical-review 8 https:/pib.gov.in/PressReleaseIframePage.aspx?PRID=1987803 7 PwC|ASSOCHAMFigure 2:Share of natural gas in Indias energy basket Indias energy mix 2024 3.6%1.5&.7%6.2V.3%6.0%NuclearOil HydroNatural gas Coal Renewables Source:https:/ppac.gov.in/#redyreckonr,India Oil and Gas Ready Reckoner FY2024-25 Augmenting the role of gas in Indias 2030 energy mix and beyond 02 Whats next for the gas sector in India:Potential for growth and need for policy interventions Overview of the gas market in India Indias gas market is in a phase of rapid expansion,driven by the Governments vision to increase the share of natural gas in its energy mix.The market is heavily dependent on imported LNG to meet its rising demand,as domestic production is limited.Key growth drivers include the expansion of CGD networks for homes and vehicles,and its use in the fertiliser and power sectors.To support this,India is aggressively investing in expanding its national gas pipeline grid and building new LNG import terminals.8 PwC|ASSOCHAMFigure 4:Natural gas demand outlook(MMTPA)52 72 92 112 0 20 40 60 80 100 120 FY22 FY23 FY24 FY25 FY30 FY35 FY40 5tual Forecasted Domestic production Import Total demand Source:PwC analysis;https:/ppac.gov.in/natural-gas/consumption 60 52 Figure 3:Historical gas consumption trend in India(MMTPA)50474650 4545 4443 40 37 3740 30 20 10 0 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 Source:https:/ppac.gov.in/natural-gas/consumption Augmenting the role of gas in Indias 2030 energy mix and beyond Natural gas demand Indias gas demand is poised for steady growth,influenced by a combination of economic dynamics,policy incentives and environmental goals.Gas consumption is expected to more than double increasing from 52 MTPA9 in FY25 to 112 MTPA10 by FY40 in line with the countrys net zero commitments.Natural gas will act as the bridge fuel as India reduces its coal-based fuel consumption and builds its renewable capacity to meet energy needs.9 https:/ppac.gov.in/natural-gas/consumption 10 PwC analysis 9 PwC|ASSOCHAMFigure 5:Sector-wise gas demand outlook(MMTPA)19.9 9.1 12.5 22.7 9.8 16.4 15.9 8.2 9.412.6 6.9 6.4 11.7 7.4 6.8 39.8 27.8 18.0 10.2 11.2 22.2 23.320.115.9 16.5 FY24 FY25 FY30 FY35 FY40 Fertiliser CGD Refinery and petrochemical Power Others Source:PwC analysis;https:/ppac.gov.in/natural-gas/sectoral-consumption Agentic automation in insurance Sectoral trends Growing demand for natural gas is expected to be driven predominantly by CGD,long-haul transport,oil refining,followed by the power sector.While traditional sectors like fertiliser production and petrochemicals remain significant consumers,this growth is concentrated in these three key areas.This trend is driven by a confluence of environmental regulations,economic advantages and strategic policy decisions by governments worldwide.10 PwC|ASSOCHAMFigure 6:CGD demand split(MMTPA)45 40 35 30 25 33 20 22 15 13 10 76 1.51.35 0.2 3 0.7 0.441.1 0.330.8 54 0.5 0.60 FY24 FY25 FY30 FY35 FY40 Commerical Industrial Domestic CNG Source:PwC analysis Augmenting the role of gas in Indias 2030 energy mix and beyond Growth segments and enhancing customer conversions CGD the primary demand driver The CGD sector is poised to be the most significant contributor to gas demand growth through 2030.To make natural gas available to the public,the Government has placed strong emphasis on the expansion of CGD networks across the country.The pace of CGD licensing has increased remarkably from the ninth round of CGD bidding,along with growing interest from companies to apply for the same.After the 12/12A CGD bidding round,potential coverage of the population is expected to reach approximately 100hieving almost complete coverage of the countrys area except for Andaman and Nicobar and Lakshadweep Islands.11 This robust growth of the CGD sector is attributable to the continued expansion of infrastructure,such as CNG filling stations and distribution grid and the use of LNG in transportation.CNG:Demand in CGD sector will be predominantly driven by CNG contributing nearly 30%of the total natural gas demand(33 MTPA)by 2040.12 The CGD sector is set for massive infrastructure growth by 2032,as minimum work programme(MWP)targets to increase domestic piped natural gas(PNG)connections tenfold to 120 million,and more than double the number of CNG stations to 17,500.13 The scale of CNG adoption in Indias transport sector is globally significant,with the countrys roads home to around 7.7 million CNG-fuelled vehicles in 2024,14 making it one of the top international markets.11 https:/pib.gov.in/PressReleaseIframePage.aspx?PRID=2040078 12 PwC analysis 13 https:/www.pib.gov.in/PressReleaseIframePage.aspx?PRID=1987803 14 https:/ 11 PwC|ASSOCHAMFigure 7:LNG vehicles forecast(in 000)500 400 300 227 200 81 18 100 0.8 170 0 0.7 FY24 FY25 FY30 FY35 FY40 68 170 New LNG HDVs Retrofitted LNG HDVs Source:PwC analysis The projected adoption of approximately 400,000 LNG-fuelled trucks by 204016 is poised to become a major new demand driver for natural gas in India,unlocking significant investment opportunities in both refuelling infrastructure and the LNG supply chain.Augmenting the role of gas in Indias 2030 energy mix and beyond LNG in long-haul trucking:At present,the market for LNG as a transportation fuel is at a very nascent stage but holds significant potential.Factors like environmental concerns,government support,LNG infrastructure development and the price competitiveness of LNG are increasing its demand in the market.LNG also offers significant environmental benefits,with lower particulate matter(PM),NOx and SOx emissions.LNG Corridors initiative:The Government,key players(e.g.IOCL,BPCL,Petronet LNG,GAIL)and many others are actively developing LNG dispensing stations along major national highways like the Golden Quadrilateral.The Ministry of Petroleum and Natural Gas(MoPNG)has mandated the development of 50 LNG stations as part of a long-term goal to create a network of 1,000,with a target to convert one-third of Indias long-haul trucks to LNG vehicles by 2030,creating a viable ecosystem for LNG trucking.15 15 https:/www.pib.gov.in/Pressreleaseshare.aspx?PRID=1673998 16 PwC analysis,Parivahan data 12 PwC|ASSOCHAM Augmenting the role of gas in Indias 2030 energy mix and beyond Oil refining India has rapidly grown into a global oil refining powerhouse.Between 2006 and 2023,the country more than doubled its refining capabilities,17 making it the fourth-largest in the world and a major exporter of petroleum products.The countrys refining capacity is projected to reach 309.5 MTPA by 2030.By 2040,18 natural gas consumption in petrochemicals and refineries is expected to reach 16.4 MTPA,growing at the CAGR of 6.5%.19 With rising demand for petrochemicals,natural gas will remain a key feedstock,driving increased consumption in the sector.Gas-based power generation A grid balancing role While challenged by cheap coal and renewables for baseload power,gas has a new and critical role to play.By the end of 2023,India had 62 gas-based power plants,with a total capacity of 24 GW.20 Despite the power sectors relatively modest CAGR for natural gas compared to other sectors,its consumption is still expected to increase,reaching 10 MTPA by 2040.21 Peaking power and grid stability As Indias share of intermittent renewable energy(solar and wind)increases,gas-fired power plants,with their quick ramp-up/ramp-down capabilities,are ideal for balancing the grid and meeting peak demand when renewables are unavailable.This is a shift from a baseload to a flexible,ancillary services role.17 https:/ 18 https:/www.pib.gov.in/PressReleasePage.aspx?PRID=2096817 19 PwC analysis 20 https:/www.pib.gov.in/PressReleaseIframePage.aspx?PRID=1911550#:text=by PIB Delhi-,The Central Electricity Authority under Ministry of Power, monitors 62,ANNEXURE 21 PwC analysis 13 PwC|ASSOCHAM Augmenting the role of gas in Indias 2030 energy mix and beyond Trade policy and potential impact of geopolitical tariffs and sanctions While growth drivers to boost gas demand in India continue to exist,we do live in an increasingly volatile and geopolitically challenged world.With over 50%of Indias gas consumption22 being met through LNG imports,the Indian gas market is highly susceptible to the volatilities of international trade policies,geopolitical conflicts,tariffs and sanctions.These factors represent a primary threat to supply security,price stability and the overall bankability of gas-based projects,thereby directly impacting the viability of Indias gas-centric energy transition.The primary geopolitical threats emanate from:Conflict-driven supply disruptions:Geopolitical conflicts between Asian and European nations Economic sanctions on producer nations:Sanctions on major gas producing nations limit Indias sourcing options.Chokepoint vulnerability:A significant portion of Indias LNG supply transits through strategic maritime chokepoints like the Strait of Hormuz,making it vulnerable to the regional instability in the region.23 The shifting trade landscape is compelling a realignment of Indias gas sourcing strategy as follows:1.Diversification as a strategic imperative The over-reliance on a single supplier or region is now viewed as a high-risk strategy.India has actively diversified its portfolio,with the US emerging as a major LNG supplier.2.Contract renegotiation and innovation Recent geopolitical volatility has underscored the need for more resilient contractual structures.Indias renewal of a massive 7.5 MMTPA long-term deal with Qatar Energy LNG by Petronet LNG Ltd is a testament to this,securing supply until 2048.24 Future contracts are likely to include more flexible terms,such as destination flexibility,hybrid pricing indices(linking to both oil and gas hub prices)and more robust force majeure clauses.3.Focus on energy security Energy security is now a core pillar of Indias foreign policy.Securing favourable long-term deals,investing in overseas gas assets and building strong government-to-government relationships with producer nations(e.g.UAE,Mozambique,US)will be critical components of mitigating trade and geopolitical risks.22 https:/ppac.gov.in/natural-gas/consumption 23 https:/www.eia.gov/todayinenergy/detail.php?id=65504 24 https:/www.petronetlng.in/w/petronet-lng-limited-executes-long-term-contract-for-purchase-of-7.5-mmtpa-lng-with-qatarenergy-1#:text=Renewal of this agreement is,and 17.5 MMTPA in 2019)14 PwC|ASSOCHAMAugmenting the role of gas in Indias 2030 energy mix and beyond Recommended policy and regulatory interventions to increase gas penetration in these sectors Indias ambition to foster a gas-based economy and significantly increase the share of natural gas in its energy portfolio represents a core strategic objective.However,the realisation of this vision has been historically constrained by persistent headwinds.To address these challenges,a focused policy approach could be instrumental in solidifying the role of natural gas in Indias energy landscape by 2030 and beyond.Integration of natural gas into the Goods and Services Tax(GST)framework Natural gas should be brought under GST to harmonise the tax structure across competing energy sources such as LPG.This will rectify the current disparate and frequently unfavourable taxation of gas relative to fuels like coal and LPG,establishing a more uniform and equitable competitive environment.Capex and policy support for use of LNG in heavy-duty transport The heavy-duty transport sector,traditionally difficult to decarbonise,presents a significant opportunity for natural gas penetration in India.LNG offers a commercially viable and environmentally superior alternative to diesel.Recent government and industry initiatives,notably the planned development of an LNG refuelling corridor along the Golden Quadrilateral and major national highways,are creating the foundational infrastructure necessary to support a national LNG-powered vehicle ecosystem.To build on this momentum and accelerate the transition,the following steps could be taken:Adapt the successful NCR model,mandating all new commercial trucks registered to operate across the Golden Corridor must meet stringent emission norms,with LNG being a preferred compliance pathway.The following incentives could be given for faster adoption:-Toll rebates:Significant discounts on tolls for LNG trucks-Priority lanes:Dedicated or priority lanes at toll plazas-Phased ban:Announce a future date after which older,highly polluting diesel trucks(e.g.BS-IV)will not be allowed to ply on these corridors.Provide direct subsidies or interest in subvention on loans for the purchase of LNG trucks to make total cost of ownership(TCO)for LNG trucks more feasible.Redefining the role of gas in the power sector Gas power plants,despite being cleaner and flexible,struggle to compete with coal for baseload power and are often underutilised,leading to stranded assets.Making it mandatory for State Electricity Regulatory Commissions(SERCs)and DISCOMs to utilise gas-based power to meet a certain percentage of their peaking power and grid balancing(ancillary services)requirements will provide a secure revenue stream for gas power plants,ensuring their financial viability and readiness to support the grids stability as the share of intermittent renewables grows.15 PwC|ASSOCHAM Augmenting the role of gas in Indias 2030 energy mix and beyond Support for the CBG sector Indias push for CBG was started by the SATAT initiative,with the primary goal to establish 5,000 CBG plants across India with a production target of 15 million metric tonnes(MMT)of CBG per annum by 2024-25.25 Next important step was the mandatory blending of CBG in the CNG and PNG segments.To further support the development of the CBG sector,the following policy initiatives could be taken:Provide land-acquisition incentives to set up rural CBG plants.Create a transparent national registry to track CBG output and issue green certificates.In early CBG obligation phases(CBG sold with natural gas for CNG/PNG),allow compliance waivers/credits to address supply shortfalls.Enhancing market access While India has an open access policy in principle,its implementation on pipelines and LNG terminals is inconsistent.New or smaller players often face challenges in securing capacity on pipelines controlled by incumbent players.The process can be opaque,and capacity hoarding can occur.This could be improved by following proposed interventions:Establish a centralised digital platform:Mandating the use of a single,transparent,electronic platform for all pipeline capacity booking,managed by an independent authority or the PNGRB.This would operate on a first-come,first-serve and non-discriminatory basis.Strengthen secondary capacity markets:Allow entities that have booked pipeline capacity to trade on an open platform(like an exchange).This will ensure that a booked but unutilised capacity can be efficiently reallocated to those who need it,preventing artificial bottlenecks.Fostering transparent price discovery India has the Indian Gas Exchange(IGX),but its traded volumes are a small fraction of the countrys total consumption.The market is still dominated by prices determined by long-term,oil-indexed contracts or volatile international spot LNG benchmarks(like Japan Korea Marker).Proposed interventions to address this issue are as follows:Phasing out administered pricing mechanism(APM):Implementing a clear,time-bound roadmap to phase out APM pricing entirely,as recommended by the Kirit Parikh Committee.26 All domestically produced gas should eventually be sold at prices discovered through a transparent market mechanism(i.e.the gas exchange).This will ensure that the gas flows to sectors where it is valued most,incentivising upstream investment by allowing producers to realise market-based returns.Empowering domestic gas trading hubs:Driving liquidity on IGX by mandating PSUs to sell a portion of their market-priced gas through the exchange.A liquid gas exchange will provide a visible,real-time price signal based on Indian supply and demand,creating a credible domestic benchmark.25 https:/www.pib.gov.in/PressReleaseIframePage.aspx?PRID=1917439#:text=The Minister also shared Indias,compressed biogas across the country 26 https:/sansad.in/getFile/annex/219/Au553.pdf?source=pqars 16 PwC|ASSOCHAM Augmenting the role of gas in Indias 2030 energy mix and beyond 03 Infrastructure as a sector enabler for increased gas penetration Indias aim of reaching 15%share of gas in energy mix by 2030 depends majorly on fast infrastructure development,policy refinements for fair access,strategic resilience and rationalisation of the tariff system.Optimal utilisation of pipelines and LNG terminals,impartial third-party access,strategic reserves of gas,market-led pricing and improved project management together form the pillars for this transformation.If executed collectively,these measures will not only suffice growing demand of the country,but will also make India a regional gas hub,guaranteeing affordable,reliable and sustainable source of energy for the years ahead.Accelerating pipeline and LNG terminal development in India Indias mission to become a gas-based economy is gaining traction,with natural gas aimed to grow from current 6.3%of the energy mix to 15%by 2030.Demand is envisaged to grow from 65 bcm/yr in 2023 to 103 bcm/yr by 2030,27 indicating nearly 60%growth.This growth makes infrastructure development of pipelines,regasification capacity and last-mile connectivity a strategic necessity.Figure 8:LNG import(bcm/yr)70 0 10 20 30 40 50 60 2023 2024 2025 2026 2027 2028 2029 2030 Forecasted Source:https:/www.iea.org/reports/india-gas-market-report/27 https:/www.iea.org/news/indias-natural-gas-demand-set-for-60-rise-by-2030-supported-by-upcoming-global-lng-supply-wave 17 PwC|ASSOCHAM Augmenting the role of gas in Indias 2030 energy mix and beyond A prime example of this push is the JamnagarLoni LPG Pipeline(JLPL)expansion by GAIL,which will double the capacity from 3.25 to 6.5 MMTPA.28 This 1,415 km pipeline connecting Gujarats industrial clusters to northern consumption centres showcases the kind of infrastructure support India needs to minimise bottlenecks and promote cleaner fuels.From an LNG viewpoint,Indias imports have increased by 70tween 2013 and 2023,and reached 36 bcm in 2024.As growth in domestic production has risen gradually while the demand for natural gas increases,LNG imports are projected to grow at 11%to 64 bcm by 2030.This will require additional regasification capacity in the latter half of this decade for India,which is currently the fourth-largest LNG importer globally.29 However,LNG terminals are being largely underutilised.The Kochi terminal is a prime example,being operated at only 21%in 2024,while most others(except Dahej,Dabhol and Hazira)averaged lower than 30%utilisation over the last decade.This inefficiency resulting from unsynchronised planning between terminal construction and downstream connectivity not only causes assets to be stranded but also results in higher tariffs for the end user.30 S.no.Year of commissioning Operator Terminal Present capacity(MMTPA)Utilisation 202324 Historical utilisation 201516 to 202223 1 2004 PLL Dahej 17.5 95.10.23%2 2013 PLL Kochi 5.0 20.60.14%3 2005 Hazira LNG Pvt.Ltd.Hazira 5.2 30.30g.17%4 2013 KLL Dabhol 5.0 42.7W.50%5 2019 Indian Oil LNG Pvt Ltd.Ennore 5.0 18.30.00%6 2020 GSPC LNG Ltd.Mundra 5.0 14.60$.93%7 2023 Adani Total Dhamra 5.0 27.40%-Total 47.7 50.50T.64%Source:https:/pngrb.gov.in/pdf/CaseStudies/20241231_CSR.pdf 28 https:/www.pngrb.gov.in/pdf/ppp/Govt-Authorization/20250723_Jamnagar-GAIL.pdf 29 https:/www.iea.org/reports/india-gas-market-report/executive-summary 30 https:/pngrb.gov.in/pdf/CaseStudies/20241231_CSR.pdf 18 PwC|ASSOCHAM Augmenting the role of gas in Indias 2030 energy mix and beyond To address this,the PNGRBs LNG Terminal Regulations,2025 promotes greater transparency,necessitating developers to provide evacuation plans,secure pre-final investment decision(pre-FID)registration and furnish bank guarantees.The purpose is to confirm that projects are demand driven and in sync with pipeline development plans.The way forward requires integrated planning ensuring that pipeline authorisations are in line with the terminal capacity and industrial demand clusters.Organised infrastructure development of pipelines,terminals and city gas networks will result in maximum throughput,reduce stranded assets and make sure that countrys infrastructure development is in line with its surging gas demand.Policy measures for equitable third-party access for cross-country pipelines,city gas infrastructure and LNG terminals India has built over 24,000 km of gas transmission pipeline and seven LNG import terminals.Still,access to infrastructure remains skewed towards major gas corporations in the market.Despite the PNGRB Act(2006)directing open access,capacity prioritisation by the owners often sidelines third-parties interest.31 The LNG Terminal Regulations,2025 has resulted in removal of the prior 20%short-term common carrier requirement and instead implemented a new set of rules,bolstering regulatory oversight by demanding pre-investment disclosure,comprehensive evacuation plans,public disclosure of tariffs and PNGRB-approved completion schedules.Operationally,the access inefficiencies continue to remain.There is no provision of a unified booking system,confirmation of slots takes up to 72 hours,and day-ahead and intra-day nominations are still not available.Due to this lack of flexibility,spot traders and city gas distributors are hampered,as the transactions costs become high and occasional shortfalls occur during peak demand.Comparing with the EUs model,we can identify Indias gaps.EU regulations need real-time reporting of the available pipeline capacity on electronic bulletin boards,along with day-ahead and intra-day booking using automated platforms,guaranteeing non-discriminatory allocations.The EUs regulator(ACER)additionally proposes to conduct auction-based capacity allocation and higher degree of cross-border coordination to ensure efficiency.Recommended reforms for India Amend the gas access codes to permit day-ahead and intra-day bookings,lowering the confirmation time down from 72 to 24 hours.Set up independent system operators(ISOs)to handle capacity allocation,scheduling and balancing separate from marketing arms eliminating conflicts of interest.Launch a National Electronic Gas Bulletin Board displaying real-time data on pipeline and terminal capacities,reference tariffs and booking status,which will boost transparency,reduce negotiation-related delays and lower transaction costs.With implementation of these reforms,India can unlock genuine third-party access,improving competition and accelerating its transition to a gas-based economy.31 https:/pngrb.gov.in/pdf/CaseStudies/20241231_CSR.pdf 19 PwC|ASSOCHAM Augmenting the role of gas in Indias 2030 energy mix and beyond Tariff reforms and potential for unbundling of infrastructure and marketing Indias gas sector has been struggling with pricing distortions and concentration of control.Nearly 50%of the gas supply of the country is domestic,32 while imports are increasing with increasing demand.Still the upstream investments are limited due to the Government-imposed price caps on the deepwater and high pressure/high temperature(HP/HT)production.As per International Energy Agency(IEA),phased extension of full gas pricing freedom in all fields would enhance upstream investment and help in securing long-term supply.Structure of the market is another challenge as GAIL administers over 12,400 km of pipelines and markets more than half of domestic gas sold in the country,33 resulting in influence over both sales price and transmission tariffs.This integration results in a conflict of interest,which deters competitive pricing.To counter these issues,IEA recommends legal unbundling of infrastructure and marketing by:developing an independent transmission system operator(TSO)to set tariffs,assign capacity and manage investments with transparency isolating marketing and trading into separate entities,with independent governance and reporting standardising gas sales agreements(GSAs)to ensure transparent,arms-length transactions.The PNGRB has also taken steps to simplify the tariff structure by reducing the previously three distance-based zones into two:Zone 1(300 km)and Zone 2(300 km).Domestic PNG and CNG customers would now pay a unified tariff of Zone 1,regardless of their distance from the gas source,while industrial users remain differentiated.34 The new Pipeline Development and Rebate(PDR)model instructs that the operators with more than 75%utilisation must reinvest half of their net earnings into development of infrastructure,while passing the rest back to consumers as tariff rebates.Similarly,the efficient fuel procurement mandate demands 75%of system-use gas to be sourced via multi-year contracts,which in turn reduces volatility.By combining market-driven pricing,tariff rationalisation and unbundling,India can encourage competition,reduce control concentration and optimise infrastructure utilisation thereby laying the groundwork to achieve 15%gas share target by 2030.32 https:/ppac.gov.in/download.php?file=rep_studies/1751629660_Readt _Reckoner_FY_2024_25.pdf 33 https:/gailcgd.gail.co.in/CGD/entry/aboutus 34 https:/pngrb.gov.in/OurRegulation/PNGRB Regulations/B. Natural Gas Pipeline/B.4. NGPL Tariff Regulations/20250707-NGPL-Tariff-Post-Third-Amendment.pdf 20 PwC|ASSOCHAM Need for strategic gas reserves During the initial period of geopolitical tensions between Asian and European nations in 2022,the vulnerability of gas-importing nations to supply disruption and price volatility was exposed.And for India,this dependency becomes a critical risk.At present,ONGC,Oil India and GAIL handle nearly 2 bcm of commercial storage,but this is insufficient for emergencies.35 A strategic reserve would provide:supply security during the time of global disruptions or surge in domestic demand stabilisation of price,which will mitigate volatility for industrial and city gas users regional leverage,enabling India to supply to neighbouring countries such as Bangladesh,Sri Lanka and Myanmar during tough markets.GoI has also deputed a feasibility study for a strategic gas reserve of 4 bcm capacity,which was modelled on its successful crude oil Strategic Petroleum Reserve(SPR).36 This proposed reserve will use underground storage i.e.depleted wells and salt caverns supplemented by above-ground LNG bullet tanks for quick response and seasonal balancing.Sites for Phase 1 are planned in western and northeastern regions of the country,with the first facility targeted to be operational within 34 years,at an estimated capex of USD 12 billion.Complementing the crude oil reserves,Indias gas SPR would not only reinforce the energy security of the country but also strengthen its position as a regional gas hub an important step towards its clean energy transition.35 https:/ 36 https:/www.pib.gov.in/PressReleasePage.aspx?PRID=2113233 21 PwC|ASSOCHAM Augmenting the role of gas in Indias 2030 energy mix and beyond Enablers for efficient infrastructure development and project management To successfully deliver Indias ambitious gas infrastructure targets,we do not just need investment but also world-class project management and regulatory certainty.Several enablers that can drive efficiency are as follows:Integrated project management Implementing GIS-enabled route planning and 4D building information modelling(BIM)scheduling would reduce project timelines while limiting cost overruns.Cloud-based dashboards would enable real-time tracking of the budgets,milestones and resources,thus improving accountability.Standardised contracts and special purpose vehicles(SPVs)Standard EPC and publicprivate partnership(PPP)templates can lessen procurement delays and bring down risk for investors.SPVs can isolate the project risk involved,simplify necessary partnerships and streamline financing for large projects like pipelines or LNG terminals.Digital twin and IoT monitoring Digital replicas of assets can support predictive maintenance and leak detection,reducing unplanned shutdowns.IoT-enabled monitoring can improve safety and reduce downtime.Regulatory certainty and skill development Transparent tendering and milestone-linked payments can expedite clearance processes.Training for 2,000 officials in project finance,contract management and stakeholder engagement can help build necessary institutional capacity.Coordinated network expansion Indias city gas network at present spans to 400 districts across 307 geographical areas.Alignment of this expansion with the trunk pipelines and LNG terminals is necessary to avoid stranded assets and maximise throughput.The IEA estimates USD 96 billion in infrastructure investment by 2050 under low-price scenarios,which shows the need for robust project governance and financing frameworks.37 37 https:/ 22 PwC|ASSOCHAM Augmenting the role of gas in Indias 2030 energy mix and beyond 04 Implications of decarbonisation and energy transition on the gas sector The global push for decarbonisation and energy transition is becoming more important,changing the gas sector significantly.As countries focus on meeting ambitious climate goals,the energy industry is making major changes to cut carbon emissions and encourage sustainable practices.The gas sector is vital in this shift,with stakeholders looking for new strategies to meet global climate goals.However,the industry also faces several challenges.Environmental and regulatory pressures are increasing as governments and consumers seek lower emissions and cleaner energy options.Methane emissions from natural gas operations are a major concern,requiring better monitoring and reduction methods.Additionally,the industry deals with market volatility caused by geopolitical tensions and economic downturns,as seen during the COVID-19 pandemic.Geopolitical risks and infrastructure issues add more complexity often needing large investments to update and protect gas pipelines,LNG terminals and storage facilities against climate threats.To navigate this challenging environment,the gas industry must keep innovating,plan strategically for future changes,and promote collaboration among stakeholders to achieve sustainable growth and resilience.As a result,traditional gas operations are being reassessed to adopt greener practices and technologies that would help in creating a lower carbon future.23 PwC|ASSOCHAMAugmenting the role of gas in Indias 2030 energy mix and beyond The role of natural gas as a bridge fuel towards energy transition Natural gas is often seen as a bridge fuel in the global energy transition i.e.it offers a cleaner alternative for coal and oil,while renewable energy sources continue to develop.When burned,natural gas emits roughly 50%less carbon dioxide than coal and 30%less than oil for the same energy output.38 This lower emission profile makes it a viable choice for countries looking to lower their carbon footprint without sacrificing energy reliability.Its adaptable properties make it ideal for balancing intermittent renewable sources like solar and wind,ensuring grid stability during supply fluctuations.Beyond its cleaner combustion,natural gas benefits from existing infrastructure and technological improvements that boost its efficiency.Combined cycle power plants,which reuse waste heat to generate extra electricity,can achieve thermal efficiencies over 60%.Innovations like carbon capture and storage(CCS)and the creation of blue hydrogen from natural gas are further reducing its environmental impact.These technologies allow natural gas to assist in decarbonisation efforts in hard-to-decarbonise sectors like heavy industry and transport,ensuring it remains relevant in a low-carbon future.Currently,India gets about 6.3%of its energy from natural gas and aims to increase this share to 15%by 2030.39 This vision is backed by policies like expanding CGD networks,promoting biogas blending and developing LNG infrastructure.Some challenges such as methane emissions during production and transportation can undermine its environmental advantages,highlighting the need for effective monitoring and reduction technologies.Moreover,long-term dependence on natural gas might delay progress in renewable energy infrastructure,emphasising the need for careful planning to manage its role effectively.By investing in cleaner operational methods and renewable technologies,the gas industry can support global sustainability goals while remaining a key player in the energy transition.Operational decarbonisation Key levers to reduce emission footprint in current gas operations While natural gas emits less CO2 than coal or oil,it still produces substantial greenhouse gases throughout its entire value chain i.e.upstream production,gas processing,pipelines and storage,LNG and city distribution.These emissions result from fuel combustion,flaring,venting and methane leaks.To reduce these emissions,the gas sector can take two main paths:switch to lower-carbon fuels or decarbonise its existing operations.Fuel switching often requires significant capital and long lead times,while many operational decarbonisation measures can be implemented more quickly and at lower costs using existing technologies.38 World Energy Outlook Special report by IEA 39 https:/www.pib.gov.in/Pressreleaseshare.aspx?PRID=1844630 Augmenting the role of gas in Indias 2030 energy mix and beyond 24 Operational decarbonisation involves implementing targeted strategies to reduce emissions from different operations across the value chain.Key levers in this effort include reducing methane leaks and modernising and upgrading infrastructure.Key levers to reduce the emission footprint:1.Methane emissions reduction Leak detection and repair(LDAR):Deploying optical gas imaging cameras,aerial surveys(aircraft-based gas mapping LiDAR),satellites and continuous sensors to detect leaks quickly and prioritise super-emitters for rapid repair Eliminating routine flaring and venting:Installing vapor recovery units(VRUs)on tanks,connecting associated gas to gathering systems and,when flaring is unavoidable,keeping flares lit and tuned and replacing open flares with enclosed or low-emission units to maximise destruction efficiency and reduce unburned methane Methane capturing and utilisation:Capturing methane for reinjection into pipelines during maintenance operations or converting it into LNG or hydrogen to turn waste into value 2.Modernisation and infrastructural upgrades Replacing leak-prone assets:Accelerating replacement of cast iron and bare steel distribution mains and services;installing modern coated steel or polyethylene(PE)pipe and replacing high-bleed equipment with no or low-bleed equipment.Using inline inspection(smart pigs),advanced coatings and composite repairs;improving cathodic protection to prevent corrosion and leaks Upgrading LNG and processing plants:Adding boil-off gas reliquefication,electric drives,high-efficiency turbines,and cold-energy recovery;optimising dehydration and sulphur removal Automating and digitalising:Integrating smart systems for predictive maintenance and emissions tracking to prevent failures and optimise performance.Installing continuous methane sensors,automated flare monitoring and robust telemetry to enable measurement-based monitoring,reporting,verification(MRV)Augmenting the role of gas in Indias 2030 energy mix and beyond PwC|ASSOCHAM 25 Diversification and business model transformation potential ofbiogas and LNG in transport,green hydrogen and environmental,social and governance(ESG)/sustainability drivers Diversification and business model transformation in the gas sector mean broadening beyond conventional natural gas sales and reshaping how value is created.Diversification adds low-carbon gases and new energy services to the portfolio,while business model transformation shifts from purely selling gases to offering integrated solutions:renewable energy,infrastructure-as-a-service and certified low-carbon products.This change is driven by climate policies,investor expectations,customer demand for cleaner energy and the need to manage long-term transition risk.Companies that diversify early can protect revenue,lower financing risks and build new capabilities that remain relevant in a net-zero energy system.Biogas/biomethane:Biogas is produced from organic waste(landfills,agricultural residues,manure,wastewater).Upgrading biogas removes CO2 and impurities to produce biomethane with pipeline-quality specifications.Biomethane can be injected into existing gas grids or used as a transport fuel,delivering immediate lifecycle emissions cuts by avoiding methane emissions from waste.It uses existing infrastructure and helps decarbonise heating,industry and heavy vehicles.Success depends on securing reliable feedstocks,building or partnering for digesters and upgrading plants,and locking in long-term offtake with utilities,fleets or industrial users.Certification and tracking of environmental attributes help monetise the premium,while quality control(for H2S,moisture,siloxanes)and sustainability standards are key to scaling.The GoI has introduced the CBG Blending Obligation(CBO).CBO will be voluntary till FY 202425 and the blending obligation would become mandatory from FY 202526.CBO shall be kept as 1%,3%and 4%of the total CNG/PNG consumption for FY 202526,202627 and 202728 respectively.From 202829 onwards,CBO will be 5%.30 LNG in transport:It focuses on fuelling deep-sea ships and heavy-duty trucks,supported by bunkering terminals and refuelling stations.LNG reduces local air pollutants(SOx,NOx,particulates)and can lower greenhouse gases compared to oil-based fuels.It offers immediate compliance benefits under tightening marine and road emissions rules.Near-term opportunities include deploying engines that reduce slip(e.g.high-pressure direct injection)and managing boil-off gas efficiently.Over time,operators can blend or switch to bio-LNG or e-LNG to deepen decarbonisation.Green hydrogen:Produced by electrolysis using renewable electricity,green hydrogen and has near-zero operational emissions.It can replace fossil-based hydrogen in refining and ammonia,enable low-carbon steel via direct-reduced iron,support power peaking and long-duration storage,and fuel heavy transport.The PNGRB has granted initial approval for 5%v/v blending of green hydrogen into the PNG supply.This blending ratio is planned to be gradually increased in phases,ultimately reaching 20%.Integrating green hydrogen with natural gas helps significantly lower carbon emissions while preserving the overall energy content of the gas mixture.41 Gas companies can develop hydrogen hubs near 40 https:/www.pib.gov.in/PressReleasePage.aspx?PRID=1979705#:text=CBO will be voluntary till,promoting biofuels 41 https:/pngrb.gov.in/pdf/CaseStudies/20250619_CSR_Report.pdf 26 PwC|ASSOCHAM strong renewables and aim for long-term agreement with offtakers,repurpose or build pipelines and storage,and use ammonia or synthetic methane as carriers for export.Costs are falling with scale,cheap renewables and incentives,but projects still require bankable offtake,reliable certification of origin and careful integration with the power system.ESG and sustainability drivers:These drivers shape access to customers and capital.Lenders,insurers and large buyers increasingly require measurable cuts in methane intensity,zero routine flaring and credible Scope 13 targets.Companies are responding by adopting measurement-based monitoring,reporting and verification,certifying gas as responsibly sourced or low-methane,and linking executive pay to emissions and safety performance.Strong community engagement,supply chain standards,and transparent disclosures help lower financing costs,win contracts,and build trust while accelerating the sectors transition.Sector/application Natural gas Electrification/BESS Strategic outlook Urban and light commercial transport CNG:Delivers an immediate,affordable and scalable solution to urban air pollution.Leverages a vast and rapidly expanding refuelling network,offering a proven TCO advantage that makes clean mobility accessible to the masses today.EVs:Faces significant hurdles of high upfront vehicle cost for consumers,range anxiety,long refuelling times,and need for massive,costly upgrades to the electricity grid to support widespread charging.Long-haul trucking LNG:Offers the power,range and quick refuelling necessary for heavy-duty logistics,providing a clear TCO advantage over diesel without compromising on performance.It is the only market-ready technology to decarbonise this critical economic backbone.Electric/hydrogen trucks:Constrained by prohibitive battery weight(reducing cargo capacity),non-existent hydrogen refuelling corridors and unproven economics.These are experimental technologies still in the R&D phase in the Indian context.LNG is set to become the dominant clean fuel for long-haul transport through 2040.It creates the critical green corridors that future technologies like hydrogen may one day utilise,cementing gas infrastructure as a long-term national asset.Power grid balancing and peaking power Gas-fired power plants:Offer flexible,dispatchable power to complement intermittent renewables;quicker ramp-up/down than coal plants BESS:Technically superior for grid balancing;zero emissions when charged by renewables;plummeting costs and strong policy support(i.e.policy linked incentives PLI).Gas power is not a competitor but an enabler of renewables:Provides firm,dispatchable capacity that guarantees the reliability of a renewable-heavy grid.This role will become more critical as Indias renewable capacity grows.Domestic cooking PNG:PNG offers convenient,safe and reliable solution for the domestic cooking with continuous piped supply.It replaces traditional cylinders providing a significant lifestyle upgrade.Induction cooktops:Inductions are still considered secondary cooking devices in most Indian households.Acceptance of induction cooktops as primary stove is highly unlikely in the near future because of its dependency on reliable power supply,which is still a challenge in many areas.PNG seems to have a clear advantage over induction cooktops because of its convenience and reliability.PNG is projected to have a strong growth trajectory and will become the stable demand anchor for the domestic sector.CNG will remain the workhorse clean fuel for Indias urban mobility transition well into the 2030s,co-existing with EVs.Reliability and affordability of CNG ensures its role as the primary alternative to liquid fuels for the foreseeable future.Augmenting the role of gas in Indias 2030 energy mix and beyond PwC|ASSOCHAM 27 Impact of electrification:EV,BESS The energy transition and emergence of electrification,driven by electric vehicles(EVs)and battery energy storage systems(BESS),is creating a new competitive dynamic within Indias energy landscape.Rather than a threat,it highlights the unique value proposition of gas as a practical,scalable and indispensable partner one that co-exists with electrification options in the countrys transition.28 PwC|ASSOCHAM05 Way forward Indias aim to improve the share of natural gas to 15%of the energy mix needs a major acceleration in the infrastructure development,creation of demand and market reforms.This transition will be driven by strategic policy,targeted investments and innovation in the private sector.A collective roadmap for the key stakeholders is necessary in order to navigate the roadblocks and capitalise on the opportunities ahead.For the Government and regulators Make a unified and market-driven policy framework by incorporating natural gas into the GST regime and phasing out the APM to ensure a level playing field.Perform strategic interventions to power demand by providing policy support for LNG in heavy duty vehicles,directing the use of gas-based power for balancing the grid and peaking power needs and building a supportive ecosystem for CBG growth.Improve energy security and transparency by developing a strategic gas reserve,legally decoupling the infrastructure and marketing arms,and mandating a clear digital platform for booking of pipeline and terminal capacity.For gas sector companies Adopt digital transformation and project management excellency by embracing technologies such as GIS mapping,IoT monitoring and digital twins to improve operational safety and efficiency.Diversify business models to be in line with the energy transition and be equipped for the future integration of green hydrogen.Prioritise operational decarbonisation and ESG performance by renovating the infrastructure to lower methane emission,hence improving access to capital and strengthening social license to operate.For financial institutions and investors Financial institutions must identify and invest in promising large-scale infrastructure projects,including cross-country pipelines,LNG infrastructure and CGD networks,to build out the national gas grid.They would need to prioritise investments in projects with strong ESG credentials and technology upgrades that support decarbonisation,as these are critical for long-term risk mitigation and sustainable returns.Further,we recommend that these institutions develop innovative financial instruments and risk mitigation strategies to manage challenges associated with price volatility,geopolitical risks and the capital-intensive nature of the gas sector.29 PwC|ASSOCHAMAbout ASSOCHAM The Associated Chambers of Commerce&Industry of India(ASSOCHAM)is the countrys apex national chamber since 1920.It advocates actionable policy suggestions to strengthen the Indian economy by leveraging its extensive membership reach of over 450,000 companies,comprising of large corporates and SMEs.With over 70 Sector and State Councils,ASSOCHAM effectively represents diverse segments of Indian industry and focusses on aligning industry priorities with the nations growth aspirations.Contact us Jaidev Sharma Additional Director and Head-Hydrocarbons,ASSOCHAM Address The Associated Chambers of Commerce and Industry of India ASSOCHAM Corporate Office:4th Floor,YMCA Cultural Centre and Library Building,01,Jai Singh Road,New Delhi-110001,India About PwC We help you build trust so you can boldly reinvent At PwC,we help clients build trust and reinvent so they can turn complexity into competitive advantage.Were a tech-forward,people-empowered network with more than 370,000 people in 149 countries.Across assurance,tax and legal,deals and consulting we help build,accelerate and sustain momentum.Find out more at .PwC refers to the PwC network and/or one or more of its member firms,each of which is a separate legal entity.Please see for further details.2025 PwC.All rights reserved.Contact us Manas Majumdar Raman Jee Jha Partner,Oil and Gas Sector Leader Managing Director,Oil and Gas PwC India PwC India Co-authors Abhinandan Dutta Deepak Agarwal Director,Oil and Gas Manager,Oil and Gas PwC India PwC India Editorial Design Dion Dsouza Shipra Gupta Rashi Gupta 32 PwC|ASSOCHAM pwc.in Data Classification:DC0(Public)In this document,PwC refers to PricewaterhouseCoopers Private Limited(a limited liability company in India having Corporate Identity Number or CIN:U74140WB1983PTC036093),which is a member firm of PricewaterhouseCoopers International Limited(PwCIL),each member firm of which is a separate legal entity.This document does not constitute professional advice.The information in this document has been obtained or derived from sources believed by PricewaterhouseCoopers Private Limited(PwCPL)to be reliable but PwCPL does not represent that this information is accurate or complete.Any opinions or estimates contained in this document represent the judgment of PwCPL at this time and are subject to change without notice.Readers of this publication are advised to seek their own professional advice before taking any course of action or decision,for which they are entirely responsible,based on the contents of this publication.PwCPL neither accepts or assumes any responsibility or liability to any reader of this publication in respect of the information contained within it or for any decisions readers may take or decide not to or fail to take.2025 PricewaterhouseCoopers Private Limited.All rights reserved.SG/September2025-M&C 48385
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A world in balance 2025:Unlocking resilience and long-term value through environmental action#GetTheFutureYouWantA world in balance 2025Unlocking resilience and long-term value through environmental actionTable of contents2Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionExecutive summary08Who should read this report and why?04Despite global headwinds,organizations are reaffirming commitment to sustainability12Sustainability is a core future-proofing strategy22Climate adaptation is a priority but most organizations are underprepared363Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionAI is powering sustainability efforts,but its environmental is a critical consideration50Organizational,structural,and geopolitical barriers to sustainability56Recommendations76Conclusion 8485Research methodologyAppendix92Who should read this report and why?The fourth edition in our annual series,this report examines the trends shaping sustainability strategies and roadmaps.It offers a comprehensive view of organizational progress toward sustainability goals;where and why momentum is slowing;and what action organizations are taking.The report will be especially valuable for chief sustainability officers(CSOs)but given the cross-functional nature of sustainability and this editions focus on business value and future-proofing it will also be relevant to the broader C-suite and leaders across functions such as strategy,R&D,supply chain,and technology.This years edition ranges across themes from investment priorities,business value creation,and climate adaptation,to the impact of AI in sustainability and barriers to implementation.It also offers recommendations to help organizations sustain progress and adapt to an evolving business and regulatory environment.This report is based on original findings from a comprehensive industry survey of 2,146 senior executives(director level and above)from 716 leading organizations across 13 countries with annual revenue above$1 billion.Half of the executives surveyed work within corporate functions,and half come from value chain functions.We also interviewed senior sustainability executives at leading organizations and conducted a global survey of 6,566 consumers.Please see the research methodology at the end of the report for more details.4Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionThank you to the industry executives who contributed their perspectives to this studyDr.Eva RiesenhuberGlobal Head of Sustainability,SiemensAnke EhlersManaging Director International Sustainability,ALDI SouthPaul PolmanFormer CEO at Unilever and co-author of the book Net Positive:How courageous companies thrive by giving more than they takeRodolfo BrajcichGlobal Director of Nutrition and Sustainability,Sigma5Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionChristine Maria Betz Chief Sustainability Officer,BSH Home Appliances GroupEdmundo FuentesExecutive Vice President Business Transformation,SigmaLuca vila Martn del CampoSustainability Global Process Owner,SigmaSimone Targetti FerriChief Sustainability Officer,Italy,LOralErik WottrichHead of Sustainability,Tele2,a Sweden-based telecom operatorGabrielle GinrHead of Environmental Sustainability,BT GroupToms ZaborowskiHead of Sustainability Excellence,Bayer Crop ScienceFilip RosengrenDirector Sustainability,SKF Group6Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental action7Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionExecutive summary Organizations around the world are at a pivotal point in their sustainability journey.While commitment to sustainability remains strong,rising consumer expectations,climate risks,and geopolitical,economic,and operational pressures are challenging the pace and depth of progress.This fourth edition of our annual A world in balance research explores how organizations are navigating these complexities.Sustainability investment is set to increase,but credibility of actions is under pressureDespite global uncertainty,organizations continue to prioritize sustainability,driven by the growing recognition of its importance to long-term business success.Most(82%)plan to increase environmental sustainability investments over the next 1218 months(up from 74%in 2024),and 92%have not revised their net zero timelines.However,the spotlight is now on action,not ambition.About two in three(67%)executives say they are under increasing pressure to demonstrate credible,science-based progress toward net zero.Yet only 21%of organizations have developed detailed transition plans with interim targets and capital allocation.At the same time,62%of consumers believe organizations are engaging in greenwashing,up from 33%in 2023 and 52%in 2024.This widening credibility gap highlights the need for transparent,evidence-backed sustainability communication.Sustainability is seen as a business value driver and core future-proofing strategyOrganizations increasingly recognize that sustainability is not just a compliance exercise its a source of business value.Over two-thirds(67%)of executives cite business value creation as a key reason for sustainability investments.Almost half(49%)of organizations have already realized a positive return on investment(ROI)on their sustainability investments half of them 82%of organizations plan to increase environmental sustainability investments over the next 1218 months8Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionExecutive summary within a shorter timeframe than for traditional investments.Sustainability is also viewed as a long-term strategic lever:75%of executives say it is core to their future-proofing efforts.This is driven by needs such as staying ahead of regulation(72%),building stakeholder trust(69%),and driving innovation(67%)in a competitive global landscape.Climate adaptation is on the radar,but execution is laggingAs climate impacts grow more severe and frequent,organizations are feeling the strain.A vast majority report disruptions:86%to supply chains,78%to production,and 73%due to raw material shortages.While 56%of executives say their organization prioritizes climate adaptation,actions often stop at planning.Many executives rate their organizations as“well-prepared,”yet only 38%have upgraded infrastructure,31%shifted suppliers or production to less climate-vulnerable regions,and 26%redesigned products.This signals a disconnect between perceived readiness and actual resilience,as organizations conflate strategic planning with true climate preparedness.67%of executives say they are under increasing pressure to demonstrate credible,science-based progress toward net zero75%of executives say sustainability is a core future-proofing strategy for their organization9Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionExecutive summary AI is powering sustainability efforts;but its environmental impact is a critical considerationMost(64%)executives report that their organization uses AI to achieve its sustainability agenda.While 57knowledge that Gen AIs environmental impact is being discussed in boardrooms,only 32%report having taken steps to mitigate it.That said,most(57%)still believe the benefits of Gen AI outweigh its environmental costs,however this has declined from 67%in 2024,indicating growing caution around its environmental footprint.Structural,geopolitical,and organizational barriers are slowing progressDespite strong intent,sustainability momentum has stalled.Following steady gains from 2022 to 2024,maturity levels have dipped in 2025.The share of sustainability“front-runners”has fallen from 7%to just 1%.According to 65%of executives,geopolitical tensions are slowing down initiatives.Internally,progress is hindered by budget constraints(cited by 81%),inadequate data and measurement systems(also 81%),and operational silos(79%).On the consumer front,affordability,availability,and information gaps continue to limit adoption of sustainable adoption of sustainable products.Only 24%of consumers consider them affordable,and just 16el they have access to sufficient sustainability information.The disconnect between organizations stated intent to invest in sustainability and the reality of stalled execution reveals a critical paradox.Sustainability is widely recognized as a strategic priority,yet short-term actions sometimes fail to align.The report concludes with targeted recommendations to help organizations navigate mounting pressures and sustain steady,long-term progress toward their sustainability goals.Key actions include:56%of executives say their organization prioritizes climate adaptation10Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionExecutive summary Strengthening the credibility of climate actions through demonstrable,near-term measures Building consumer trust through intuitive consumer messaging Advancing from climate adaptation strategy to operational preparedness64%of executives report that their organization uses AI to achieve its sustainability agendaCyril GarciaGroup Executive Board Member,Head of Global Sustainability Services and Corporate Responsibility,Capgemini“Organizations today are navigating a complex landscape defined by both uncertainty and opportunity.Geopolitical pressures,climate risks,and shifting regulatory landscapes undoubtedly add complexity,but they also strengthen the case for rethinking growth and resilience and for future-proofing competitiveness.”Ramping up circularity to reduce resource dependency Investing in next-generation infrastructure to enhance resilience Transforming and evolving functions to build future-readiness Enabling sustainability progress through robust data systems and responsible AI.11Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionQuantum safety is on the radar of most organizations01Despite global headwinds,organizations are reaffirming commitment to sustainability0112Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionPolitical pressures,regulatory delays,and investor caution are contributing to a more complex environment for sustainability-related initiatives.For example:Amid rising political and legal scrutiny of ESG initiatives,particularly in the US,several major banks across the US,Europe,and Asia have exited the Net-Zero Banking Alliance(NZBA),signaling a setback for voluntary climate finance coalitions.1 Climate tech venture and growth investment declined by 19%year on year in H1 2025.Investors cite policy uncertainty,especially around US climate incentives and tariffs,as the primary concern.2 Regulatory momentum has slowed in key markets such as the US and EU.In March 2025,the US Securities and Exchange Commission(SEC)voted to stop defending its climate disclosure rule in court after multiple lawsuits,effectively stalling implementation of the rule and leaving its future uncertain.3 The European Commission has delayed the rollout of key climate disclosure and due diligence rules(CSRD4 and CSDDD5),citing efforts to simplify compliance.6 Yes,despite these challenges,our research shows that organizations continue to demonstrate a strong commitment to sustainability.This commitment is increasingly motivated not only by regulatory requirements,but also by the tangible business value sustainability delivers.As explored later in the report,business value ranks as the second most important driver of sustainability investments just behind compliance.While regulation has been instrumental in shaping sustainability agendas,our findings indicate that even when regulatory momentum slows,investment plans continue.This reflects a broader shift toward viewing sustainability as a core business strategy that enhances resilience,drives efficiency,and strengthens competitiveness.Sustainability investments are set to increaseMost(82%)organizations plan to increase investment in environmental sustainability over the next 1218 months(up from 74%in 2024).A further 14%expect to maintain current investment levels,and only 4%expect to cut back(see Figure 1).Additionally,66%of organizations treat sustainability as a key criterion in their business investment decisions.Moreover,59%of executives see a clear business case for sustainability(up from 55%in 2024)and only 22%agree that the cost of sustainability initiatives outweighs the benefits(compared to 23%in 2024).For example:Schneider Electric pledged more than$700 million by 2027 to strengthen supply chain sustainability in the US.It intends to enhance energy infrastructure;expand its domestic manufacturing base;and improve grid reliability.7 In 202529,Spanish bank BBVA plans to channel 700 billion to sustainable business,more than double the 201825 target.8 Global retailer IKEA will reportedly invest 1 billion in recycling organizations.9 In March 2025,US-based materials science organization Dow announced an investment in Xycle,a Rotterdam-based chemical recycling startup,to support the construction of its first commercial-scale plant and expand access to circular plastic feedstocks.10 In May 2025,Microsoft signed an offtake agreement with Sublime Systems,a low-carbon-cement technology startup,to purchase up to 622,500 tons of low-carbon cement for its data centers and support scaling.11 Rodolfo Brajcich,Global Director of Nutrition and Sustainability at Sigma,a Mexican multinational food company,highlights how sustainability is core to the companys strategy:“As we shape our mid-to long-term vision,sustainability is deeply embedded in everything we aim to accomplish.Our core investment areas include monitoring and investing in refrigeration equipment to prevent fugitive emissions;shifting to greener energy sources through on-site electricity generation and clean electricity procurement;reducing water consumption;improving waste management and adopting circular solutions;and transforming packaging by reducing virgin plastic and enhancing recyclability.These 13Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionare not isolated projects,but part of our core strategy to advance sustainability and business performance.”Anish Saigal,Director Sustainability and Transition Finance at Barclays,asserts:“ESG commitments havent simply disappeared amid geopolitical tensions.The banking sector continues to move forward,making major financial commitments.This reflects how sustainability is now embedded into how industries and investors operate;commercially,its tied to business opportunity,competitiveness,and future growth.”Our conversations with industry executives suggest that while sustainability investment is increasing,some organizations are stepping up investment in priority areas while keeping others steady,or in some cases,redirecting them.These decisions reflect a deliberate effort to align sustainability investment with areas most critical to business impact.Source:Capgemini Research Institute,Sustainability transformation trends survey,JuneJuly 2025,N=716 organizations.Figure 1.More than 80%of organizations plan to increase investment in environmental sustainability82%4%How are your environmental sustainability investments likely to evolve in the next 1218 months?DecreaseRemain flatIncrease66%of organizations treat sustainability as a key criterion in their business investment decisions14Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionRodolfo BrajcichGlobal Director of Nutrition and Sustainability at Sigma“As we shape our mid-to long-term vision,sustainability is deeply embedded in everything we aim to accomplish.Our core investment areas include monitoring and investing in refrigeration equipment to prevent fugitive emissions;shifting to greener energy sources through on-site electricity generation and clean electricity procurement;reducing water consumption;improving waste management and adopting circular solutions;and transforming packaging by reducing virgin plastic and enhancing recyclability.These are not isolated projects,but part of our core strategy to advance sustainability and business performance.”15Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionOrganizations are standing firm on net zero commitmentsDespite global uncertainty,92%of organizations have retained the timelines of their net zero goals,signaling strong commitment(see Figure 2).For instance:Mercedes-Benz continues to invest in renewable energy usage and generation to decarbonize production,with renewable resources already meeting 50%of energy needs at its production plants.The organization aims to achieve up to a 50%reduction in CO emissions across the entire value chain within the next decade.12 Renata Jungo Brngger,Member of the Board of Management of Mercedes-Benz Group AG.Integrity,Governance&Sustainability,says:“In a time of growing global uncertainties,we continue to take proactive measures to ensure a real difference within our six sustainability focus areas aiming to anchor sustainability firmly in our operational business.We want and need to be ahead for example by proactively identifying and addressing potential issues in our value chain.The goal is to avoid potential risks at an early stage ensuring the future success of Mercedes-Benz.”13 In February 2025,Standard Chartered bank published its Transition Plan,which represents an important milestone in the banks net zero roadmap,published in 2021.In addition to targeting net zero by 2050,it has set interim 2030 targets against all 12 high-emitting sectors,as defined NZBA Guidance.14 Among the 8%of organizations that have extended their net zero timelines,the reasons cited most frequently are overly ambitious targets,limited control over Scope 3 emissions,and high costs,rather than an ideological or strategic shift away from sustainability.This trend holds across all surveyed countries,underscoring a globally resilient stance(see Figure 3).The data reflects responses from 716 large organizations each generating over$1 billion annually and collectively representing approximately$10.7 trillion in revenue(please see the research methodology at the end of the report for more details).Our discussions with industry executives surfaced perspectives on how a growing sense of realism is shaping adjustments to sustainability goals.For instance,real-world constraints such as limited availability of recycled materials are prompting a reassessment of earlier targets.In parallel,the current geopolitical climate,marked by increased scrutiny and pushback against sustainability in some countries,is creating space for companies to revisit overambitious commitments and develop more grounded,achievable strategies.16Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental action92%of organizations have retained their net zero timelinesSource:Capgemini Research Institute,Sustainability transformation trends survey,JuneJuly 2025,N=714 organizations that have a net zero target.Figure 2.Over 90%of organizations have retained their net zero timelines92%8%0%0%0%What is your organizations current position on its net zero commitments?We are committed todecarbonization but net zerois not a target anymoreWe are postponing ournet zero objectives bymore than 5 yearsWe are postponing ournet zero objectives by35 yearsWe are postponing ournet zero objectives by12 yearsWe havent changed thetimelines of our net zerocommitments17Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionSource:Capgemini Research Institute,Sustainability transformation trends survey,JuneJuly 2025,N=714 organizations that have a net zero target.Figure 3.Most organizations across countries have retained their net zero timelines92%Percentage of organizations that havent changed their net zero timelines by countryItalyNetherlandsIndiaSwedenCanadaUSNorwayAustraliaSpainJapanUKFranceGermanyGlobal8%of organizations have extended their net zero timelines;the reasons cited most frequently are overly ambitious targets,limited control over Scope 3 emissions,and high costs,rather than an ideological or strategic shift away from sustainability18Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionRenata Jungo BrnggerMember of the Board of Management of Mercedes-Benz Group AG.Integrity,Governance&Sustainability“In a time of growing global uncertainties,we continue to take proactive measures to ensure a real difference within our six sustainability focus areas aiming to anchor sustainability firmly in our operational business.We want and need to be ahead for example by proactively identifying and addressing potential issues in our value chain.The goal is to avoid potential risks at an early stage ensuring the future success of Mercedes-Benz.”13 19Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionThe imperative to demonstrate progressAbout two in three(67%)executives say their organization is under increasing pressure to demonstrate credible,science-based toward net zero.A senior sustainability executive at a multinational food and beverage company highlights this evolving mindset:“Sustainability has always been framed as a long-term goal 2030,2040,even 2050.But that mindset is shifting.Were now being asked:whats the year-one deliverable?What do we need to achieve in the next quarter?Theres growing pressure to break down net zero ambitions into near-term actions and KPIs just like we do with financial metrics.It is no longer enough to talk about distant milestones.Its about showing progress,step by step.”Most organizations are falling short,with 82%only planning to reach net zero by 2041 or beyond(see Figure 4).Only 21%have a detailed transition plan that includes science-based interim targets and capital allocation.Source:Capgemini Research Institute,Sustainability transformation trends survey,JuneJuly 2025,N=714 organizations that have a set net zero target.Figure 4.Over four in five organizations have set net zero targets for 2041 or later78%4%1%Proportion of organizations with net zero targets by specified timelines After 20502041205020312040By 2030Our research reveals 62%of consumers feel that organizations/brands are engaging in“greenwashing,”up from 33%in 202315 and 52%in 2024,16 highlighting persistent public skepticism around sustainability claims and a widening credibility gap.Further,77lieve corporations should do more to reduce GHG emissions.A European Commission study suggests that 53%of green claims are vague,misleading,or unfounded,and 40%have no supporting evidence whatever.The risk is increased by the rise of deepfake technology.17 In response,from April 2025,the UK Competition and Markets Authority(CMA)can impose penalties of up to 10%of global turnover for misleading environmental claims.18This sends a strong message to businesses:sustainability communications must be accurate,transparent,and backed by evidence.82%of organizations only plan to reach net zero by 2041 or beyond 20Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionVincent CharpiotExecutive Vice President,Head of Group Sustainability Business Accelerator,Capgemini“The actual sign of progress is that organizations continue to hold firm on sustainability despite short-term uncertainties.That persistence reflects a growing recognition that sustainability is deeply intertwined with long-term business performance.”21Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionSustainability is a core future-proofing strategy0222Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionOrganizations recognize sustainability as a key driver of business valueWhile regulatory compliance remains a key motivator(71%of executives cite it as a strong driver of sustainability investments),two in three executives(67%)identified business value including profitability,cost savings,and operational efficiency as a strong driver of sustainability investments(see Figure 5).This reflects a growing understanding that sustainability is a strategic asset with measurable ROI.Luca vila Martn del Campo,Sustainability Global Process Owner at Sigma,says:“Sustainability is part of Sigmas global strategy,projects are evaluated through a business lens,and the results are clear:sustainability creates business value.For example,energy efficiency and green energy deliver cost savings our migration to clean energy in Mexico continues to bring us savings to this day while water efficiency and reuse are helping us build resilience and mitigate the risk of water scarcity in stressed regions.Sustainability has also become a powerful way to attract and retain talent and strengthen our culture,as employees,especially younger generations,want to work for companies that have a sense of purpose.”Erik Wottrich,Head of Sustainability at Tele2,a Sweden-based telecom operator,highlights:“Sustainability has evolved from being a compliance checkbox,to a communications tool,and now into a strategic lever.We see that sustainability initiatives are not only reducing emissions but also cutting costs and driving innovation.For instance,AI is being used to temporarily reduce capacity in network equipment during low-traffic periods without affecting service.”Miljan Gutovic,CEO at Holcim AG,a Swiss multinational building materials manufacturer,said:“Sustainability is driving net sales growth and margin expansion at Holcim.We are seeing rising demand for sustainable offering that comes with price premiums.”19 Sustainability is just as vital for public sector organizations as a means to deliver long-term value to citizens.Investments in sustainability help reduce operating costs,strengthen infrastructure resilience,and meet rising public expectations 70%of surveyed consumers believe governments must play a larger role in reducing greenhouse gas emissions.Initiatives such as energy-efficient buildings,clean transport,water reuse systems,and climate-resilient infrastructure can not only lower costs but also protect communities and build public trust.67%of executives identified business value including profitability,cost savings,and operational efficiency as a strong driver of sustainability investments23Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionSource:Capgemini Research Institute,Sustainability transformation trends survey,JuneJuly 2025,N=2,146 executives.Figure 5.While compliance leads,business value is a strong driver of sustainability investments 71gaVF%What is driving your organizations sustainability investments?Percentage of executives who rate the following as strong driversConviction that it is the right thing to doAdapting to climate risksFulfilling ESG commitmentsDriving business value(e.g.,business resilienceprofitability,cost savings,operational efficiency)Complying with regulations24Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionRevenue growthCost savingsNew business opportunitiesImproved customer lifetime valueImproved affordabilityStandard Chartered bank reported income of$982 million from sustainable finance in 2024,against a target of at least$1 billion by 2025.20BT Group targets action in its product development processes,improving data collection and enabling customers to access its networks,products,and services to cut carbon.21 Gabrielle Ginr,Head of Environmental Sustainability at BT Group,says:“Since FY22,weve helped customers avoid over 5.5m tonnes of carbon,mainly through full fiber broadband reducing personal or work-related travel.As we develop more products and services,like Internet of Things and AI,we expect this number to grow.Associated revenues from carbon-saving products amounted to 6bn in 2025.”In June 2025,LOral launched its first global,multi-brand,multi-category,multi-channel campaign:#JoinTheRefillMovement.The campaign invites consumers worldwide to embrace refills and promote both sustainability and smarter spending.25 Simone Targetti Ferri,CSO Italy at LOral,told us:“Our refill strategy is a game changer.In the medium term,pouches cost less to produce than traditional packaging.Its better for the environment and lets us offer lower prices to retailers and consumers.”A senior executive from a multinational fashion retailer says:“Our resale program is a standalone business unit.It generates revenue and is profitable.Our repair services dont just drive revenue.They are a customer retention tool and extend customer lifetime value CLV.”H&Ms investment in the second-hand platform Sellpy is an example of simultaneous growth creation and sustainable development.In 2024,sales from resale increased to 0.6%of total group turnover.24Delta Airlines achieved$110 million in annual cost savings by cutting jet fuel use by 1%(45 million gallons)through a range of operational efficiencies such as reducing weight on board and optimizing aircraft speed and routing.22 The Singapore Government plans to invest$300 million over five years to improve energy efficiency in public sector buildings.The initiative is expected to deliver lifecycle cost savings and generate excess savings for the public sector in the long term.23Source:Secondary sources and Capgemini Research Institute interviews.Figure 6.How sustainability is delivering business value 25Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionSimone Targetti FerriCSO Italy at LOral“Our refill strategy is a game changer.In the medium term,pouches cost less to produce than traditional packaging.Its better for the environment and lets us offer lower prices to retailers and consumers.”26Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionA world in balance 2025:Unlocking resilience and long-term value through environmental actionSustainability efforts have already proven profitable for nearly half of organizationsNearly half(49%)of organizations report a positive ROI from sustainability initiatives.For many,the payback period is shorter than or comparable to that for traditional investments:50%report accelerated ROI 5%report broadly unchanged time to ROI Only 35%experienced a longer timelineA recent study by Morgan Stanley reveals that 83%of organizations globally measure ROI for their sustainability activities in a similar way as that for non-sustainability initiatives.Moreover,one-quarter see increased profitability as the greatest value-add for sustainability over the next five years.26 Sustainability efforts deliver ROI in both tangible and intangible forms.Tangible returns include cost savings(e.g.,from energy-efficient processes or waste management programs),increased revenue(e.g.,sales from sustainable products),and improved access to capital(e.g.,lower Erik WottrichHead of Sustainability at Tele2,a Sweden-based telecom operator“Sustainability has evolved from being a compliance checkbox,to a communications tool,and now into a strategic lever.We see that sustainability initiatives are not only reducing emissions but also cutting costs and driving innovation.For instance,AI is being used to temporarily reduce capacity in network equipment during low-traffic periods without affecting service.”27Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actioninterest rates).Intangible benefits include talent attraction(e.g.,avoided rehiring costs),stronger brand reputation(e.g.,customer loyalty),and risk resilience(e.g.,avoided costs from disruption or regulatory fines).Julien Denormandie,former French Minister and Chief Impact Officer at Sweep,a software firm specializing in carbon data management,says:“Businesses that embed sustainability into their core operations often discover untapped revenue streams and cost efficiencies that dramatically improve their net present value over time.What was once seen as a reputational play is now a tangible driver of income and shareholder value.The ROI equation has evolved today,environmental sustainability is directly tied to financial outcomes.”27Italy-based multinational energy company Enel,for instance,increased renewable capacity by 60%and cut emissions intensity by over 70tween 2017 and 2024,while increasing ordinary EBITDA from 15.6 billion to 22.8 billion in the same period.28 Looking ahead,Enel expects a 40%increase in EBITDA by 2027,driven by its continued investment in renewables.29Organizations see sustainability as a catalyst for innovation,competitiveness,and long-term resilienceThree-quarters of executives(75%)say sustainability is a core future-proofing strategy for their organizations to drive long-term growth,competitiveness,innovation,and resilience.75%of executives say sustainability is a core future-proofing strategy for their organization28Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionSource:Capgemini Research Institute,Sustainability transformation trends survey,JuneJuly 2025,N=2,146 executives.Figure 7.Executives from Sweden,the UK,and Norway lead in viewing sustainability as a future-proofing strategy 75yxwvvvvutsig%Percentage of executives,by country,who agree with the statement:Sustainability is a core future-proofing strategy for our organizationCanadaFranceGermanyJapanIndiaUSSpainItalyAustraliaNetherlandsNorwayUKSwedenGlobal29Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental action“Sustainability is part of Sigmas global strategy,projects are evaluated through a business lens,and the results are clear:sustainability creates business value.For example,energy efficiency and green energy deliver cost savings our migration to clean energy in Mexico continues to bring us savings to this day while water efficiency and reuse are helping us build resilience and mitigate the risk of water scarcity in stressed regions.Sustainability has also become a powerful way to attract and retain talent and strengthen our culture,as employees,especially younger generations,want to work for companies that have a sense of purpose.”Luca vila Martn del CampoSustainability Global Process Owner,Sigma30Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionSource:Capgemini Research Institute,Sustainability transformation trends survey,JuneJuly 2025,N=2,146 executives.Figure 8.More than four in five executives from retail,automotive,public sector,and aerospace and defense organizations say sustainability is a core future-proofing strategy 75xwsrrpgg%Percentage of executives,by sector,who agree with the statement:Sustainability is a core future-proofing strategy for our organizationTelecomHealthcare and life sciencesEnergyFinancial servicesAgriculture and forestryConsumer productsIndustrial manufacturingUtilitiesAerospace and defensePublic/governmentAutomotiveRetailGlobal31Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionThe need to ensure future regulatory alignment(72%),strengthen stakeholder trust(69%),mitigate emerging risks(68%),and drive innovation to remain competitive(67%)all influence this view(see Figure 9).As global competition intensifies,55%of executives say they face growing pressure to embed sustainability into their offerings.Simone Targetti Ferri at LOral emphasizes that sustainability enhances competitiveness:“If we can cut waste,reduce resource use,and still deliver value,were not just sustainable we are more competitive than companies that cant afford to change.”Christine Maria Betz,Chief Sustainability Officer at BSH Home Appliances Group,explains how sustainability is embedded into their business strategy:“Sustainability is not a standalone initiative at BSH its one of our strategic pillars that guides our entire business.We dont treat it as a separate agenda;its embedded in how we design products,engage with consumers,and make investment decisions.”She adds:“Whether its reselling scrap,using alternative materials,or rethinking supply chains,each step reduces risk and builds strength and resilience for the future.Circular products are still expensive today,but if we find smarter ways to scale them,they can open up entirely new value pools.”Source:Capgemini Research Institute,Sustainability transformation trends survey,JuneJuly 2025,N=1,616 executives that say that sustainability is a core future-proofing strategy for their organization.Figure 9.Beyond compliance and risk mitigation,sustainability is viewed as a catalyst for innovation,competitiveness,and long-term resilience72ihgcXSF%Why does your organization view sustainability as a core future-proofing strategy?Percentage of executives who rate the following as important factorsReducing costs(e.g.,through energysavings,waste reduction,circularity,etc.)Building resilience to externaldisruptions(e.g.,climate,supply chain)Attracting and retaining talentEnabling access to capitalDriving innovation to remain competitive(to keep pace with or outpace global competitors that are advancing rapidly on sustainable offerings)Reducing operational and financial risksImproving stakeholder trust andbrand reputationEnsuring compliance with evolvingregulations32Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental action“Whether its reselling scrap,using alternative materials,or rethinking supply chains,each step reduces risk and builds strength and resilience for the future.Circular products are still expensive today,but if we find smarter ways to scale them,they can open up entirely new value pools.”Christine Maria Betz Chief Sustainability Officer at BSH Home Appliances Group33Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionFlorent AndrillonHead of Group Climate Tech,Capgemini“Investing in sustainability is investing in future-proofing growth.Organizations that harness it as a catalyst for innovation and resilience are best positioned to unlock new value pools and thrive in uncertainty.”34Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental action2.2.A discussion with Dr.Eva RiesenhuberGlobal Head of Sustainability,SiemensHow does Siemens maintain momentum on sustainability initiatives amid geopolitical volatility?We view sustainability as a long-term transformation one weve backed with steady,strategic investment.For example,two years ago,we committed 650 million to transition our operations and cut scope 1 and 2 emissions by 90%by 2030 electrifying our fleet,shifting production,and moving all our buildings to net zero.Weve defined our strategy and are executing consistently.Our focus is firmly on the future,maintaining the pace of progress to deliver whats needed.How does AI help in advancing Siemens sustainability agenda?AI is a powerful enabler of the energy transition and for resource efficiency and circularity.It helps manage complexity whether in grid management,predictive maintenance,or optimizing energy flows.At Siemens,we apply industrial AI across grid management and advanced manufacturing.For example,we used AI to redesign a robot arm to weigh 2 kilograms instead of 50 kilograms,saving up to 90%of material,reducing the cycle time by 20%.When scaled across more than three million robots arms worldwide,the impact is enormous.How does Siemens address AIs environmental impact?We recognize that AI has its own footprint.Data centers consume vast amounts of energy,so we focus on making AI itself greener:through smarter algorithms,better cooling technologies,and more efficient infrastructure.With our customer Greenergy,for example,we developed an AI managed automatic cooling system reducing the energy use of their data center by up to 30%.We are still at the early stages but expect rapid progress in AI infrastructure.The key is balance:not every AI application is necessary,but when applied to critical infrastructure,the societal benefits of AI far outweigh its costs.35Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionClimate adaptation is a priority but most organizations are underprepared0336Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionSource:Capgemini Research Institute,Sustainability transformation trends survey,JuneJuly 2025,N=716 organizations.Figure 10.Most organizations have already felt the impact of climate change Has your organization experienced tangible consequences of climate change on its business operations or value chains?Percentage of organizations that have experienced the following consequencesWater insecurityEnergy insecurityEmployee productivity and impact onwell-beingIncreased investor and regulatory scrutinyInsurance and liability costsImpact on revenueReduced production capacityPhysical damage or loss of infrastructureRaw materials scarcityProduction stoppagesSupply chain disruptions86xs)%7%6%6%5%4%Climate impacts are hitting business operations and value chainsMost organizations surveyed have experienced supply chain disruptions(86%),production stoppages(78%),and raw material scarcity(73%)as a direct consequence of climate change(see Figure 10).A senior executive from a multinational fashion retailer explains:“Ten years ago,climate adaptation wasnt really on the radar.It was more about emissions and mitigation.But thats changed.Now,organizations are engaging in scenario planning and asking:What if theres no water?What if sea levels rise?What does that mean for our supply chain or even for our business model?”Extreme weather events are causing widespread disruptions to business operations and value chains globally,as illustrated in Figure 11.37Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionSources:Information compiled from publicly available secondary sources.Figure 11.Examples of climate-related disruptions Raw materials scarcitySupply chain disruptionsOperational stoppagesPhysical asset damageFinancial lossClimate impactsIllustrative casesIn July 2024,flooding at a key aluminum suppliers factory disrupted production for Porsche.30Extreme heat and drought across cocoa-producing West African countries and coffee-producing regions in Brazil and Vietnam are driving supply shortages and price spikes,impacting food manufacturers.31In December 2023,Apple suppliers Foxconn and Pegatron suspended iPhone production in Chennai,India,after Cyclone Michaung caused severe flooding and disrupted factory operations.34In January 2025,BASF,Dow,and other chemical companies shut down Gulf Coast plants after an Arctic freeze from winter storm Enzo disrupted operations and forced emergency shutdowns.35In September 2024,LG Electronics Hai Phong plant in Vietnam suffered major damage after Typhoon Yagi caused flooding and structural collapse,disrupting production.36In 2024,flooding in Slovenia damaged raw-materials processing facilities,disrupting supply chains for automotive and electronics manufacturers.37US property and casualty insurer Travelers disclosed that the Los Angeles,California wildfires in January 2025 led to over$1.7 billion of net losses,including personal and commercial segments.38 Global insured losses from natural disasters totaled$137 billion in 2024(up from$115 billion in 2023),driven by Hurricanes Helene and Milton,severe storms in the US,wildfires,and major floods worldwide.39 Recent droughts severely lowered water levels in major rivers such as the Mississippi,Yangtze,Rhine,and Amazon,causing significant supply chain disruptions.32In January 2025,Archer-Daniels-Midland(ADM)declared force majeure at its Gulf Coast terminals after a deep freeze halted grain loading and fertilizer logistics.3338Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionMore disruption is expected as climate risks intensifyAs global temperatures continue to rise,extreme weather events are projected to become more likely and severe.40 Reflecting this growing concern,the World Economic Forums 10-year risk outlook ranked extreme weather as the top long-term global risk,for the second consecutive year.41 For executives,the most pressing concerns are maintaining operations during extreme weather events(76%);sourcing materials or parts(74%);and meeting regulatory and disclosure requirements(73%).Additionally,66%foresee difficulties in managing insurance or financial risks.While less widespread,water and energy insecurity are still notable concerns for 20%and 19%of respondents,respectively.Erik Wottrich,Head of Sustainability at Tele2,says:“Weve always designed our infrastructure to withstand storms and floods,but now were seeing these events more frequently.Its not just about resilience its about anticipating the next level of disruption.That means rethinking where we store equipment,how we cool it,and how we build redundancy into systems that were never meant to operate under climate stress.”A study by the Potsdam Institute for Climate Impact Research(PIK)estimates that,by 2049,climate change could cost the global economy approximately$38 trillion annually,with a projected range between$19 trillion and$59 trillion.These damages are driven primarily by rising temperatures,along with shifts in rainfall patterns and increased temperature variability.Additional weather extremes such as storms and wildfires could push these costs even higher.42 Our analysis shows that climate change will cause massive economic damages within the next 25 years in almost all countries around the world,also in highly-developed ones such as Germany,France,and the United States,says PIK scientist Leonie Wenz,who led the study.43 The total annual cost of physical climate risks alone for the worlds largest companies in the S&P Global 1200 is projected to reach$1.2 trillion by 2050.44 76%of executives anticipate challenges with maintaining operations during extreme weather events66%of executives foresee difficulties in managing insurance or financial risks39Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionSource:Capgemini Research Institute,Sustainability transformation trends survey,JuneJuly 2025,N=2,146 executives.Figure 12.Executives are bracing for disruption as climate impacts intensifyDo you anticipate that climate change will create challenges for your organization in any of the following areas?Percentage of executives who expect the following challenges76tsf %0%We do not anticipate any significant challenges Energy insecurityWater insecurityManaging insurance or financial riskMeeting regulatory or disclosure requirementsSourcing materials or partsMaintaining operations during extreme weather eventsA senior executive from a multinational fashion retailer Ten years ago,climate adaptation wasnt really on the radar.It was more about emissions and mitigation.But thats changed.Now,organizations are engaging in scenario planning and asking:What if theres no water?What if sea levels rise?What does that mean for our supply chain or even for our business model?”40Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental action2.2.What is climate adaptation?Types of climate risk:1.Physical risks These relate to the direct physical impacts of climate change and are categorized as:Acute risks:Extreme weather events such as hurricanes,floods,or wildfires that can damage physical assets,disrupt operations,delay or break supply chains,threaten employee health and safety,and reduce productivity.Chronic risks:Long-term climate shifts such as rising sea levels,desertification,or changes in temperature and precipitation patterns that gradually erode asset value,strain resource availability,and increase operational costs.2.Transition risks These stem from the changes associated with the transition to a low-carbon economy:Policy and legal risks:New regulations,carbon pricing,or litigation that increase compliance costs or restrict operations.Technology risks:Disruption from emerging low-carbon technologies that may render existing systems or investments obsolete.Market risks:Shifts in consumer preferences,investor expectations,or supply chains that affect demand for certain products and services,potentially leading to reduced revenue or financial losses.Climate adaptation refers to the process of anticipating,preparing for,and responding to climate risks both physical(such as extreme weather events and rising sea levels)and transition risks(such as regulatory changes or shifts in market expectations).Unlike mitigation,which targets the root cause of climate change by reducing greenhouse gas(GHG)emissions to limit future warming,adaptation focuses on managing the current and future impacts of climate change.The two are necessary and complementary pillars of climate action.Reputational risks:Stakeholder criticism or loss of trust due to perceived inaction on climate issues.Climate adaptation involves two core actions:first,assessing climate risks through scenario analysis and forecasting,and integrating those risks into enterprise risk management(ERM),infrastructure planning,and supply chain strategies.Second,taking action such as upgrading assets,shifting operations,and redesigning products.41Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionOrganizations prioritize climate adaptationAmid growing concern over the likelihood of missing the 1.5C target set by the Paris Agreement,climate adaptation(see insert“What is climate adaptation?”)is becoming increasingly imperative.The World Meteorological Organization accords a 70%probability that global average temperatures between 2025 and 2029 will breach the critical 1.5C threshold.45 Organizations are beginning to respond:56%of executives say their organization actively prioritizes climate adaptation as part of its broader climate strategy.But the focus on adaptation varies across industries(see Figure 13).The agriculture and forestry sector faces direct physical risks such as crop failure and reduced yields,as well as forest loss due to wildfires.While less physically exposed,the financial services sector faces risks through its investment portfolios and growing regulatory pressure to assess and disclose climate-related exposures.The consumer products and utilities sectors give the lowest priority to climate adaptation,despite being among the most vulnerable.Infrastructure-dense industries such as manufacturing,energy,utilities,telecom,consumer products,and retail are particularly exposed owing to their extensive physical assets.A 2021 study found that,of capital-intensive industries,utilities face the highest long-term physical risk due to climate hazards such as water stress,wildfires,storms,and heatwaves.46 Its relatively low emphasis on climate adaptation reveals a disconnect between exposure and preparedness.70%probability that global average temperatures between 2025 and 2029 will breach the critical 1.5C threshold4542Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionSource:Capgemini Research Institute,Sustainability transformation trends survey,JuneJuly 2025,N=2,146 executives.Figure 13.The agriculture and forestry,government,and financial services sectors lead in the prioritization of climate adaptationBut most remain underprepared to respondMore than half(54%)of executives say their organization is underprepared for the impacts of climate change(e.g.,physical damage to people and property due to extreme weather events,financial losses,reputational damage,or regulatory non-compliance).67%of executives from the agriculture and forestry sector say their organization actively prioritizes climate adaptation56gfaYYUTSSRPI%Our organization actively prioritizes climate adaptation as part of its overall climate strategyPercentage of executives who agree with the statementGlobalAgriculture and forestryPublic/governmentFinancial servicesAerospace and defenseAutomotiveEnergyHealthcare and life sciencesIndustrial manufacturingTelecomRetailConsumer products manufacturingUtilities43Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionSource:Capgemini Research Institute,Sustainability transformation trends survey,JuneJuly 2025,N=2,146 executives.Figure 14.Perceptions of under-preparedness are highest in the automotive,consumer products,and telecom sectorsConfusing climate preparedness with strategic planningDespite growing awareness,many executives appear to misjudge the depth of climate adaptation required.Most rate their organizations as well or fully prepared for several types of climate risk particularly acute physical risks(75%),policy and legal risks(77%),and market risks(74%)(see Figure 15).However,this confidence is not always backed by implementation(see Figure 16).While many organizations have taken foundational steps such as conducting climate risk assessments(78%)and integrating physical climate risks(84%)and transition risks(76%)into ERM,adaptation remains limited.Only 38%have upgraded physical infrastructure and 31%have shifted suppliers or production to less climate-vulnerable regions.Just 26%have redesigned products or services to withstand future climatic conditions.The gap between perceived levels of preparedness and tangible action suggests that executives may be equating preparedness with planning,reflecting a narrow view of what climate adaptation truly entails.A senior executive from a multinational fashion retailer asserts:“Analysis alone isnt action.Theres a gap between knowing and being resilient.Even experts struggle to fully define the worst-case scenario.We are trying to plan for something we cant fully see.So,its hard to know if youre actually well prepared.”54bXWVVUSSQPFD%Our organization is currently underprepared for the impacts of climate changePercentage of executives who agree with the statementGlobalAutomotiveConsumer products manufacturingTelecomFinancial servicesRetailAerospace and defenseIndustrial manufacturingUtilitiesHealthcare and life sciencesAgriculture and forestryEnergyPublic/government44Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental action38%share of organizations that have upgraded physical infrastructure to adapt to climate risksWithout translating adaptation strategies into on-the-ground action,organizations risk remaining vulnerable as climate impacts intensify.BT Group,for instance,has taken a series of measures rolling out full fiber and closing legacy networks to reduce physical network sites,investing in cooling upgrades that allow network operations to continue in external temperatures up to 45C,deploying early warning systems to manage risks and prioritize restoring services,and collaborating with the water industry to protect assets from water leaks and flooding to enable rapid repairs,among others.47 Gabrielle Ginr,Head of Environmental Sustainability at BT Group,adds:“Climate risks like flooding or extreme heat can damage our network infrastructure and disrupt services.Its important for us to make sure our services keep going under any circumstances.Thats why we have been moving or upgrading our critical infrastructure where needed.In FY25,we invested more than 8m in cooling upgrades to our core network and mobile sites.Climate resilience needs to be built now,not later.”Source:Capgemini Research Institute,Sustainability transformation trends survey,JuneJuly 2025,N=2,146 executives.Figure 15.Organizations feel more prepared for immediate,visible threats than for long-term risksHow prepared is your organization to address the following types of climate-related risksLow preparedness(not at all prepared/slightly/moderately prepared)High preparedness(well prepared/fully prepared)Acute physical riskChronic physical riskPolicy and legal transition riskTechnology transition riskMarket transition riskReputation transition risk75%a#wEU&t)q9ECapgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionA senior executive from a multinational fashion retailer“Analysis alone isnt action.Theres a gap between knowing and being resilient.Even experts struggle to fully define the worst-case scenario.We are trying to plan for something we cant fully see.So,its hard to know if youre actually well prepared.”Source:Capgemini Research Institute,Sustainability transformation trends survey,JuneJuly 2025,N=2,146 executives.Figure 16.Organizations have taken limited concrete adaptation measures84xv81&%Which of the following actions has your organization taken to adapt to climate risks?Integrated physical climate risks into enterprise riskmanagement/business continuity planningConducted a climate risk assessment(i.e.,assessing and forecasting climate risks)Integrated transition climate risks into enterprise risk management/business continuity planningUpgraded physical infrastructure to withstand climate impactsShifted suppliers or production to less climate-vulnerable regionsRedesigned products or services to withstand future climatic conditions46Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionGabrielle GinrHead of Environmental Sustainability at BT Group“Climate risks like flooding or extreme heat can damage our network infrastructure and disrupt services.Its important for us to make sure our services keep going under any circumstances.Thats why we have been moving or upgrading our critical infrastructure where needed.In FY25,we invested more than 8m in cooling upgrades to our core network and mobile sites.Climate resilience needs to be built now,not later.”47Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental action2.2.A discussion with Anke EhlersManaging Director International Sustainability,ALDI SouthHow has the role of sustainability evolved for ALDI South?In 2022,we launched our first global sustainability strategy,making sustainability an active part of shaping business strategy.That shift was driven by multiple forces:consumer expectations,regulatory pressures,a broader societal awakening,and a mindset shift within businesses.For ALDI South,this means recognizing sustainability not as a separate function but as a principle that underpins business resilience,competitiveness,and long-term value creation.How do you see sustainability shaping ALDI Souths strategy going forward especially amid geopolitical uncertainty and your focus on cost leadership?Geopolitical volatility has only reinforced why sustainability must be central.At ALDI South,resilience is a strategic priority:ensuring our supply chains remain robust so our business can withstand shocks.For example,weve even entered into 30-year supplier contracts something unthinkable a few years ago because securing continuity is securing competitiveness.Sustainability and cost leadership go hand in hand.Efficiency,which underpins our discount model,is increasingly achieved through sustainable practices,whether in sourcing,logistics,or energy use.In that sense,sustainability has become not just a priority but a core pillar of our business strategy.What are the most critical climate risks for retailers,and how is ALDI South responding?On the physical side,extreme weather events floods,hurricanes,and wildfires have already forced us to close stores,with some even permanently lost.Beyond infrastructure damage,these events disrupt communities and supply continuity.Supply chain risks are equally important,as climate change reduces availability of commodities such as cocoa,coffee,and sardines,driving price volatility and long-term sourcing concerns.Litigation and compliance risks are also rising as climate regulations tighten.Our approach combines working closely with suppliers,reassessing sourcing patterns,adapting physical infrastructure such as considering weather patterns when selecting store locations,and evolving transition plans in line with EU sustainability directives.48Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental action49Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionAI is powering sustainability efforts,but its environmental impact is a critical consideration0450Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental action57%of executives say the sustainability impact of Gen AI is a topic of discussion at the board levelOrganizations are using AI to advance their sustainability agendasToday,64%of executives say that their organization uses AI to achieve its sustainability agenda.AI supports a range of sustainability-related use cases from automating reporting processes and improving resource efficiency to optimizing energy grids,transport networks,and urban infrastructure.It can also accelerate the discovery of climate solutions,such as packaging design and materials innovation.48 In addition to these applications,AI can play a valuable role in climate adaptation and resilience.In addition to these applications,AI can play a valuable role in climate adaptation and resilience.It can enhance scenario modeling,early warning systems,and real-time disaster response;support the design of climate-resilient infrastructure by simulating materials and structural designs under future climate conditions;help reconfigure supply chains by identifying climate-vulnerable nodes and recommending alternative sourcing strategies;and support product redesign by anticipating resource scarcity and suggesting resilient alternatives.Within the broader AI landscape,generative AI(Gen AI)offers a range of potential applications in sustainability,including ESG reporting,sustainable product design,life cycle assessment(LCA),supplier sustainability reporting,virtual assistance,sustainable IT governance,and ESG scenario planning.49 Despite this promise,52%of executives report that their organization uses Gen AI to advance its sustainability agenda in 2025,down from 65%in 2024 and 56%in 2023.One reason for this decline could be concern over Gen AIs environmental footprint.In previous research,48%of executives believed that their use of Gen AI had contributed to increased greenhouse gas emissions.50 In our current research,57%of executives say the sustainability impact of Gen AI is a topic of discussion at the board level(the same proportion as reported last year).The use of agentic AI to advance sustainability goals is still in its early stages,with 29%of executives saying their organization uses or plans to use agentic AI/AI agents for sustainability.Unlike traditional AI or Gen AI applications,which often focus on narrow,predefined tasks,agentic AI can manage and execute end-to-end processes.In the context of sustainability,it could be used to manage complex tasks across systems.For example,it could be used to monitor and adjust energy or water usage in real time based on changing conditions,or coordinate waste management workflows across facilities.In reporting,it could be used to gather data from multiple sources,validating it against regulatory requirements,and generating draft disclosures,reducing manual effort.Toms Zaborowski,Head of Sustainability Excellence at Bayer Crop Science,says:“Theres a huge opportunity in using AI for reporting and prediction.With the massive volume of data and the need for transparency,AI can assist in adapting,generating,and validating content against regulations and legal frameworks.At the same time,its predictive capabilities offer the potential to forecast environmental impacts or supply chain disruptions before they happen thats where I see real efficiency gains.”Below are a few use cases demonstrating the role of AI in advancing sustainability efforts.51Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental action*Note:The list of use cases is indicative,rather than comprehensive.Source:Information compiled from publicly available secondary sources.Figure 17.AI use cases in sustainability Use casesExamplesAt Bayer Crop Science,breeders use machine learning(ML)and digital twin technology to write new genetic combinations and anticipate a plants performance in thousands of micro-level climatic and soil conditions,optimizing crop design.Historically,a single breeding cycle took five or six years to complete,but this AI-powered precision-breeding program takes only four months which will more than double the rate of genetic innovation by 2030.51Accelerating scientific discoveryIn Timor-Leste,UNEP is testing how the agriculture sector could apply ML to evaluate crop sensitivity to environmental conditions;assess the impact of weather on crop growth;and generate tailored advisories to promote resource efficiency.52Enhancing resource efficiency75F,an IoT-powered building solutions provider,uses AI to analyze weather,building use,and sensor data to adjust heating,ventilation and air-conditioning(HVAC)settings automatically for energy savings and comfort.The tools have saved 75Fs customers 42%in HVAC energy use worldwide.53Improving energy efficiencyTo improve the accuracy and efficiency of extreme weather predictions,NVIDIAs Earth-2 platform uses Gen AI models to generate realistic atmospheric states and forecast events such as tropical cyclones more quickly,helping researchers better anticipate and respond to climate risks.55Hitachi is using AI to identify and mitigate climate-related supply chain risks and enhance supply chain resilience.56Strengthening climate adaptation and resilienceUS-based battery manufacturing organization EnerSys uses Gen AI to analyze and generate insights from large datasets related to sustainability metrics,including Scope 1 and 2 emissions,travel data,and waste data.54ESG reporting automation52Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionToms ZaborowskiHead of Sustainability Excellence at Bayer Crop Science“Theres a huge opportunity in using AI for reporting and prediction.With the massive volume of data and the need for transparency,AI can assist in adapting,generating,and validating content against regulations and legal frameworks.At the same time,its predictive capabilities offer the potential to forecast environmental impacts or supply chain disruptions before they happen thats where I see real efficiency gains.”29%of executives say their organization uses or plans to use agentic AI/AI agents for sustainability53Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionThe environmental footprint of AI is prompting greater cautionFrom manufacturing(encompassing materials and hardware impact),model training,and usage(including data centers energy,water,and carbon impact),to end-of-life(e-waste),AI/Gen AI consumes vast resources and leaves a notable environmental footprint.As noted previously,nearly three in five executives(57%)reveal that the impact of Gen AI on sustainability is a topic of discussion in their boardroom.However,only about one-third(32%)report that their organizations have taken steps to mitigate Gen AIs environmental impact.Startup Mistral AI has recently released a first-of-its-kind study to quantify the environmental impacts of their large language models(LLMs)across three categories:GHG emissions,water use,and resource depletion.The study found that model training and inference account for most emissions(85.5%)and water use(91%).57NVIDIA is reducing the environmental footprint of AI through accelerated computing,which integrates GPUs and CPUs to deliver up to 20 x greater energy efficiency than traditional CPU-only systems.It is also deploying direct-to-chip liquid cooling to reduce data center energy consumption.58 But while 57%of executives say the benefits of Gen AI outweigh its negative environmental impacts,this is down from 67%in 2024,indicating growing caution around its environmental footprint and possibly a more nuanced understanding of Gen AIs capabilities and limitations.For more information,refer to our research on Developing sustainable Gen AI.57%of executives say the benefits of Gen AI outweigh its negative environmental impacts54Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionSol SalinasExecutive Vice President,Head of Sustainability for the Americas,Capgemini“By analyzing complex data at scale,AI can help organizations proactively anticipate climate risks,model scenarios,and make faster,more informed decisions strengthening their ability to adapt and thrive in the face of climate uncertainty.”55Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionOrganizational,structural,and geopolitical barriers to sustainability0556Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionMomentum has stalled After steady gains in 202224,reflected in a 22-percentage-point increase in our sustainability maturity index*(see Figure 18)the trajectory has dipped in 2025 by 12 percentage points.*Further,the share of organizations considered sustainability front-runners has declined from 7%in 2024 to just 1%in 2025.The drop in front-runners reflects a broader dip in sustainability progress.Since organizations must outperform peers across three dimensions(value chain processes,internal enablers,and tech adoption),fewer met the criteria this year(see Figure 19 for details).While intent remains strong,organizations are increasingly constrained by a range of internal and external barriers.*The sustainability maturity index benchmarks organizations progress on sustainability over the past four years across 93 questions in our sustainability framework.We took 2022 as the base year.An index value of 100 indicates that a result matches the baseline average;an index of 200 means the result is double the average;and an index of 50 means it is half the average.For more details on the questions used in the index,please refer to the Appendix.*While Figure 18 shows an 11-percentage-point difference between the 2024 and 2025 index,the actual difference is 12pp,owing to rounding.Souce:Capgemini Research Institute,Sustainability transformation trends survey,AugustSeptember 2022,N=2,004 executives;AugustSeptember 2023,N=2,001 executives;JuneJuly 2024,N=1,859 executives;JuneJuly 2025,N=1,851 executives.*Norway is excluded as it was not covered in the 2022 research.*Agriculture and forestry is excluded as it was not covered in the 2022 or 2023 research.Figure 18.Sustainability index by country and sector,202225 AustraliaCountry*Global averageSector*2022Base2023Index2024Index2025IndexCanadaFranceGermanyIndiaItalyJapanNetherlandsSpainSwedenUKUS100100100100100100100100100100100100111116115108108121116119105110103113121127118138133116123128115108116129112101113100104100110106891121221112022Base2023Index2024Index2025Index100100100100100100100100100100100100106113959912410099120951191111091241191149510914812914212912512111810511493101104127123114131107107120Aerospace and defenseAutomotiveConsumer products manufacturingEnergyFinancial servicesHealthcare and life sciencesIndustrial manufacturingPublic/governmentRetailTelecomUtilities57Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionSource:Capgemini Research Institute,Sustainability transformation trends survey,AugustSeptember 2022,N=668 organizations;AugustSeptember 2023,N=668 organizations;JuneJuly 2024,N=628 organizations;JuneJuly 2025,N=617 organizations.Figure 19.Sustainability maturity assessmentTo gain a sense of where organizations are in their sustainability journeys and identify the leading organizations,we mapped their sustainability maturity across three dimensions:Value chain processes:These include sourcing,R&D/product design/innovation,manufacturing,and logistics,as well as the use of technology for sustainability.Sustainability enablers:This dimension relates to organizations getting their people to buy into their sustainability cultures,supported by corporate functions such as IT,finance and accounting,and sales and marketing.Tech accelerators:This dimension refers to the adoption of digital technologies and pathways to accelerate sustainability transformation.We identified three cohorts:1.Front-runners:Significant progress along the three dimensions 2.Experimenters:Low maturity in one or two dimensions 3.Beginners:Low maturity across the three dimensionsFront-runnersExperimentersBeginners11c&%8X4%7V7%1h1 2220232024202558Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionAs Figure 20 shows,sustainability progress has dipped across corporate and value chain functions.Corporate functions experienced an 11-percentage-point(pp)decrease compared to 2024.Notably,IT experienced a 21pp drop,possibly owing to organizations prioritizing the procurement of materials and components amid supply chain disruptions and tariff uncertainties.These challenges could have diverted focus from initiatives such as eco-design of applications and energy performance optimization.Meanwhile,vision and leadership declined by 9pp,potentially reflecting the long-term nature of business and operating model redesigns,which are especially difficult to advance in the face of volatile geopolitical conditions.Value chain functions recorded a 13pp decline compared with 2024.Within this,logistics dropped by 18pp and sourcing by 11pp,both likely impacted by geopolitical tensions and trade disruptions.These pressures could have prompted organizations to adjust transportation strategies,including the use of less sustainable logistics solutions to maintain operational continuity.For example,stockpiling goods in anticipation of future tariffs may increase reliance on carbon-intensive modes of transport and warehousing,thereby inflating carbon footprints and slowing progress on eco-friendly transportation initiatives.Furthermore,there has been a decline in initiatives across key sustainability areas such as biodiversity,water stewardship,and the circular economy.For instance,55%of executives say circularity is a key component of their sustainability strategy,down from 65%in 2024.We explore the decline in progress on biodiversity and water stewardship in more detail later in the report.59Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionNote:Negative pp values reflect the percentage point drop in the share of organizations implementing sustainability initiatives in each respective area.Source:Capgemini Research Institute analysis.Capgemini Research Institute,Sustainability transformation trends survey,AugustSeptember 2022,N=2,004 executives;AugustSeptember 2023,N=2,001 executives;JuneJuly 2024,N=1,859 executives;JuneJuly 2025,N=1,851 executives.*Norway is excluded as it was not covered in the 2022 research.*Agriculture and forestry is excluded as it was not covered in the 2022 or 2023 research.Figure 20.Change in sustainability index by corporate and value chain functions,2024 vs.2025Key areas showing a decline in progressCorporate functions-11ppOverall index-12ppKey areas showing an acceleration in progressValue chain functions-13ppEco-designing IT applications(i.e.,designing for the lowest environmental impact)Identifying energy-intensive applications and improving energy performanceUsing a green cloud architecture for data centers(to reduce power consumption)Upskilling/reskilling on hard sustainability skills(e.g.,renewable energy,carbon accounting,environmental science/engineering,data analysis/visualization)Integrating sustainability vision into the core strategy of the organizationDeveloping internal governance policies and procedures relating to environmental and social sustainabilityAuditing sustainability data by a third partyReporting sustainability impacts,along with financial performance,on a quarterly/annual basisOffering competitive pricing to encourage more people to consume/purchase sustainable products/servicesEducating customers about the importance of adopting sustainable practicesCollaborating actively with interested stakeholders,including customers,investors,academia and governments,to develop and promote sustainable approachesReducing the use of packaging material in products Monitoring and reducing energy consumption through smart systems(e.g.,sensors to optimize heating in buildings)Considering ESG ratings and environmental pledges taken by suppliers during supplier selection Using AI/ML to optimize data center utilizationMeasuring and collecting data on all Scope 1 and Scope 2 emissionsMeasuring the energy consumption of industrial processesEquipping employees with tools to support the low-carbon transitionTraining employees to adopt sustainable practices in-officeRedesigning the business/operating model for sustainabilityDeveloping a strategy to transition all energy sources to renewablesAssessing environmental externalities when evaluating projects to fund Commitment to fossil fuel divestmentMeasuring the impact of the organizations digital presence on carbon emissions Communicating the carbon footprint of every product/service the organization sellsProviding autonomy to employees to develop new solutions to sustainability challengesBacking sustainability reporting and claims with robust audited dataDedicated carbon reporting from transportation suppliersAdoption of eco-friendly transportation strategiesFollowing sustainable prototyping and testing processesRedesigning products to have a lower impact on forestsImplementing water stewardshipMonitoring the conversion of natural ecosystems on owned/managed landsWorking with tier-2 and tier-3 suppliers to reduce their emissionsReducing deforestation within the supply chain Using technology such as AI,automation,or digital twins to achieve the sustainability agendaUsing tools such as supply chain control towers for monitoring and measuring ESG metricsRelocating the manufacturing footprint to regions offering low-carbon alternativesIT-21ppTalent-11ppVision and leadership-9ppFinance-10ppSales and marketing-7ppCulture-4ppLogistics-18ppInnovation/R&D/Design-17ppOperations-16ppSourcing-11ppTechnology-10ppManufacturing-5pp60Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionPockets of progress Despite a broader decline,several foundational pillars of transformation have shown encouraging signs of progress(see Figure 20).In addition,the US,Germany,and Spain among countries,and the aerospace and defense and automotive sectors,recorded increases in their sustainability index scores(see Figure 18).Notable areas of progress include:Vision:A 10pp increase in organizations reporting that sustainability is well integrated into core strategy.This was especially evident in the US(25pp),Spain(20pp)and the aerospace and defense sector(26 pp).Governance:A 13pp increase in the adoption of internal policies and procedures addressing environmental and social sustainability.The aerospace and defense sector stood out with a 40pp improvement,alongside 32pp in automotive,31pp in Germany,and 25pp in Spain.Stakeholder collaboration:A 10pp increase in engagement with external stakeholders including customers,investors,academia,and governments to develop and promote sustainable approaches.This momentum was particularly strong in aerospace and defense(29pp)and automotive(22pp).Emissions measurement:A 7pp increase in tracking Scope 1 and 2 emissions,reflecting stronger commitments to transparency and accountability.This improvement was even more pronounced in the aerospace and defense sector,which saw a 27pp increase.The automotive sector also advanced,with a 12pp increase.Progress in scope 3 emissions tracking,an area where the global index declined,was also notable in these sectors.The aerospace and defense sector recorded a 30pp increase,while the automotive sector saw a 16pp gain.These gains suggest that,sustainability is becoming more deeply embedded,even as organizations face broader execution challenges.For more details on the index,please refer to the Appendix.In addition,we see progress from last year around social sustainability and climate tech initiatives.61Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental action2.2.Social sustainability continues to gain groundOrganizations are steadily expanding their focus on social sustainability,with progress strengthening year over year.For instance,the share of executives saying their organizations publicly report the outcomes of their social sustainability initiatives rose to 66%in 2025,up from 57%in 2024 and 47%in 2023.Similarly,the share of executives reporting that their organizations use third parties to disclose social impact has remained virtually unchanged,at 60%this year,compared with 61%in 2024 and 49%in 2023.Affordability and accessibility are also advancing.The share of executives reporting that their organizations make products and services affordable to local communities grew from 40%in 2023 to 54%in 2024 and reached 57%in 2025.Accessibility for people with disabilities or health conditions rose from 42%in 2023 to 50%in 2024,climbing further,to 54%,this year.Our research also shows modest progress on supply chain practices.The proportion of organizations working only with suppliers who pay a living wage rose from 38%in 2023 to 45%in 2024,and 48%in 2025.Meanwhile,across all age groups,74%of consumers now expect organizations to work only with suppliers that pay a living wage,up from 66%in 2024 and 45%in 2023.77%of consumers now expect organizations to work only with suppliers that pay a living wage,up from 66%in 202462Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental action2.2.Source:Capgemini Research Institute,Sustainability transformation trends survey,AugustSeptember 2023,N=1,076 executives;JuneJuly 2024,N=1,003 executives;JuneJuly 2025,N=1,002 executives in corporate functions.Figure 21.Organizations continue to advance on social sustainability 20232024202549aGWfBPTTW8EH%Share of executives who agree with the statementsWe use an external third party to help disclose our social impact(e.g.,GRI,SA8000)We publicly report the outcomes of our social sustainability initiativesWe make our products/services accessible to people with disabilities/health conditions/impairmentsWe make our products/services affordable to our local communitiesWe only work with suppliers who pay a living wage63Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental action2.2.Source:Capgemini Research Institute,Sustainability transformation trends survey,JuneJuly 2024,N=2,152 executives;JuneJuly 2025,N=2,146 executives.Figure 22.Climate tech is a key driver of sustainability progress2024202569sgqta and digital technologies will play an important role in accelerating climate tech adoptionWe will never be able to achieve our sustainability goals without climate techShare of executives who agree with the statementsClimate tech remains a key enabler of sustainabilityIn our research,climate tech refers to innovative technologies specifically designed to mitigate the impact of climate change and resource depletion(e.g.,energy storage,carbon capture,low-carbon hydrogen,alternative fuels,electrification,smart grids).It includes both hardware and software solutions(e.g.,climate modeling).Climate tech continues to be viewed as an enabler of sustainability.Seventy-one percent of executives say their organization will never achieve its sustainability goals without climate tech,up from 67%in 2024.Similarly,73%say that data and digital technologies will play an important role in accelerating climate tech adoption,up from 69%in 2024.64Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionStructural and organizational barriers remainFinancing gaps are impeding climateadaptationDespite growing awareness of climate risks,the lack of robust climate finance mechanisms remains a critical bottleneck.Over half of executives(55%)cite financial barriers as the top obstacle to advancing climate adaptation efforts.Despite rising investments since the Paris Agreement,wide investment gaps persist for both mitigation and adaptation,but far more significantly for the latter.59 A study by the World Resources Institute evaluated climate adaptation investments in 12 countries and found that every$1 invested can generate over$10.50 in economic,social,and environmental benefits,with average annual returns of 2027%,making a strong case for scaling adaptation finance.60 Barriers to adoption of sustainableproductsAffordability,availability,and information gaps continue to be major barriers to consumer adoption of sustainable products(see Figure 22).Price remains the most significant hurdle,with only 24%of consumers finding sustainable products affordable.Even when consumers are willing to make environmentally conscious choices,sustainable products are not easily accessible.Additionally,only 16%of consumers feel that the sustainability information available to them is sufficient.Source:Capgemini Research Institute,Sustainability transformation trends survey,JuneJuly 2025,N=6,566 consumers.Figure 23.Price is the biggest roadblock to sustainable choices62DC7%4%What are the biggest barriers preventing you from purchasing sustainable products?Price(sustainable products are too expensive)I dont have enough information about the productI dont trust the sustainability claims Im not interested in purchasing sustainable products exclusive optionAvailability(sustainable products are not easily available where I shop)65Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionOperational silos,data gaps,and budget constraints hinder progressSiloed operations,cited by 79%,limit cross-functional collaboration and make it difficult to embed sustainability across departments.Inadequate data and measurement systems,flagged by 81%,make it difficult to track progress and make informed decisions.Budget constraints,also reported by 81%,further restrict scaling.Further,only 48%of executives say their organizations sustainability and business agenda is fully aligned.Even fewer just 27%say their organization has embedded sustainability-related KPIs across all business units.81%of executives cite inadequate data and measurement systems as a barrier to advancing their organizations sustainability agenda 48%of executives say their organizations sustainability and business agenda is fully alignedEdmundo Fuentes,Executive Vice President Business Transformation at Sigma,explains how Sigma integrates sustainability and business KPIs:“Were embedding sustainability KPIs into our core business,so it becomes part of how performance is measured.That means looking not just at cost or efficiency,but also at emissions,water use,and circularity across our operations.By integrating these metrics into decision-making,whether in supply chain or production,we gain visibility to manage risks,optimize resources,and create long-term value.”66Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionEdmundo FuentesExecutive Vice President Business Transformation at Sigma“Were embedding sustainability KPIs into our core business,so it becomes part of how performance is measured.That means looking not just at cost or efficiency,but also at emissions,water use,and circularity across our operations.By integrating these metrics into decision-making,whether in supply chain or production,we gain visibility to manage risks,optimize resources,and create long-term value.”67Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental action2.2.Biodiversity progress dips after consistent progress After steady gains since 2022,organizations progress on biodiversity appears to be slowing.Investment in conserving natural habitats rose from 43%in 2022 to 66%in 2024 but has dropped to 51%in 2025.Similarly,monitoring of ecosystem conversion on owned or managed lands peaked at 60%in 2024,before falling back to 42%this year(see Figure 24).The slowdown may suggest that competing demands are impacting the pace of execution.Biodiversity loss presents material risks across sectors.In 2025,three Singapore banks DBS,OCBC,and UOB conducted a joint study to assess nature-related risks in their lending portfolios.The palm oil industry was used as a pilot to model how risks such as drought,water shortages,and ecosystem degradation could affect borrowers financial resilience.Some companies were highly 68Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionSource:Capgemini Research Institute,Sustainability transformation trends survey,AugustSeptember 2022,N=1,001 executives;AugustSeptember 2023,N=1,000 executives;JuneJuly 2024,N=923 executives;JuneJuly 2025,N=919 executives in value chain functions.Figure 24.Biodiversity efforts lose pace43VfQGYB%Share of executives who agree with the statementsWe invest in conserving natural habitats(such as rainforests)We monitor the conversion of natural ecosystems(i.e.,changes owing to deforestation)on our owned/managed lands2023202220242025resilient,while others were significantly affected,highlighting the commercial importance of understanding nature risks for each customer.The study aimed to demonstrate the business case for nature-related risk assessment and promote its wider adoption across the financial sector.61 As the UN Secretary-General recently warned,biodiversity loss is happening at“lightning pace”.62 The destruction of tropical forests,for example,directly weakens global carbon sinks,undermining climate resilience.Despite the risks,less than a third(30%)of executives say their organization has a clear strategy on addressing biodiversity loss.30%of executives say their organization has a clear strategy on addressing biodiversity loss69Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionWater scarcity is set to intensify,with global freshwater demand projected to exceed supply by 40%within five years,due to climate-driven heat and drought.Several industries including agriculture,textiles,food,chemicals,energy,and technology face mounting disruption.By 2050,up to$70 trillion in global GDP could be exposed to high water stress,five times more than in 2010.64 These risks are no longer distant;for example,the semi-conductor industry is already vulnerable.Analysts warn that TSMC could miss its production targets by up to 10%by 2030 if water supply risks are not effectively managed.In response,Taiwan has sanctioned a desalination plant worth 508 million to help secure water for its chipmakers.65Source:Capgemini Research Institute,Sustainability transformation trends survey,AugustSeptember 2022,N=1,001 executives;AugustSeptember 2023,N=1,000 executives;JuneJuly 2024,N=923 executives;JuneJuly 2025,N=919 executives in value chain functions.Figure 25.Fewer organizations are focusing on water stewardship this year53%of organizations have implemented a water stewardship program55duS%Share of executives who agree with the statementWe have implemented a water stewardship program(i.e.,using water in a way that is socially equitable,environmentally sustainable,and economically beneficial)2023202220242025Water stewardship declines The responsible use and management of water is essential to achieving environmental,social,and economic sustainability.Yet only 53%of executives say their organization has implemented a water stewardship program,a sharp drop from 75%in 2024(see Figure 25).This decline comes even as awareness continues to grow 71%of organizations measure water consumption in industrial processes.The automotive sector has a higher share(63%)of organizations implementing water stewardship programs.Ford,for example,aims to eliminate freshwater withdrawals for manufacturing across all facilities,including those in water-stressed regions,where it prioritizes alternative sources such as recycled water,rainwater harvesting,and treated wastewater.6370Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionGeopolitical tensions continue to weigh on sustainability progressOngoing geopolitical tensions from tariff and trade-related disputes to regional conflicts are impacting sustainability efforts.In our 2024 research,we anticipated that geopolitics could disrupt sustainability momentum,with 65%of executives reporting that geopolitical factors were driving a slowdown in investments and projects.66 This concern has materialized,with momentum dipping across multiple sustainability areas.In JuneJuly 2025,the same proportion 65%say that current geopolitics is slowing down sustainability initiatives.While organizations continue to prioritize sustainability,with 82%planning to increase investments as noted previously,persistent external pressures appear to be diverting executive attention and shifting focus from long-term sustainability planning to short-term geopolitical and operational concerns.A senior executive from a multinational fashion retailer says:“Geopolitical tensions especially around tariffs have created a kind of operational fire drill.The urgency of navigating tariff-related disruptions pulls focus away from very important but longer-term,less acute priorities like sustainability.When teams are constantly reacting to immediate crises,it becomes difficult to maintain momentum on goals that require sustained attention and investment exactly the kind of commitment that sustainability demands.”Executives in Spain(78%),Norway(71%),and the US(71%)are more likely to report a slowdown in sustainability investments/projects owing to current geopolitics,compared with 59%in India and 58%in Canada and France(see Figure 26).Notably,76%of agriculture and forestry executives report a slowdown,versus 54%in healthcare and life sciences(see Figure 27).However,geopolitical tensions can also act as a catalyst for sustainability.For example,disruptions such as rising energy prices or restricted access to key inputs could prompt organizations to accelerate the shift toward renewable energy,alternative materials,and redesigning supply chains for greater resilience.Tariffs,in particular,can accelerate reindustrialization plans,leading to shorter supply chains and lower carbon emissions.In our previous research,more than half(54%)of executives said tariffs on imports would boost their reindustrialization plans.67 The impacts of geopolitical tensions on sustainability could vary therefore depending on timing:In the short term,geopolitical tensions may distract or delay some sustainability efforts,particularly those requiring long-term planning or capital.Over the medium to long term,these same tensions could force structural changes such as reindustrialization,energy diversification,and material innovation that can enable or even accelerate sustainability.This indicates that the current slowdown is likely temporary,while the broader shift toward sustainability remains strong.65%of executives report that geopolitical factors are slowing down sustainability initiatives71Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionSource:Capgemini Research Institute,Sustainability transformation trends survey,JuneJuly 2024,N=2,152 executives;Capgemini Research Institute,Sustainability transformation trends survey,JuneJuly 2025,N=2,146 executives.Figure 26.Close to two-thirds of executives across countries agree that current geopolitics is slowing down their sustainability investments/projectsPercentage of executives,by country,who agree with the statement:Current geopolitics is driving a slowdown in our sustainability investments/projects2024202565efxgqqqgifaeaccpibaRYiXeXsY%GlobalSpainNorwayUSNetherlandsAustraliaJapanItalySwedenUKGermanyIndiaCanadaFrance72Capgemini Research Institute 2025A world in balance 2025:Unlocking resilience and long-term value through environmental actionSource:Capgemini Research Institute,Sustainability transformation trends survey,JuneJuly 2024,N=2,152 executives;Capgemini Research Institute,Sustainability transformation trends survey,JuneJuly 2025,N=2,146 executives.Figure 27.Most executives across sectors say that geopolitics is driving a sustainability slowdown Percentage of executives,by sector,who agree with the statement:Current geopolitics is driving a slowdown in our 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Advancing Chinas Sustainable Blue Economy-Building Strong Policy Foundations for Ocean Accounting and Blue Finance2Contributing authorsBAI Yunwen,Vice President,Institute of Finance and Sustainability(IFS)Karina Barquet,Team Leader of Water,Coasts and Ocean,Senior Research Fellow,Stockholm Environment Institute CHEN Shang,Senior Scientist,First Institute of Oceanography,Ministry of Natural Resources Alfredo Giron,Head of Ocean Action Agenda and Friends of Ocean Action,World Economic ForumHAN Baolong,Associate Professor at the Research Center for Eco-Environmental Sciences(RCEES),Chinese Academy of Sciences HAN Guoyi,Senior Research Fellow,Stockholm Environment Institute Louise Heaps,Lead,Sustainable Blue Economy(Global),WWF-UKLIU Dahai,Professor,School of Public Administration,Renmin University of China;Academic Leader,Key Laboratory of Coastal Science and Integrated Management,Ministry of Natural Resources,China Philip A.S.James,Director,UNSW Centre for Sustainable Development Reform and Global Ocean Accounts Partnership REN Yujie,Director of Green Finance,International Institute of Green Finance,Central University of Finance and Economics,ChinaJohn Virdin,Assistant Professor of the Practice,Marine Science and Conservation Division,Nicholas School of the Environment;Director,Ocean Policy Program,Nicholas Institute for Energy,Environment and Sustainability,Duke University,Durham,NC,USAWEN Mengyao,Researcher,Institute of Finance and Sustainability(IFS)XIE Xi,Partnership and Industry Transitions Lead,Center for Nature and Climate,World Economic ForumXING Wenxiu,Professor,First Institute of Oceanography,Ministry of Natural ResourcesZHANG Xiaoquan,Chief Science O?cer of China Program,The Nature Conservancy Patrick Yeung,Assistant Director,Climate Action,AVPN ZHANG Yimo,Priority Project Coordinator,Sustainable Blue Economy,World Wide Fund for Nature Beijing O?ce.ZHOU Zhou,Green Finance Researcher,International Institute of Green Finance,Central University of Finance and Economics,ChinaCover image:Yishu Fang/iS3Table of contentsContributing authors 2Foreword 4Executive summary 61.Context 2 1.1 Status of the oceans economic sectors 2 1.2 Chinas need for a sustainable blue economy and ambitions to develop on 42.The evolution of the sustainable blue economy narrative in China 6 2.1 SBE in Chinese policy and planning 6 2.2 Policy gaps and areas of improvements 93.Improving ocean accounting to support sustainable development 17 3.1 Overview of global ocean accounting 17 3.2 Chinas ocean accounting progress 194.Unlocking blue fjnance to facilitate the blue transformation 22 4.1 The global blue?nance ecosystem 22 4.2 Major types of blue?nance instruments 24 4.3 Chinas blue?nance taxonomy development and future applications 26 4.4 Challenges and policy gaps 275.Recommendations 28 5.1 SBE de?nitions and principles 28 5.2 Ocean accounting 28 5.3 Blue?nance Appendix 1 30 1.1 De?nitions of blue economy 30 1.2 De?nition of SBE and regenerative blue economy 31 1.3 De?nition of ocean economy 31Appendix 2 32 Overview of Chinas Blue Finance Standards Practices 32Abbreviations 35 4We congratulate the publication of this report contributing to the Special Policy Study(SPS)for The China Council for International Cooperation on Environment and Development(CCICED).The CCICED has long served as a vital platform for advancing sustainable development in China through high-level policy dialogue and international cooperation.Since its establishment in 1992,the CCICED has brought together Chinese and global experts to address pressing environmental challenges,fostering innovative solutions for green growth,climate resilience,and ecological conservation.As China accelerates its transition toward a sustainable future,the ocean has emerged as a critical frontier for balancing economic development with environmental stewardship.Under CCICEDs Phase VII strategic focus on A Sustainable Blue Economy Towards Carbon Neutrality,the SPS on ocean governance has evolved from earlier themessuch as ecosystem-based management and marine pollutionto a comprehensive exploration of the sustainable blue economy(SBE)s role in achieving climate and sustainability goals.Central to this e?ort is this study which discussed SBE principles,and examined how ocean accounting and blue?nance can serve as foundational drivers for Chinas sustainable blue transition.This report,set for release at the 2025 UN Ocean Conference,provides important insights for aligning Chinas ocean-based economic development with its carbon neutrality ambitions while ensuring marine ecosystem health.Key to this transformation is the development of robust ocean accounting frameworks and innovative blue?nance mechanisms.The report highlights need to re?ne Chinas ocean accounting systems by integrating environmental-economic indicators,enabling better measurement of ocean wealth and sustainability performance.Simultaneously,it explores how blue?nance tools and standardsspanning bonds,credits,and investment taxonomiescan mobilize capital toward sustainable blue economic activities while preventing“blue-washing.”By bridging policy,science,and?nance,these tools can unlock the ocean economys full potential as an engine for green growth.As China advances its“Ecological Civilization”vision,this report o?ers high-level recommendations to strengthen SBE narrative and strategic planning,further develop the ocean accounting system,incentivize responsible investment,and foster international collaboration.We hope these insights will guide policymakers,?nancial institutions,and stakeholders in building an inclusive,climate-resilient economyone that safeguards marine ecosystems while driving sustainable prosperity for generations to come.ForewordMinhan DaiChair Professor,Xiamen University&Council Member,CCICEDJan-Gunnar WintherSpecialist Director,The Norwegian Polar Institute&Council Member,CCICED5The global ocean economy is currently undergoing profound transformation.In face of multiple challenges including climate change,biodiversity loss,pollution,and the overexploitation of resources the issue of sustainable ocean development has become a central concern for the international community.As a major maritime nation and a key player in the global ocean economy,China has actively responded to the call for sustainable development and accelerating its transition toward a more sustainable blue economy.The 14th Five-Year Plan(FYP)have explicitly set forth the goals of building a maritime power and a Beautiful China,elevating the development of a high-quality,green,and inclusive blue economy to the level of national strategy;while the Belt and Road Blue Cooperation Initiative highlights Chinas willingness to cooperate internationally for developing an SBE and improving the health and resilience of marine ecosystems.Meanwhile,the international community has been continuously re?ning SBE concepts and policy frameworks while promoting reforms in global ocean governance through multilateral cooperation.How to absorb and adapt international experience based on Chinas national circumstances,strengthen the foundations of an SBE,and achieve coordinated progress in economic,social,and environmental dimensions is a key focus of this report.Through a comprehensive review of the policy evolution towards SBE,the development of ocean accounting systems,and the advancement of blue?nance,this report explores the development path and policy recommendations for an SBE in China.We hope that our analysis will provide valuable references and insights for the Chinese government,businesses,and society at large,and contribute to Chinas joint e?orts with the international community in achieving the goals of an SBE.ForewordAlfredo GironHead of Ocean Action Agenda and Friends of Ocean ActionWorld Economic ForumPatrick YeungAssistant Director,Climate ActionAVPN6Sustainable development is a global issue that directly impacts social progress and human well-being.In the context of intensifying climate change,exacerbated by pollution and other development activities,both biodiversity and livelihoods are exposed to increasing risks.The transformation of marine economic sectors towards an SBE is imperative,as these sectors can pose threats to the ocean if their practices are not properly regulated or sustainably managed.Conversely,they can be part of the solution to address climate change and biodiversity loss if strategic policies are implemented.As a major maritime nation,Chinas ocean economy holds a signi?cant position in the national economy;however,the traditional development model can no longer meet the demands of the new era.It is now imperative to promote necessary policy reforms and accelerate sustainable ocean management.Accelerating the establishment of an SBE system is crucial for promoting high-quality economic development,safeguarding national maritime interests,and achieving harmonious coexistence between humanity and nature.This report focuses on establishing of the foundation for Chinas SBE.It reviews the global and domestic context of SBE development,analyzes the key opportunities and challenges,and provides a systematic analysis of policy frameworks,ocean accounting,and blue?nance tools.The main?ndings are as follows:1.The importance of the SBE is increasingly prominent.The ocean not only supports 80%of global trade and provides critical blue food security,but also fosters emerging industries such as o?shore wind power and blue biotechnology.Chinas gross ocean product has continued to grow,accounting for approximately 8%of the national GDP in 2024.The ocean economy is playing an increasingly vital role in promoting employment,ensuring food security,and supporting the sustainable development of coastal regions.2.The development of an SBE faces complex challenges.Although China has made progress in optimizing the structure of its ocean economy,ecological protection,and technological innovation,it still faces issues such as declining environmental carrying capacity of marine resources,fragmented management systems,insu?cient social inclusiveness,and a lack of relevant standards and policy tools.Additionally,climate changeinduced sea level rise and the increasing frequency of extreme weather events have further exacerbated the vulnerability of coastal economies.3.The ocean accounting system needs improvement to support SBE development.To achieve sound governance and informed policy-making,it is essential to establish a ocean accounting system that incorporate ecosystem services and non-market values,and promote data sharing and standardized statistics.These measures will enhance the scienti?c basis and transparency of ocean governance and performance monitoring.4.Blue?nance still needs to be further activated.While blue?nancial instruments and standards have begun to show results,there remain signi?cant gaps compared to the existing green?nance in terms of dedicated?nancing,?nancial standards,incentive mechanisms,and information disclosure.Local pilot innovations have provided valuable experience for national implementation,making it urgent to improve national standards for blue?nance.5.Based on the above?ndings,this report proposes development pathways and policy recommendations for advancing the SBE in China,To achieve a more ambitious transformation,the concept of an SBE should be integrated into the top-level policy frameworks with clear de?nitions and guiding principles,as well as incorporated into the 15th FYP and the subsequent policies to drive the necessary changes.It is also essential to establish inter-ministerial coordination mechanisms;encourage local pilot initiatives;improve comprehensive ocean accounting systems and blue?nance incentive standards;strengthen social inclusion and gender equality;and support international cooperation and knowledge exchange.Through systematic policy advancement and institutional innovation,China can play a leading role in the international SBE and ocean governance agenda,achieving synergies among business development,ecological protection,and social well-being,and contributing to the building of a strong maritime nation and a Beautiful China.Executive summary7Philip Thuruston/iS81.1 Status of the oceans economic sectors The ocean plays an important role in the global economy.Blue foods contribute to global food security,while maritime shipping mobilizes over 80%of global trade,and ocean-based tourism continues to grow.UN Trade and Development has classi?ed ocean-based economic activities into 14 categories1 and estimated the value of the global ocean economy in 2018 to be$2.5 trillion,3.3%of global GDP.The global ocean economy has grown 2.5 times since 19952.Over the past decade,ocean economic sectors have undergone substantial transformations globally,particularly as“non-traditional”industries such as o?shore wind energy,o?shore aquaculture and marine biotechnology have rapidly expanded3.This growth represents a signi?cant shift away from traditionally 1 UN Trade and Developments(UNCTAD)international ocean economy classi?cation included:A.Marine?sheries;B.Aquaculture and hatcheries;C.Seafood processing;D.Sea minerals;E.Ships,port equipment and parts thereof;F.High-technology and other manufactures not elsewhere classi?ed;G.Marine and coastal tourism;H.Trade in?sheries services;I.Maritime transport and related services;J.Port services,related infrastructure services and logistical services;K.Coastal and marine environmental services;L.Marine research and development and related services;M.Ocean energy&renewable energy.From UNCTAD,2021,“Towards a harmonized international trade classi?cation for the development of sustainable ocean-based economies”,https:/unctad.org/publication/towards-harmonized-international-tradeclassi?cation-development-sustainable-ocean.2“The ocean economy is booming.But for how long?”,UNCTAD,2025,https:/unctad.org/news/ocean-economy-booming-how-long.3“Fast-growing trillion-dollar ocean economy goes beyond?shing and shipping”,UNCTAD,2025,https:/unctad.org/news/fast-growing-trillion-dollar-ocean-economy-goes-beyond-?shing-and-shipping.dominant sectors,like?sheries,shipping,tourism,oil and gas,and coastal aquaculture.Global agendas aimed at addressing climate change,economic development and food security are inadvertently driving increased utilization of ocean resources.While these initiatives often have positive intentions,they may also lead to unsustainable exploitation of marine environments.In Box 1,we list?ve emerging key drivers of change in the ocean economy.This is not an exhaustive list,but a summary of common patterns found in global reports.Opportunities and challenges are inherently intertwined and coexist.For example,investing in research and innovation to address these challenges can lead to the development of safer,more e?cient technologies that minimize environmental impacts.1.Context Chunyip Wong/iS94 5 6 7 8 9 10 11 12 13 14 15 16 17 184 Amon,D.J.,Gollner,S.,Morato,T.,et al.,2022,“Assessment of scienti?c gaps related to the e?ective environmental management of deep-seabed mining”,Marine Policy 138.5 Galparsoro,I.,Menchaca,I.,Garmendia,J.M.,et al.,2022,“Reviewing the ecological impacts of o?shore wind farms”,npj Ocean Sustainability,1(1),1.6 American Wind Wildlife Institute(AWWI),Wind Turbine Interactions with Wildlife and Their Habitats:A Summary of Research Results and Priority Questions,2021,https:/rewi.org/wp-content/uploads/2020/07/AWWI-Wind-Power-Wildlife-Interactions-Summary-2021.pdf.7 Naylor,R.L.,Hardy,R.W.,Buschmann,A.H.et al.,2021,“A 20-year retrospective review of global aquaculture”,Nature 591,551563.8 FAO,Position paper on“Ecosystem Restoration”of production ecosystems,in the context of the UN Decade ofEcosystem Restoration 2021-2030,2020,COFI/2020/Inf.15.29 UNCTAD,Review of Maritime Transport-Navigating maritime chokepoints,2024,https:/unctad.org/publication/review-maritime-transport-2024 10 World Travel and Tourism Council,Travel&Tourism Economic Impact 2024:Global Trends,2024,https:/researchhub.wttc.org/product/economic-impact-report-global-trends11 Sengupta,D.,Choi,Y.R.,Tian,B.,et al.,2023,“Mapping 21st century global coastal land reclamation”.Earths Future,11(2),e2022EF002927.12 Yan,F.,Wang,X.,Huang,C.,et al.,2023.“Sea reclamation in mainland China:process,pattern,and management”,Land Use Policy,127,106555.13 Sengupta,D.,Choi,Y.R.,Tian,B.,2023,“Mapping 21st century global coastal land reclamation”.Earths Future,11(2),e2022EF002927.14 Lynch,A.H.,Norchi,C.H.,Li,X.,2022,“The interaction of ice and law in Arctic marine accessibility”,Proceedings of the National Academy of Sciences,119(26),e2202720119.15 Aksenov,Y.,Popova,E.E.,Yool,A.,et al,2017,“On the future navigability of Arctic sea routes:High-resolution projections of the Arctic Ocean and sea ice”,Marine Policy,75,300-317.16 Weber,J.,Handbook on Geopolitics and Security in the Arctic,2020,Springer International Publishing.17 Dodds,K.,Nuttall,M.,The scramble for the poles:The geopolitics of the Arctic and Antarctic,2015,John Wiley&Sons.18 Prip,C.,2022,“Arctic Ocean governance in light of an of an international legally binding instrument on the conservation and sustainable use of marine biodiversity of areas beyond national jurisdiction”,Marine Policy,142,103768.BOX 1:Five emerging key drivers of change in the ocean economy1.The quest for renewables:The transition to renewable energy sources,such as wind and solar power,is essential for mitigating climate change.However,the production of renewable energy technologies requires rare minerals and metals.These resources,including cobalt,nickel and rare earth elements,are increasingly sought after in the deep sea due to the depletion of terrestrial sources.The extraction of minerals from the ocean?oor poses substantial risks to marine ecosystems.The process can cause habitat destruction,sediment plumes and the release of toxic substances,adversely a?ecting deep-sea species and ecosystems.The long-term environmental impacts of deep sea-bed mining are not fully understood,and there is therefore a need to close key scienti?c gaps before any exploitation is considered4.A circular economy approach should be prioritized and implemented.2.The shift to sea-based energy production:Land-based wind power projects have faced increasing opposition due to land use con?icts,noise and visual impacts.As a result,there has been a shift toward o?shore wind energy,which is seen as a more viable alternative.O?shore wind farms are being developed at an unprecedented rate,placing additional impacts on marine environments5.Beyond o?shore wind,other forms of ocean-based energy generation are also being developed to harness the vast energy potential of the ocean.The shift toward o?shore sources of energy can con?ict with other ocean uses,such as?sheries,shipping,and tourism.Moreover,the construction and operation of o?shore wind farms can have signi?cant impacts on marine biodiversity.For instance,the noise from turbine construction and operation can disrupt marine mammals,particularly whales,which rely on sound for communication and navigation.Additionally,the physical presence of turbines can alter habitats and pose collision risks to birds and bats6.E?ective ecosystem-based marine spatial planning(MSP)is crucial to balance the competing uses of ocean space.However,MSP faces challenges in reconciling the interests of di?erent stakeholders and ensuring the protection of marine ecosystems.There is a need for multi-stakeholder integrated approaches that fully consider ecological,economic and social dimensions,ensuring that planetary boundaries are not exceeded.3.A growing demand for seafood:The global demand for seafood is rising due to population growth and changing dietary preferences.This has led to the expansion of o?shore aquaculture,which is seen as a solution to over?shing and declining wild?sh stocks.O?shore aquaculture involves the farming of?sh,shell?sh and seaweed in open ocean environments,often far from the coast.While o?shore aquaculture can reduce pressure on wild?sh populations,it also poses environmental risks.These include the potential for disease transmission to wild populations,nutrient pollution and habitat degradation.The use of chemicals and antibiotics in aquaculture can also impact marine ecosystems7.Ensuring that o?shore aquaculture is sustainable requires robust regulatory frameworks and best practices.These include monitoring and managing environmental impacts,promoting the use of sustainable feed and protecting marine habitats.It is also crucial to acknowledge that wild-caught?sheries remain a signi?cant source of seafood,and that persistent over?shing in these areas has substantial implications for food security,particularly in regions where aquaculture development may be limited.There is a need,therefore,for a balance between increasing production and maintaining ecological integrity8.4.Continued growth in trade and coastal urbanization:Over 80%of world trade volume is carried by sea9.The continued growth of international trade has driven unprecedented expansion in coastal infrastructure.Global seaborne trade volumes have more than tripled between 1970 and 2022,necessitating continuous port development and the expansion of shipping lanes(ibid.).In parallel,coastal tourism remains a powerful economic force,contributing nearly$11 trillion or 10%of GDP to the global economy in 202410 and fueling extensive urbanization along coastlines.In Asia,coastal expansion has led to major land reclamation projects that have altered natural habitats and increased exposure to sea level rise11.China exempli?es this trend.The countrys share of arti?cial coastlines resulting from reclamation projects has increased from 24%to 70.9%over the past four decades,largely driven by the development of aquaculture ponds ports and agricultural land12.Globally,78%of major coastal cities have resorted to land reclamation,collectively adding over 25,000 hectares of new land equivalent to the size of Luxembourg since the start of the 21st century13.5.Melting poles and geopolitical con?icts:The melting of sea ice due to climate change is opening new navigational routes,particularly in the Arctic region.This development is leading to increased interest in previously inaccessible areas for shipping,resource extraction and?shing14.The Northern Sea Route and the Northwest Passage are becoming viable options for shorter shipping routes between Europe and Asia,potentially reducing transit times and fuel consumption15.However,the opening of these routes is also sparking new geopolitical con?icts,as nations vie for control over these strategic waterways and the resources they harbor.Issues of territorial claims,environmental protection and the rights of indigenous peoples are becoming increasingly prominent16.Increased human activity in these fragile environments poses signi?cant risks to local ecosystems and biodiversity17.E?ective international governance and cooperation are essential to manage these new challenges and ensure that the exploitation of polar regions is conducted sustainably18.101.2 Chinas need for a sustainable blue economy and ambitions to develop oneChinas gross ocean product has grown signi?cantly,from RMB 5 trillion($794 billion)in 2012 to RMB 10 trillion($1.39 trillion)19 or 8%of national GDP in 2024,re?ecting the integration of marine economic activities into the broader socio-economic development of the country.According to the World Wide Fund for Nature(WWF)s analysis in the“Reviving Chinas Ocean Economy 2022:Empower Sustainable Development”report,the asset value of Chinas ocean economy is estimated at around RMB 54 trillion($7.34 trillion)20.The countrys marine economic sectors,such as coastal tourism,marine transportation,marine?sheries and seafood processing,marine chemical industry,o?shore oil and gas industry,and marine engineering construction industry,are pivotal to the national economy,accounting for approximately 37.4%of gross ocean product and 2.9%of Chinas GDP.Yet the countrys coastal communities and economies are increasingly threatened by climate change,with coastal waters warming at a rate of 0.25C per decade from 1980-2019 and sea levels rising by 3.4mm annually,both surpassing global averages21.These changes heighten the vulnerability of coastal regions to ecological disasters,such as exacerbating red tides and marine dead zones,as well as intense typhoons and storm surges.The diminished resilience of coastal communities and the natural environment pose substantial risks to Chinas most economically active and rapidly urbanizing coastal regions22.For example,Typhoon Fitow in 2013 resulted in an economic loss of RMB 44.9 billion($7.3 billion,by CCICED estimate)and impacted approximately 6.66 million people23.Marine heatwaves and ocean acidi?cation present substantial 19 CCICEDs conversions for this report were calculated using the average U.S.Treasury Reporting Rates for each year cited.20 World Wide Fund For Nature Beijing Representative O?ce,Reviving Chinas Ocean Economy 2022:Empower Sustainable Development,2022,https:/webadmin.wwfchina.org/storage/?les/Reviving_Chinas_Ocean_Economy_2022_EN.pdf.21 中华人民共和国自然资源部海洋预警监测司,2019年中国海平面公报,2020,https:/ 中华人民共和国自然资源部海洋预警监测司,2019年中国海洋灾害公报,2020,http:/ 中华人民共和国国家海洋局,2013年中国海平面公报,2014,http:/ It is an initiative aimed at creating a sustainable and environmentally friendly nation,?rst announced in 2012.“Embracing Sustainability:How Businesses Can Contribute to the Beautiful China Initiative”,China Brie?ng,2024,https:/www.china-brie? 习近平,2020,“推动构建海洋命运共同体（2019年4月23日）”,习近平谈治国理政（第三卷）,第463-464页.26“Xi stresses building Beautiful China,advancing modernization featuring harmony between humanity and nature”,Xinhua,2023,https:/ Pan,W.,Wang,J.,Lu,Z.,2021,“High-quality development in China:Measurement system,spatial pattern,and improvement paths”,Habitat International,118,102458.28 National Development and Reform Commission(NDRC),The Outline of the 14th Five-Year Plan for Economic and Social Development and Long-range Objectives through the Year 2035 of the Peoples Republic of China,2021,https:/ to marine biodiversity and?sheries,potentially leading to severe consequences for Chinas large-scale shell?sh farming industry,which is critical for ensuring food security and livelihood for low-income households.Despite signi?cant progress in marine ecological civilization and technological innovation,Chinas ocean economy faces numerous challenges,including declining coastal resource capacity,environmental degradation,pollution,frequent ecological disasters,increased food and livelihood demands and a lack of innovation in the marine industry.As China addresses the challenges of sustainably managing ocean spaces and resources,its leaders have prioritized the development and conservation of marine resources.They see sustainable development as essential to building a strong maritime nation and achieving a“beautiful China24.”Chinese President Xi Jinping has underscored the importance of developing a robust marine economy to support Chinas establishment as a strong maritime nation,and has advocated for the development of world-class ports,a modern marine industrial system and a sustainable marine ecosystem.Emphasizing marine conservation,Xi has called for caring for the ocean as much as for life itself25.At the National Conference on Ecological Environmental Protection in July 2023,Xi highlighted the need for“a bigger picture of ecological protection from the mountaintop to the ocean26.”These priorities are transitioning China toward“high-quality development,”which scholars de?ne as an e?cient,fair and sustainable development that stimulates societys creativity and vitality as a whole27.Chinas 14th FYP for Economic and Social Development,which outlines policy objectives from 2021-2025,dedicates a chapter to the“development of the marine economy”28.This re?ects the countrys commitment to sustainable ocean development and ambition of establishing itself as a maritime power in the new era.Figure 1.Chinas marine economic growth demonstrated by the increasing trend of gross ocean product from 2012 to 2024.Source of data:China Marine Economic Statistics Bulletins in 2012-2024Development of Chinas marine economy11Adobe Stock12A number of concepts are used to de?ne and characterize economies related to the ocean.They include the concept of an ocean economy,blue economy,SBE,regenerative blue economy,and others.See appendix 1.1-1.3 for the difgerent defjnitions.SBE is a concept applied across multiple?elds,such as marine industry,blue?nance,marine ecosystems,marine management and governance,and marine value accounting.Various organizations have proposed guidelines and principles for SBE development.They include the WWFs Principles for a Sustainable Blue Economy(2015)and the Sustainable Blue Economy Finance Principles(2018),which were co-developed by the European Commission,WWF and the Prince of Wales International Sustainability Unit,and have been hosted by United Nations Environment Programme Finance Initiative(UNEP FI)since 2019.In 2023,the G20 also released High-Level Principles on a Sustainable and Climate-Resilient Blue Economy29.The term“sustainable blue economy”is more comprehensible to Chinese society than the ambiguous term“blue economy”,which is often used as a synonym for“ocean/marine economy”and only sometimes implies a connection to sustainability.“Sustainable blue economy”,on the other hand,facilitates the communication of priority actions necessary for promoting sustainability.It is therefore strongly recommended to adopt this term for standardization in China,particularly in the context of policy development and industry engagement.2.1 SBE concept in Chinese policy and planning Since the 1960s,China has experienced?ve“blue industrial technology revolutions”,which have signi?cantly shaped the countrys marine economic development.In the 1980s,China introduced the concept of the“blue revolution”,aiming to leverage modern science and technology to enhance the quality and quantity of aquatic products from both marine and inland waters.This period saw the frequent use of terms like“blue industry”and“blue economy”in the literature on Chinas marine economy,where the blue economy was initially synonymous with the marine economy and industry.A pivotal moment came in April 2009 when then-Chairman Jintao Hu emphasized the importance of developing the marine economy and creating a blue economic zone on the Shandong Peninsula.This initiative was formally approved by the State Council in January 2011,making it part of the national strategy and leading to a clearer distinction between the blue economy and the ocean economy.The blue economy began to be seen as a broader concept,focusing on sustainable development,coordination 29 G20 Environment and Climate Ministers Meeting Annex-Chennai High Level Principles for a Sustainable and Resilient Blue/Ocean-Based Economy https:/g7g20-documents.org/database/document/2023-g20-india-sherpa-track-environment-ministers-ministers-annex-g20-environment-and-climate-ministers-meeting-annex.30“Belt and Road Blue Cooperation Initiative”,Ministry of Foreign A?air of China,2023,https:/ CCICED,2023,“Pathways and Policies of Blue Economy in Supporting Carbon-Neutrality Target”http:/ The Blue Partnership Principles announced by the Chinese delegation at 2022 UN Ocean Conference provides the concept,common collaborative areas and vision of the blue partnership which aims to contribute to the realization of the United Nations 2030 Agenda for Sustainable Development.https:/www.weforum.org/friends-of-ocean-action/sustaina-ble-blue-partnership-cooperation-network/.between ecological and socio-economic systems,and the integrated development of land and sea.The concept of the blue economy continued to evolve,and the State Oceanic Administration highlighted its essence as sustainable development under the green growth paradigm.The 13th FYP(2016-2020)further reinforced this by advocating for the integration of land and sea strategies,scienti?c exploration of marine resources,marine ecosystem protection and the development of a strong maritime nation.The international recognition of the blue economy led China to adopt terms like“blue”and“sustainable”more frequently in foreign cooperation,culminating in the proposal of blue partnership diplomacy in 2017.This Blue Partnership initiative aimed at fostering global cooperation to protect marine ecosystem,respond to climate change,tackle marine pollution and promote sustainable resource use.By 2023,the Belt and Road Blue Cooperation Initiative was launched to foster a resilient and inclusive blue economy based on cleaner production,green technology and the circular economy30.Key actions in the initiative include Reports like WWFs“Reviving Chinas Ocean Economy 2022”and the 2023 Special Policy Study by the CCICED31 underscored the broad scope of the SBE,which encompasses traditional and emerging marine-related industries,advocates for carbon neutrality and sustainable practices,and emphasizes circularity,collaboration and resilience.China actively participates in numerous international organizations and conventions related to the ocean and has initiated Blue Partnerships with various countries to foster innovation,integrated management and capacity-building.At the 2022 UN Ocean Conference,China launched 16 Blue Partnership Principles32,emphasizing cooperation in marine ecological conservation,climate change mitigation,pollution reduction and sustainable resource utilization.The establishment of the Sustainable Blue Partnership Cooperation Network further enhances stakeholder collaboration.Chinas rati?cation of the World Trade Organization(WTO)Agreement on Fisheries Subsidies in 2022 demonstrates its commitment to combating illegal?shing and alleviating over?shing pressures.2.1.1 The administrative framework Chinas Ministry of Natural Resources(MNR)serves as the core authority responsible for the blue economy and marine economy,overseeing marine resource development,economic planning and international cooperation.Meanwhile,the Ministry of Ecology and Environment(MEE)focuses on ecological protection,pollution prevention and climate change response.Through policy coordination and inter-ministerial collaboration,these two ministries work together with other authorities managing the respective 2.The evolution of the sustainable blue economy narrative in China13marine economic sectors to jointly promote the high-quality development of the marine economy and the construction of ecological civilization.In its policy discourse,the MNR primarily uses the term“blue economy”rather than“sustainable blue economy.”This choice results from a combination of factors,including policy continuity,departmental functional focus,adaptation to the international discourse system,and the needs of local practices.This choice does not imply a neglect of sustainability but rather re?ects an approach of“conceptual integration”and“action embedding,”where ecological goals are translated into speci?c policy tools.The following provides a multi-dimensional analysis of this phenomenon:1)Policy terminology continuity and inclusiveness of top-level designAt the 2012 Rio 20 Summit,the concept of the blue economy was introduced,linking the marine environment with economic development,and its connotation already included the goal of“sustainability.”In Chinas 13th FYP,the blue economy was o?cially proposed under the framework of“expanding blue economic space,”de?ned as an integrated framework encompassing high-quality development of the marine economy,technological innovation and ecological protection.The long-term adoption and consistent application of this term have tied it closely to Chinas strategic goal of becoming a“maritime power,”giving it signi?cant continuity.Moreover,the blue economy re?ects the inclusiveness of top-level design.In the context of Chinese policy,the term“blue economy”is endowed with broad connotations,encompassing both the upgrading of traditional industries(such as?sheries and shipping)and the development of emerging sectors(such as marine renewable energy and biopharmaceuticals),while also emphasizing ecological protection and the sustainable use of resources.2)Practice-oriented approach and departmental functional focusAs the core authority responsible for marine resource development and management,the MNR places greater emphasis on economic planning and industrial layout.For instance,policies led by the ministry,such as the construction of“blue economic corridors”and the development of a“new marine industry system,”are directly aimed at economic growth,while ecological protection is often achieved through inter-ministerial collaboration(e.g.jointly advancing the“returning aquaculture to the sea”project with the MEE).The use of the term“blue economy”allows for a sharper focus on the functional scope of the MNR,avoiding the policy fragmentation that could result from overly broad concepts.Although Chinas policy documents do not explicitly include the“sustainable”pre?x,the concept of sustainability is integrated into practice through speci?c measures.Examples include promoting“high-quality development of the marine economy,”“blue?nance,”“blue carbon sinks,”and the“realization of ecological product value.”3)Adaptation to the international cooperation discourse system Under the United Nations framework,the term“sustainable blue economy”is often tied to the environmental standards,which may impose institutional pressures on developing countries like China,causing reluctance in adopting this Chunyip Wong/iS14narrative.Domestically,the concept of the blue economy might be overly generalized,resulting in unfocused policy objectives and di?culties formulating concrete action plans.Internationally,if China lacks a clear blue economy strategy,it may struggle to take a leading role in shaping the global development of the SBE one which underpins innovation,e?ciency and long-term environmental,social and economic resilience.Although“blue economy”remains the dominant term at present,the deepening of sustainability concepts and the development of emerging technologies,such as marine carbon sinks and blue hydrogen,may drive an upgrade of the concept.Furthermore,if global narratives for an SBE become highly binding,China may need to adjust its terminology to better integrate into the international system.2.1.2 Implications of the policy developmentOver the past 12 years,Chinas approach to ocean-related development has shifted from conventional exploitation to a more balanced and sustainability-focused paradigm,aligning with global sustainability agendas.This evolution is re?ected in directives from the Communist Party of China and national policies detailed in the 13th and 14th FYPs.The congresses of the Communist Party progressively emphasized developing the ocean economy while protecting ocean ecology,with the 20th congress highlighting“ecological civilization”.The FYPs set green and smart technologies as principles for ocean development,prioritizing industries such as distant water?shery,desalination,pharmaceutics,ocean equipment and ocean services,and expanding to include ocean tourism,near-shore green aquaculture and sea ranches in the 14th FYP.Both FYPs incorporated ecosystem-based comprehensive management of the ocean,including functional zoning,development intensity control,reclamation control,coastal area conservation and restoration,?shing intensity control,?shery moratorium implementation and pollutant quota systems.Maintaining 35%of the coastline in its natural condition has been a consistent target that China has pursued through actions like the“mangrove for south,tamarisk for north”restoration and strict pollution control enforcement.“Ocean governance”was also emphasized in both FYPs,alongside international and Belt and Road Initiative(BRI)agendas,aiming to project Chinas positive SBE impacts globally.These e?orts demonstrate Chinas ambition to become a powerful maritime country through balanced and sustainable ocean development.2.1.3 Integrating MSP with SBE agendaAs the scale of marine development and utilization continued to grow,China began implementing marine functional zoning in the 1980s to balance marine ecological conservation with the development and use of marine spaces.This e?ort has been continuously re?ned and improved in practice.Before the 2018 State Council institutional reform,Chinas MSP system was based on the Law on the Administration of the Use of Sea Areas and the 33“3030 Leads Nature Day As The Most Prominent Biodiversity Goal to Combat Climate Change“,High Ambition Coalition for Nature&People,2023,https:/hacfornatureandpeople.org/30 x30-leads-nature-day-as-the-most-prominent-biodiversity-goal-to-combat-climate-change/.Marine Environmental Protection Law,forming a framework characterized by multi-department collaboration,but with fragmented responsibilities.The core of this system consisted of marine functional zoning and the marine principal functional zoning plan.Additionally,there were a range of specialized plans,such as the island protection plan and the coastal protection and utilization plan.During this period,Chinas marine spatial development gradually shifted toward higher quality and e?ciency,with signi?cant improvements in marine ecological environment quality.However,this system faced several issues,including a disconnect between terrestrial and marine planning,overlapping departmental responsibilities,and ine?ciencies in governance.Recognizing the importance of natural capital and ecosystem services in coastal and marine spaces,as well as the necessity of integrating land and marine planning for ecological conservation,China entered the“multi-plan integration”stage of territorial spatial planning following the establishment of the MNR in 2018.Under this new framework,territorial spatial planning and Chinas“national-provincial”two-tier coastal zone planning have become the core of MSP,replacing the traditional marine functional zoning system and fully inheriting the responsibilities related to MSP.This new system divides marine space into“marine ecological space”and“marine development and utilization space,”with strict“marine ecological protection redlines”established within ecological spaces.These redlines aim to ensure the protection of critical ecosystems while restricting unregulated development.China has also joined the High Ambition Coalition for Nature and People in 2023,demonstrating Chinas dedication in meeting the global biodiversity target to protect at least 30 percent of the planets land and ocean by 2030.33 In order to strengthen the coordination with the SBE and ocean governance agendas to achieve the area-based marine protection targets,it is necessary to evaluate the MSP system based on SBE development principles and goals,and strengthen the application of scienti?c data on marine biodiversity and resources,as well as incorporating the socio-economic parameters for sustainable local livelihood and industry developments.Further information on improving Ocean Accounting that can provide foundation to support MSP and policymaking will be elaborated in Chapter 3.152.2 Policy gaps and areas of improvements2.2.1 Gaps in Chinese frameworks and policy directionsCurrently,SBE has not been introduced as the key theme in Chinas FYP,and there lacks explicit favorable policy signals for advancing the SBE.In 2017,China introduced its“Implementation Opinions on Building a Strong Maritime Country,”which outlines the objectives and measures for the ocean economys development.However,this document is not a traditional FYP but a long-term strategic plan.This plan falls short in providing a detailed roadmap for promoting the practical development of the SBE and has not yielded su?ciently clear signals indicative of favorable policies to develop maritime sectors in a way that also results in nature and community bene?ts.Despite the increasing global consensus on the value and strategic signi?cance of the SBE,China has not yet formulated a national or provincial-wide systematic strategic plan for the SBE.While some provinces like Shandong and Zhejiang have piloted blue or marine economic zone development plans,these e?orts lack the overarching framing of SBE development to synthesize them.Chinas major policies related to the blue economy highlight modernizing marine economic development and include some elements of marine ecological protection,but they overlook the inclusion and improvement of social wellbeing and livelihoods,including those of women and other marginalized groups.Additionally,these policies lack alignment with the global conversation on the blue economy,Kunming-Montreal Global Biodiversity Framework(GBF)and the climate goals set in the Paris Agreement.There is no consensus on the defjnition of the term“blue economy”in China,and many perceptions and views on the blue economy come mainly from the international level.O?cial documents or reports use the notion of“ocean economy,”while the term blue economy or SBE mostly appears in provincial events or occasions held by institutes attached to ministries.This lack of a clear de?nition complicates the balance between marine economic development and ecological protection,impeding sustainable development e?orts.The terms“blue economy”,“green economy”,and“ocean economy”are often confused,leading to misunderstandings about the environmental sustainability,equity,inclusiveness and climate resilience that the blue economy emphasizes.SBE,on the other hand,clearly implies that the ocean economy should be sustainable.This clarity supports the development of more coherent strategies and action plans.The incentive level for local governments or entities to develop an SBE is still low.Currently,several provinces and cities are building their ocean pilot zones,each taking a speci?c sector to incubate their industrial expertise.In January 2024,Weihai City formulated and issued Chinas 34“Resolution of the Central Committee of the Communist Party of China on Further Deepening Reform Comprehensively to Advance Chinese Modernization”.Adopted at the third plenary session of the 20th Central Committee of the Communist Party of China on July 18,2024.?rst catalogue of sustainable investment and?nancing support for blue industries.This initiative is an innovative example of Weihais development of the blue economy,which will promote the e?ective integration of industrial elements and?nancial capital and guide?nancial resources to focus on the blue economy.However,more resources should be mobilized to match these policies.Promoting a sustainable economy related to the ocean can adapt actions taken to address climate change.Policies to help develop the SBE include incentives for small and medium-sized enterprises and individuals,such as subsidies designed to encourage SBE innovations and e?ciencies,the organization of industrial clusters,like sustainable industry parks,and the provision of appropriate capacity building innovative solutions for mobilizing?nance and capacity should also be further sought.These incentives should be built on the progress of the points mentioned above.2.2.2 Governance system on ocean economic sectors and conservation matters The SBE in China is currently more of a development concept focused on green growth approaches rather than a concrete policy.This absence of a clear de?nition,shared goal,accountability and operational framework for the SBE hinders the integration of sustainable practices and resource allocation.Successful environmental mainstreaming in China has been achieved through clear leadership by speci?c ministries,as seen in areas like wetland conservation and climate change.The SBE requires similar coordination,but currently,various ministries handle di?erent aspects,leading to potential policy con?icts.For instance,the MNR oversees overall ocean economy development,the MEE manages ocean protection and pollution control,and the Ministry of Agriculture and Rural A?airs handles aquaculture and?sheries.This fragmented governance system lacks a uni?ed approach,which can undermine SBE progress.Establishing a leading ministry,akin to the MEEs role in climate change,could streamline e?orts and ensure cohesive policy implementation.Additionally,Chinas fragmented marine legislation poses challenges,lacking integration and coordination.The development of an environmental code34,expected by 2026,presents an opportunity to incorporate SBE principles and support policy coherence for sustainable marine development.A comprehensive governance system that integrates ocean economic sectors and conservation matters is crucial for advancing an SBE and addressing the complex,cross-cutting nature of marine issues.162.2.3 Inclusiveness and livelihood of communities during the SBE transition process The expansion of ocean-based industries can lead to the displacement of local communities and exacerbate social inequities.Coastal communities often rely on traditional livelihoods,such as?shing and tourism,which may be impacted by industrial activities35.Involving local communities and ensuring both their visibility in decision-making processes and that they bene?t from ocean-based developments can address social challenges,assure support and engagement and encourage innovation.Inclusive governance models and bene?t-sharing mechanisms can help distribute the economic gains of the SBE more equitably36.Even with the high growth of industrial activity in the ocean economy in the 21st century(dubbed“the blue acceleration”)37,small-scale(in some cases artisanal)?sheries are still the oceans largest employer38.The most recent estimates show that these?sheries include signi?cant numbers of people worldwide who participate in them for subsistence only,suggesting that the ocean and its small-scale?sheries can provide important safety nets to help prevent poverty and food insecurity39.Hence any policy or collective action to shift ocean use must include the voices of these users40 and their wider coastal communities to ensure that their rights and traditional uses are protected as part of an equitable SBE 41,42,43.Indeed,international policy goals(SDG14.b)44 and instruments45 have been agreed on in order to secure a safe space in the increasingly crowded ocean for small-scale?sheries.Some scholars have suggested that governments could zone coastal areas for small-scale?sheries,a tool some countries are already using46.Regardless of the speci?c policy instruments,placing coastal communities at the center of decisions for future ocean use will require a multi-pronged approach47,and will also likely determine whether a future SBE is,by de?nition,sustainable.Throughout the entire?shing industry supply chain,womens contributions are signi?cant in both pre-harvest tasks such as net repair and bait preparation as well as harvesting in coastal shallow waters.Their catches are essential for family nutrition and income support.Globally,women constitute more than 85%of the workforce,signi?cant in both small-scale and industrial processing sectors48.Despite their signi?cant role in ocean economy sectors like?sheries,women often hold low-ranking,underpaid or informal positions,instead of managerial roles,and they struggle to access resources like capital,credit or 35 Bennett,N J.,Blythe,J.,White,C.S.,et al.,2021,“Blue growth and blue justice:Ten risks and solutions for the ocean economy”,Marine Policy 125,104387.36 Bennett,N.J.,Cisneros-Montemayor,A.M.,Blythe,J.,et al.,2019,“Towards a sustainable and equitable blue economy”,Nature Sustainability 2(11),991-993.37 Jou?ray,J.B.,Blasiak,R.,Norstrm,A.V.,et al.,2020,“The blue acceleration:the trajectory of human expansion into the ocean”,One earth 2(1),43-54.38 FAO,Duke University,and WorldFish,Illuminating Hidden Harvests:The Contributions of Small-Scale Fisheries to Sustainable Development,2023,https:/openknowledge.fao.org/items/34646086-8b46-4040-b3b9-c569058bceb9.39 Virdin,J.,Basurto,X.,Nico,G.,et al.,2023,“Fishing for subsistence constitutes a livelihood safety net for populations dependent upon aquatic foods around the world”,Nature Food 4(10),874-885.40 Cohen P.J.,Allison E.H.,Andrew N.L.,et al.,2019,“Securing a just space for small-scale?sheries in the blue economy”,Frontiers in Marine Science 6(171),18.41 Bennett,N.J.,Cisneros-Montemayor,A.M.,Blythe,J.,et al.,2019,“Towards a sustainable and equitable blue economy”,Nature Sustainability,2(11),991-993.42 sterblom,H.,Wabnitz,C.C.C.,Tladi D.,et al.,Towards Ocean Equity,2020,www.oceanpanel.org/how-distribute-bene?ts-ocean-equitably.43 Gill,D.A.,Blythe,J.,Bennett,N.,et al.,2023,“Triple exposure:reducing negative impacts of climate change,blue growth,and conservation on coastal communities”,One Earth,6(2),118-130.44“Goal 14|Department of Economic and Social A?airs”,United Nations,n.d.,https:/sdgs.un.org/goals/goal14#targets_and_indicators.45“Voluntary Guidelines for Securing Sustainable Small-Scale Fisheries”,FAO,n.d.,https:/www.fao.org/voluntary-guidelines-small-scale-?sheries/en.46 Basurto,X.,Vidin,J.,Franz,N.,et al.,2024,“Securing ocean space for the sustainable development of small-scale?sheries”,Research Square.47 Claudet,J.,Blythe,J.,Gill,D.A.,et al.,2024,“Advancing ocean equity at the nexus of development,climate and conservation policy”Nature Ecology&Evolution,8(7),1205-1208.48 FAO Globe?sh Research Programme,The role of women in the seafood industry,2015,Page 3,http:/www.globe?sh.org/upl/Publications/Final EXECUTIVE_SUMMARY_GL.pdf.49 International Institute for Environment and Development(IIED),Steering Gender to the Centre of the Blue Economy,2019,https:/www.iied.org/steering-gender-centre-blue-economy.training.Social norms and domestic responsibilities further limit their opportunities49.Thus,SBE-related policies should be inclusive to value womens contributions and recognize their distinct roles to assure their equitable livelihood opportunities.The successful implementation and sustainability of an SBE greatly depends on public participation and acceptance.Failing to engage community in the process can undermine the recognition and e?ectiveness of SBE development.The Department of Marine Ecology and Environment under the MEE launched an online platform and app to encourage public involvement in marine environmental protection and to gather coastal residents views on coastal development and conservation.More e?orts are needed to promote the importance of coastal and marine conservation among local communities,including women who often have more limited access to information and barriers to their participation in public forums.These platforms can serve as educational tools and can leverage collective community wisdom to inform policy making for developing an SBE at both the national and local levels.To understand the gender issues of di?erent marine economic sectors and regions,as well as the potential disproportionate impact of climate change on gender,data need to be gathered and analysed from various primary and secondary sources.By mapping key demographic and economic indicators and assessing high-impact sectors in marine economy,this will provide insights to set the foundation for policymaking to ensure gender inclusion in the SBE development processes.Patrick Yeung173.1 Overview of global ocean accountingOcean accounts are a comprehensive set of structured tables that compile and integrate data concerning oceans natural assets,use of those assets to support economic activities and social well-being,impacts of economic activities on the ocean environment and ecosystems,and governance conditions.These accounts apply the same accounting concepts and principles found in established frameworks like the System of National Accounts(SNA)and the System of Environmental-Economic Accounting(SEEA).By incorporating macroeconomic accounts,environmental-economic accounts,ecosystem accounts and structured data on ocean bene?ciaries,technology,governance and management,ocean accounts provide a holistic view of the relationship between ocean wealth,ocean health,ocean economy and ocean governance.This integration allows for the accounting of legal,illegal,unreported and unregulated activities,as well as the assessment of natural assets(condition and extent),?ows,wastes,expenditures,taxes and subsidies related to the ocean.Ocean accounts enable countries to move beyond traditional GDP measures to better manage and monitor progress toward SBE development.By integrating multiple data sets from various sources,these accounts help track changes in ocean wealth,ocean-related income and welfare,and ocean-based economic production.They create a common information infrastructure that supports evidence-based decision making on ocean governance,policy development and the e?ectiveness of policy outcomes,including strategically planning SBE development.Additionally,ocean accounts can facilitate private sector?nancing in the ocean economy and ecosystem restoration projects by providing investors with regularly updated and comparable data,enabling them to track the success of their portfolios.They also support the derivation of Beyond GDP indicators,enabling international comparisons and reporting on commitments like the Sustainable Development Goals(SDGs),Kunming-Montreal GBF and the Paris Agreement.By organizing and presenting information in accessible formats such as dashboards,scenarios,spatial plans and indicators,ocean accounts ensure that decision makers can easily understand and utilize the data for informed governance and sustainable development.The development of ocean accounting frameworks represents a critical and burgeoning approach to measuring and managing SBE development.More than 50 countries have reported undertaking some form of pilot ocean account,although the majority are sectorally narrow(only four have done a full Ocean Economy Satellite Account).Globally,progress has been made in establishing basic frameworks,providing SNA/SEEA compliant technical guidance and piloting approaches,particularly related to ocean and coastal ecosystems and ocean economy accounts.3.1.1 The limitations of current global ocean accounting Despite signi?cant progress,current implementation practices of ocean accounting remain focused on pilot studies and is experimental.These practices are yet to be established as o?cial statistics.Comprehensive accounts need to be developed to be e?ective tools for holistic ocean management and sustainable development planning.The existing state of ocean accounting re?ects both the complexity of measuring ocean-related economic activity and the historical focus on conventional economic metrics.Several limitations characterize current approaches,including the ability to understand and apply local knowledge for decision making(a signi?cant area of research for the global community).These limitations must be addressed to ensure that ocean accounts are e?ective tools for comprehensive ocean management and sustainable development planning.Key considerations in implementing the ocean accounting framework are:1)Variations in de?nitions of ocean-related activities and boundariesThe Global Ocean Accounts Partnership(GOAP)Technical Guidance on Ocean Accounting clearly de?nes the scope of ocean-related activities,however the measurement approaches of blue,coastal activities and indirect ocean-related services vary signi?cantly across jurisdictions.While ocean activities are de?ned by the Organisation for Economic Co-operation and Development(OECD)and others,countries still implement their own de?nitions,which leads to variations in what is included.For example,many have terrestrial components,while some also include freshwater lakes.The proportion(or“partial”in technical 3.Improving ocean accounting to support sustainable developmentjokuephotography/iS18terms)of each economic activity related to the ocean needs to be determined by individual implementing bodies when developing an account.These partials naturally di?er between jurisdictions based on national circumstances.This necessary inconsistency can make comparative analysis between countries challenging,though coherent ocean accounting within jurisdictions and over time o?ers powerful insights for policy development within countries.The transboundary nature of the ocean remains a particular challenge and is one of the key reasons why the GOAP was established and why the global,multi-institutional partnership developed its Technical Guidance for Ocean Accounting,which speci?cally addresses ocean-related challenges in existing accounting frameworks.This guidance continues to evolve as we learn more about the interconnected nature of our ocean.However,this should not be a barrier to implementation,if acknowledged.2)Data collection,integration and quality issuesVery often data exists for ocean accounting purposes,however,discoverability,access and transparency are challenging.Though implementation across accounting exercises commonly relies on fragmented data collected for other purposes;the lack of standardized data collection protocols,insu?ciently strong metadata and limited coordination between agencies can lead to data gaps and quality concerns.Global experience demonstrates,however,that the implementation of any accounting exercise is vital to illuminate where data gaps exist and what priority data to collect.Countries may also struggle to maintain consistent time series data in environmental data,making trend analysis and policy evaluation di?cult.The increasing quality and use of remote sensing and similar techniques is beginning to change this at least for nearshore waters.Again,as with the de?nition challenge and consistent with SNA and SEEA country-level implementation,data should not be a barrier to implementation,if acknowledged in the accounts.3)Incomplete coverage of ecosystem elementsAlthough a comprehensive ocean accounting framework should organize social,economic and environmental information,to date,many countries are taking an approach that predominantly emphasizes the economic aspect on market-based activities.This results in a signi?cant oversight of several critical aspects of ocean resources and their broader impacts.The integration of environmental and economic data remains particularly challenging,with few countries successfully implementing comprehensive approaches that capture both dimensions concurrently.They often fail to adequately capture non-market ecosystem services,such as the regulatory functions of marine ecosystems that contribute to climate stability and biodiversity.Social and cultural values associated with ocean resources,including recreational,spiritual and heritage bene?ts,are frequently neglected,despite their importance to many communities.Furthermore,the distributional impacts across di?erent stakeholder groups are not su?ciently addressed,leading to inequities in how bene?ts and burdens are shared among various populations.Lastly,the interconnections between ocean health and economic outcomes are often ignored,missing the critical link between a thriving marine environment and a prosperous economy.To support SBE development,it is imperative to expand accounting activities to encompass these non-market values and interconnections,ensuring a more comprehensive and equitable approach to ocean resource management.Ocean accounts,which link economic,environment and social dimensions,attempt to address these shortcomings.3.1.2 Benefjts of ocean accounting for sustainable development Following the existing ocean accounting activities and frameworks and improving implementation can meaningfully contribute to SBE planning in several key areas:Strategic planning and policy development:Even incomplete ocean accounts provide valuable baseline information for policy development.They help identify key economic sectors,track growth patterns and highlight potential sustainability concerns.This information supports more informed strategic planning processes and helps align development objectives with environmental constraints.Sector-speci?c management:Current frameworks often provide detailed information about traditional maritime sectors(?shing,shipping,o?shore energy),enabling more e?ective sector-speci?c management approaches.This granular data can inform licensing decisions,capacity planning and regulatory frameworks.Monitoring and evaluation:Existing accounts,despite their limitations,establish important baseline metrics for monitoring progress toward SDGs.They provide quantitative frameworks for evaluating policy e?ectiveness and tracking sectoral changes over time.Integration with broader economic planning:Ocean accounts help integrate marine sector considerations into broader economic planning processes.They provide structured ways to consider ocean-related activities within national development strategies and economic policies.E?ective MSP:Integrating ocean accounting that captures economic,environmental,and social datasets enables policymakers to track critical metricssuch as ecosystem health,human activity patterns,resource con?icts,and cross-sectoral impactsensuring that MSP processes are grounded in data-driven decision-making.This helps develop balanced spatial plans that harmonize marine conservation with SBE.193.2 Chinas ocean accounting progress The global valuation of the ocean economy is predominantly estimated based on ocean industries,while the speci?c methodologies and parameters for evaluating the values of marine ecosystem services are still under development.The aggregation of ocean-speci?c data with terrestrial data,such as the merging of marine and freshwater?sheries,makes it more challenging to understand the health and economic contribution of the ocean.Despite Chinas progress in creating a sophisticated system for analyzing and accounting for its ocean-based industries,there are still areas in the accounting of marine ecosystems that require further improvement and enhancement.China is a major maritime country that attaches great importance to the construction of an ocean economic system,while also promotes ocean governance and conservation.Its development of blue?nance has gone through three stages:The?rst stage occurred during the 12th FYP period and pertained to guidance and regulation of the marine economy.During this time,China supported the restructuring of the marine economy mainly through?scal and?nancial instruments.During the 13th FYP period,China entered the second stage,characterized by?nancial institutions supporting the development of the marine economy,and speci?c subsets of the marine economy,such as marine?sheries,marine transportation,marine tourism,marine renewable energy industries.The third stage,during the 14th FYP period,was marked by strong?nancial support for the development of the blue economy.During this stage,the relevant agencies and departments began labelling blue bonds,and?nancial institutions began issuing blue bonds to support marine conservation and the sustainable use of resources.3.2.1 Improving the ocean economic accountingThere are four essential accounts that connect ocean assets and governance with sustainable economic practices.These accounts include ocean asset accounts,which assess the health of ocean resources;ocean economy accounts that track economic activities and revenues;ocean residue accounts for waste and emissions entering the ocean;and ocean governance accounts that identify management responsibilities and monitor management e?ectiveness.These four accounts interact dynamically to shape SBE development.For example,expanding ocean-based economic activities may boost GDP(increasing the economy account)but deplete assets and increase residues,further degrading assets if governance is weak.Conversely,sustainability requires maintaining or improving asset conditions,reducing residues,and strengthening governance to ensure responsible management.By balancing these accounts,stakeholders can promote economic growth while preserving marine ecosystems and ensuring long-term sustainability.su tim/iS20In China,the component of the account being mainstreamed for strategic planning and policymaking is the economic account,while the rest are either only partially piloted at the local level or studied in research.There is a need for developing a comprehensive ocean accounting approach to advise policies and ensure economic growth does not compromise ocean health.Improving ocean accounting is crucial for informed decision-making in the SBE.Non-market ecosystem services should complement ocean economy satellite accounts but should not be integrated into one macroeconomic aggregate.Incorporating metrics related to ocean health,ecosystem services and the link between natural capital and economic productivity into national accounts is a key strategy for implementing an SBE.For China,besides the sustainable transformation of the ocean industries,a vital next step toward an SBE is the integration of more environmental and natural capital-related information into its existing accounts,which should fully re?ect the health of the marine environment and the development and societal contributions of the SBE.China could bene?t from engaging with GOAP,which aims to incorporate marine sectoral and environmental data into national decision-making,and participate in the co-development of international standards.Due to the varying data foundations and accounting methods among countries,comparing the development of the ocean economy on an international scale is still challenging,highlighting the need for enhanced dialogue and collaboration.There needs a stronger alignment between China and the other countries on the scope of ocean-related activities and de?ne them and their respective ratios(i.e.,direct e?ects);then analyze input-output reliance(i.e.,indirect e?ects).The scope should capture a wide range of indicators of the induced e?ects like labor input,and scienti?c and technological innovation.Moreover,it is important to research into sex-disaggregated data concerning people,such as labor,so that the di?erential impact of and contributions to the ocean industry on women and men can be more fully understood.Regular revisions of the ocean industry statistics accounting system and the digitization of the industry data collection and processing are also necessary.50 McCook,L.J.,Cai,L.,Yeung,C.W.,et al.,2025,“Marine ecosystem services and natural capital in China:Opportunities for improved understanding,valuing,and policy”,PNAS Nexus 2025 May 20;4(5):pgaf110.3.2.2 Advancing the valuation of marine ecosystem services in China The oceans value extends beyond providing essential resources;it also o?ers crucial ecosystem services such as climate regulation,coastal protection,water conservation,food supply,livelihoods and cultural value.Recognizing these values is vital for sustainable ocean development.Although valuing marine ecosystem services is complex,initiatives like the shared wealth fund by WWF and the attempts of marine ecological capital assessment by the First Institute of Oceanography50 provide a starting point.China should develop a national approach to valuing marine ecosystem services and integrate these values into policy and economic development decisions.Comprehensive marine data is essential for formulating sustainable blue economic development plans and improving the marine industrys e?ciency.However,China currently lacks comprehensive laws and regulations on marine information sharing.Addressing these challenges requires adjusted policies to enhance data collection and analysis,incentivizing public-private partnerships and leveraging technological innovation.Scienti?c and comprehensive marine data can provide a solid foundation for the formulation of marine economic development planning and policies,as well as assessing the carrying capacity of the marine environment.This data is crucial for improving the e?ciency and competitiveness of the marine industry,which is essential for the development of the SBE.Chinas ocean observation and data network construction faces two major problems:insu?cient ocean observation facilities and incomplete laws and regulations on marine information sharing and service policies.The coverage of Chinas marine observation facilities is not wide enough,with certain blind spots and gaps a?ecting comprehensive monitoring and data acquisition.Additionally,Chinas current marine legal system lacks a relevant legal framework for marine information management,including the ownership,collection rights,attribution and transfer of marine information.This has led to monopolization of marine information and wasted national resources,directly constraining the development of the SBE.Patrick YeungPatrick YeungPatrick Yeung21ling yu/iS224.1 The global blue fjnance ecosystem In order to direct capital and development policies toward SBE pathways,there is a need for commonly agreed ocean-based principles,accountability frameworks,guidance,criteria and metrics.These must be supported by robust regulation,including the use of incentives and disincentives.While the ocean is not well incorporated within the global?nance system,some blue?nance frameworks and guidance have been or are being developed and are considered to be signi?cant contributions to the emerging blue?nance ecosystem.4.1.1 Principles,frameworks,criteria and metricsThe Sustainable Blue Economy Finance Principles provide the?rst global ocean framework to guide?nance decisions and development policy toward the most sustainable development pathways.The Principles are hosted by UNEP FIs Sustainable Blue Economy Finance Initiative51,a knowledge management platform that has 88 members,representing over$11 trillion AUM.The Principles have also been adopted by 44 signatories,including both public and private sector partners,such as the World Bank,European Investment Bank(EIB)51“Sustainable Blue Finance”,UNEP FI,n.d.,https:/www.unep?.org/blue-?nance/.52 UNEP FI,Turning the Tide:How to Finance a Sustainable Ocean RecoveryA practical guide for?nancial institutions,2021,https:/www.unep?.org/publications/turning-the-tide/.53 UNEP FI.Diving Deep:Finance,Ocean Pollution and Coastal Resilience,2022,https:/www.unep?.org/publications/diving-deep/.and Asian Development Bank(ADB),Bank of Qingdao,Rockefeller Capital Management,Axa XL,and have been endorsed by the Government of Portugal and the EU High-Level Expert Group on Sustainable Finance.By aligning with the Ocean Sustainable Development Goal(SDG14)and complementing existing frameworks governing responsible investment(the Equator Principles and UN Principles for Responsible Investment(UN PRI),the Principles are designed to provide a broad vision,guardrails and guidelines for future sustainable?nancing of the ocean,and ensuring that ocean-related?nance delivers long-term value,without causing negative impacts on marine ecosystems or on e?orts to reduce carbon emissions.As such,the Principles are relevant to all ocean users that are?nancing,being?nanced by,or regulating the ocean economy.SBE guidance52,53 has also been developed to compliment the Principles and guide sustainable development decisions within the ocean economy.This publicly available guidance covers eight maritime sectors(aquaculture,commercial?sheries,coastal tourism,shipping,ports,marine renewable energy,solid waste disposal and natural infrastructure)and provides clear,actionable,and granular science-based criteria categorizing activities that should be avoided,those that would need to be transitioned,through policy and targeted?nance interventions,and those that should be proactively sought out,?nanced and implemented.4.Unlocking blue fjnance to facilitate the blue transformationBOX 2:Overview of Sustainable Blue Economy Finance PrinciplesProtective:Support investments,activities and projects that take all possible measures to restore,protect or maintain marine ecosystems.Compliant:Support activities compliant with international,regional,national legal and other relevant frameworks.Risk-aware:Base investment decisions on holistic and long-term assessments that account for economic,social and environmental values,quanti?ed risks and systemic impacts and adapt decision-making processes and activities to re?ect new knowledge of the potential risks.Systemic:Identify the systemic and cumulative impacts across value chains.Inclusive:Support investments,activities and projects that include,support and enhance local livelihoods,and engage e?ectively with relevant stakeholders,identifying,responding to,and mitigating any issues arising from a?ected parties.Cooperative:Promote cooperation between?nancial institutions and relevant stakeholders.Transparent:Report on investments positive and negative impacts and report on progress in terms of implementation of these Principles.Purposeful:Endeavor to direct investment/banking/insurance to projects and activities that contribute directly to the achievement of SDG 14 and other SDGs.Impactful:Support investments,projects and activities that go beyond the avoidance of harm to provide social,environmental and economic bene?ts from our ocean for both current and future generations.Precautionary:Assess the environmental and social risks and impacts of ocean investment,activities and projects based on sound scienti?c evidence and take precautionary principles when scienti?c data is insu?cient.Diversifjed:Recognize the importance of small to medium enterprises in the ocean economy and develop diversi?ed instruments to reach a wider range of small and large-scale sustainable development projects.Solution-driven:Support commercial innovations and encourage the spread of best practice thus developed.Partnering:Partner with public,private and non-government sector entities.Science-led:Develop knowledge and data on the potential risks and impacts associated with investment in the ocean economy;endeavor to share scienti?c information and data on the marine environment.23The Principles o?er an overarching chapeau for the emerging blue?nance ecosystem.It is therefore important to seek linkages and alignment between the Principles and other functional parts of the blue?nance ecosystem.Most notably,the Task Force on Nature-related Financial Disclosures(TNFD)is a corporate disclosure framework for?nance institutions to report and act on evolving nature-related risks54.By providing criteria and metrics on nature-related impacts and dependencies,it aims to increase transparency across the sector and encourages consistent reporting.The TNFDs focus is broad in terms of biodiversity,but the task force is currently developing criteria that is strongly aligned with UNEP FI guidance for a number of ocean sectors.4.1.2 Insights from the international experienceWhile these emerging initiatives and voluntary frameworks have a signi?cant role to play in shaping ocean-related guidance and in driving the transition toward an SBE,it is important that SBE sectors are included in national“sustainable”?nance taxonomies classi?cation systems that provide regulators and?nanciers clarity on the activities,assets and project categories that deliver on key climate,green and blue,social and sustainable objectives55.By providing environmental performance criteria to de?ne what constitutes sustainable activities across di?erent sectors56,they deliver integrity within the sustainable?nancial market and allow governments to track capital?ows to“sustainable”sectors.This enables them to assess whether su?cient capital is?owing to targeted sectors to meet national biodiversity and climate commitments57.By way of example,within the EU green taxonomy,introduced in 2020,economic activities must respect three criteria,namely(i)substantially contribute to one or more environmental objectives of the taxonomy;(ii)do no signi?cant harm(DNSH)to any other environmental objectives of the taxonomy;and(iii)respect social safeguards.To guide the second category,UNEP FIs guidance includes a recommended exclusion list for activities that cause signi?cant harm to nature and people58.Given the signi?cant contribution of the ocean to national economies59 and the risks associated with unsustainable business-as-usual practices60,the development of blue taxonomies and their integration with national policies and development plans should be prioritized.Current sustainable?nance taxonomies(47 as of April 2024 61)are primarily based on terrestrial sectors,however,so targeted action is needed to scale the blue dimension.As a minimum,sustainable blue?nance taxonomies need to be forward-looking and grounded in robust ocean science to incentivize and guide corporate transition to operate 54 TNFD,Recommendations of the Taskforce on Nature-related Financial Disclosures,2023,https:/tnfd.global/wp-content/uploads/2023/08/Recommendations_of_the_Taskforce_on_Nature-related_Financial_Disclosures_September_2023.pdf.55 Nicholas Pfa?,zgr Altun,and Yanqing Jia,Overview and Recommendations for Sustainable Finance Taxonomies,2021,https:/www.icmagroup.org/assets/documents/Sustaina-ble-?nance/ICMA-Overview-and-Recommendations-for-Sustainable-Finance-Taxonomies-May-2021-180521.pdf.56 WWF,When Finance Talks Nature,2022,https:/ww?nt.awsassets.panda.org/downloads/when_?nance_talks_nature.pdf.57 Jena,L.P.,Tandon,G.,Creating E?ective Sustainable Finance Taxonomies,2025,https:/www.orfonline.org/public/uploads/posts/pdf/20250211110942.pdf.58 UNEP FI,“Recommended Exclusions for Sustainable Blue Economy Financing,2021,https:/www.unep?.org/publications/turning-the-tide-recommended-exclusions.59 WWF,Reviving the Ocean Economy,2015,https:/wwf.panda.org/discover/our_focus/oceans_practice/reviving_the_ocean_economy/.60“Navigating Ocean Risk:Value at risk in the global blue economy”,WWF&Metabolic,2021,https:/value-at-risk.panda.org/#recommendations.61 Sustainable Banking and Finance Network(SBFN),2024,SBFN Toolkit.Sustainable Finance Taxonomies,https:/www.sbfnetwork.org/sbfn-toolkit-sustainable-?nance-taxonomies/.62 OECD,2020,Developing Sustainable Finance De?nitions and Taxonomies,Green Finance and Investment,2020,https:/doi.org/10.1787/134a2dbe-en.within planetary boundaries.Successful implementation of sustainable blue?nance taxonomies should address regulatory integration,harmonization and improvements in data availability7.Alignment through a common set of principles,such as the Sustainable Blue Economy Finance Principles,de?nitions and sustainability objectives,would ensure ocean-related technical screening criteria and performance metrics are aligned to climate and biodiversity commitments and are interoperable across markets.They should also be reviewed regularly,to integrate the latest environmental science and technology innovation,and should be consistent with international guidance,such as the UNEP FI guidance,and corporate disclosure standards,such as the Task Force on Climate-related Financial Disclosures(TCFD)and TNFD.It is also key to have mandatory reporting requirements,as is the case for the EU and China62,where the Green Industry Guiding Catalogue is mandatory for sustainable?nancing activities.Uptake,alignment and adoption of standardized SBE frameworks,principles,guidance,tools,criteria and metrics will require regulators and the?nance sector to view ocean risks as material and to fully recognize the strong opportunities o?ered by a“sustainable”blue economy.Patrick Yeung244.2 Major types of blue fjnance instruments Financial support for the green development of the marine economy exhibits three key characteristics.First,the marine economy is an important focus for?nancial support,yet due to varying risk preferences associated with di?erent?nancial instruments,di?erent types of capital are allocated across sectors such as o?shore wind power,marine equipment manufacturing,seawater aquaculture,and marine ecological protection,with slight variations in priority areas.Second,in terms of overall scale,?nancial support still has room for expansion relative to the marine economys share of total GDP.However,this may also indicate that?nancial leverage has been e?ectively utilized.Third,based on index performance and bond yield levels,the asset quality of?nancial support for the marine economy generally aligns with the average level across all asset types.4.2.1 CreditInternationally,credit support for the marine economy has evolved into a dual-driven model of government guidance and market operations.Developed countries like Singapore,Japan and Norway use policy banks and maritime funds to provide long-term,low-interest loans,reducing?nancing risks and supporting marine economic development.Commercial banks complement these e?orts by o?ering market-based loans for sectors such as shipbuilding and?sheries,and integrating marine ecological risks into their credit approval processes,aligning with the SDGs.Multilateral?nancial institutions like the World Bank and ADB further promote the SBE by?nancing environmental targets and marine risk insurance.In China,banks have innovated credit products for the marine economy,using sea-use rights,biological assets and carbon sink rights as collateral,and expanding?nancing to cover the entire marine industry chain.Technological advancements like the Internet of Things(IoT)and blockchain are enhancing asset supervision and mitigating credit risks.The Agricultural Development Bank of China has pioneered the“marine ”credit model,focusing on green development,industrial parks,ports,and tourism,with well-de?ned repayment sources and strong growth potential.Type of pledgeContentApplication casesRight to use uninhabited islandsSupporting island development and ecological restoration by pledging the right to use islands as collateralIn 2013,China Minseng Bank Fuzhou Branch61 handled the registration of an RMB 80 million($13 million)mortgage on the right to use the uninhabited Yangyu Island and its surrounding sea area in Fujian for?shery resource restoration and tourism development,creating a precedent for these types of mortgages in the country.Pledge of marine carbon sinksConverting ecological value into?nancing capacity by pledging the expected yield rights of aquaculture carbon sinks such as algae and shell?shChina Industrial Bank Qingdao Branch62 launched the nations?rst marine carbon sink pledge loan with Jiaozhou Bay wetland carbon sinks as a pledge.Weihai Commercial Bank63,in 2022,issued an RMB 8 million($1.18 million)loan with the pledge of the expected marine carbon sink revenue rights from the enterprises seafood farming as a credit enhancement tool.IoT dynamic supervision of pledgesMonitoring marine ranch assets through IoT technology to solve the challenges of valuing and regulating live assetsIn 2022,Changdao Rural Commercial Bank64 issued a issued a RMB 5 million($739,000)working capital“Ocean Ranch IoT Loan”to a seafood production enterprise.The enterprise used the right of use to the sea area it owns as collateral to obtain the loan,and addresses the common issue of lack of asset on the shore as collateral that seafood enterprises face.Table 1:Types and cases of innovative pledges for marine economy credit4.2.2 BondsThe bond market signi?cantly promotes the sustainable development of the global marine economy,with blue bonds emerging as a new asset class.Since the Seychelles issued the?rst sovereign blue bond in 2018,the volume and scale of blue bond issuances have grown,supporting sustainable marine value chains,ecosystem management,conservation and coastal infrastructure.Green and sustainability bonds also fund marine-related projects,driving investments in blue carbon reserves,o?shore wind power and coastal zone management.The International 63“福建无人岛开发市场化破冰 个人可申请做岛主”,China News,2013,https:/ Industrial Bank,2021,https:/ 2022年度环境信息披露报告”,Weihai City Commercial Bank,2023,https:/ Government,2022,http:/ Market Association(ICMA)has developed guidelines for blue?nance to enhance transparency and investor con?dence.In China,blue bonds primarily?nance o?shore wind power and seawater desalination projects,though their issuance remains low compared to the marine economys GDP contribution.As of 2024,30 blue bonds worth 30.99 billion($4.3 bllion)have been issued,with funds mainly allocated to coastal provinces.Innovations include the diversi?cation of bond types,such as the blue asset-backed security,and projects that combine sustainable marine resource utilization with clean energy development,supporting carbon neutrality and the transition to a clean energy system.63 64 65 6625Marine industryGreen insurance productProduct detailsInsurance functionTraditional marine industry (?shery,shipping,ports,tourism,etc.)Hainan Tilapia Farming Income Insurance65The insurance liability covers income loss resulting from the death of tilapia due to natural disasters such as typhoons,heavy rains and?oods,as well as losses incurred when the market purchase price falls below the target guarantee price speci?ed in the contract.To qualify for coverage,farmers must trace the source of the seed,maintain appropriate breeding densities,ensure adequate breeding facilities,and adhere to standardized management practices.Claims will be denied if the use of illegal drugs or antibiotics exceeds regulatory limits.Loss compensation,industry sustainable transformationEcosystems servicesMexico Quintana Roo Coral Reef Insurance66The insurance covers 160 kilometers of coral reefs,with payout funds activated in the event of a storm with wind speeds surpassing speci?ed thresholds.These funds are used to?nance reef restoration e?orts conducted by pro-fessional protection teams.Risk management,loss compensation,capital?nancingMangrove CCER Project Insurance67The insurance covers the loss of State Certi?ed Emission Reduction(CCER)carbon sinkss in the Fujian Mangrove Provincial Nature Reserve.It aims to mitigate the?nancial uncertainty of CCER revenue resulting from natural disasters and accidents.Loss compensation,capital?nancingTable 2:Types and cases of innovative green insurance for marine economy4.2.3 InsuranceThe insurance industry plays a crucial role in marine risk management,loss compensation,capital?nancing,and the sustainable transformation of the sector,facilitating a shift from resource consumption to ecological value.It has developed a multi-tiered risk mechanism covering traditional industries like?shing and shipping,emerging sectors such as o?shore wind power,and marine ecosystems.Products like aquaculture income insurance and green ship insurance support the green transition of traditional industries,while full-process coverage is o?ered for emerging?elds.Initiatives like mangrove insurance in the Philippines fund conservation e?orts through premiums,reducing risk via proactive management.The industry has moved from economic payouts to ecological restoration,exempli?ed by Mexicos hurricane-triggered coral reef insurance and Belizes Marine Index Policy,which aid disaster recovery and economic resilience.In capital?nancing,the insurance sector mobilizes social capital for sustainable marine projects and uses credit enhancement tools like?shery carbon sink index insurance to support enterprise?nancing.Additionally,insurance drives innovation in green technologies,with products such as Skulds carbon emission pricing model incentivizing emission reductions and China United Property Insurance promoting eco-friendly farming through shell?sh carbon sink insurance.67 68 6967“今年翻塘了，但我还有钱过年”,The Paper,2022,https:/ “Biodiversity and Ecosystems Services Index:measuring the value of nature”,Swiss Re,2020,https:/ 中国太保首创红树林CCER项目保险保障模式”,China Paci?c Insurance Company,2024,https:/ Others1)FundsGreen funds support maritime sustainability through diverse funding sources and investment strategies.They balance environmental protection with economic development,focusing on ecosystems such as coral reefs and mangroves,and sectors such as?sheries and energy.Funding comes from government and public contributions,private capital,or a mix of both.Investment approaches vary geographically,with developed countries focusing on market-based funds and developing countries relying on international and policy funds.Finally,international funds focus more on global governance,sovereign funds on regional needs,and market-based funds on sustainable returns and innovation.2)Financial leasingThe?nancial leasing industry plays an important role in promoting technological innovation and environmental sustainability across the marine sector,particularly in the areas of marine engineering equipment,marine transport and marine?sheries.In maritime transport,green lease?nancing has enabled major projects such as the“Boqiang 3060”wind turbine installation vessel,highlighting the role of leasing in promoting sustainable maritime technologies.In marine?sheries,leasing promotes marine ranching activities,such as Suyin Financial Leasing supporting the construction of environmentally friendly multifunctional marine ranching platforms.264.3 Chinas blue fjnance taxonomy development and future applicationsIn China,domestic?nancial institutions have followed international developments,intensi?ed?nancial innovation,introduced policy guidelines and expanded blue?nance practices.However,Chinas current green?nance standards for identifying blue activities reveal several issues,including fragmented standards and regional disparities;fragmented industry coverage;lack of technical details and data support;uneven alignment with international standards;and lack of monitoring,evaluation and incentive mechanisms.China has not issued a nationwide guideline for blue?nance,relying instead on green?nance standards that inadequately de?ne sustainable marine economic activities.Regional and institutional di?erences in classi?cation standards hinder the large-scale development of blue?nance.Policies vary in their de?nitions of the“blue economy,”with emerging sectors like marine carbon sink trading and blue carbon?nance facing?nancing constraints.Some policies lack quantitative indicators and actionable guidelines,increasing the risk of“blue-washing.”While some standards reference international guidelines,most local policies focus on domestic needs and lack integration with international carbon markets,limiting cross-border cooperation.Additionally,most policies lack dynamic tracking mechanisms and regular evaluations,reducing market con?dence in the e?ectiveness of blue?nance initiatives.Over the past two years,local governments in China have carried out a number of explorations and practices of blue?nance standards.In 2024 the Yantai government and the Institute of Finance and Sustainability(IFS)jointly compiled and released a blue investment and?nancing industry support catalogue70,which for the?rst time compiled a qualitative and quantitative system for?nancial institutions to identify and invest in blue economic activities.The Yantai catalogue contains?ve main elements:1)Establishment of four objectives.The key to de?ning SBE activities is the establishment of environmental and social objectives for economic activities.Aligned with SDG14 and Chinas 14th FYP for Marine Ecological and Environmental Protection,the blue?nance standard encompasses four objectives:sustainable use and protection of marine resources,prevention and control of marine pollution,protection and restoration of biodiversity and ecosystems,and climate change mitigation and adaptation.2)Principles.The de?nition of SBE activities should follow principles that guide industry activities and indicator selection.Substantial contribution:SBE activities should signi?cantly contribute to one or more of the four environmental objectives.DNSH:These activities should not negatively impact the oceans or the sustainable use of resources.Adaptation to latest developments:Activities should be 70“蓝色金融标准和产品创新”,Institute of Finance and Sustainability,2024,https:/ updated and improved to align with the evolving ocean economy,policy environment and development priorities,ensuring compliance with national and international sustainable development standards.Inclusiveness:From a just transition and social perspective,SBE activities should support the livelihoods of local residents and e?ectively communicate with local communities.3)Blue fjnance industry classifjcation.The Yantai government and IFS screened ocean-related economic activities based on industrial classi?cation for ocean industries and their related activities.They omitted industrial activities that have signi?cant negative impacts on the marine ecosystem,such as the marine oil and gas industry,the marine mining industry,and the marine engineering and construction industry.They then de?ned SBE activities based on blue?nance standards,including the Chinese and international standards,to facilitate the identi?cation of SBE activities by?nancial institutions.This culminated in the shortlisting of 12 primary,41 secondary and 84 tertiary industries.4)Indicator system.Blue?nance,a subset of green?nance,focuses speci?cally on the sustainable development of the marine economy and ecological protection,areas not fully covered by green?nance standards.In constructing its indicator system,the Yantai government and IFS?rst de?ned 15 primary ocean industries.They then identi?ed SBE activities based on both national and international blue?nance standards.These activities address internationally signi?cant issues like near-shore pollution control,plastic pollution reduction,and plastic replacement,as well as key concerns for China,such as the development of the aquaculture industry.5)Application.Local governments and regulatory agencies can combine the development priorities of the blue industry in their regions,compile a blue?nance project database and formulate targeted support policies.Financial institutions can formulate regional blue industry investment and?nancing programs to quickly screen and?nancially support their clients SBE activities.Enterprises can formulate plans for the sustainable development of relevant marine industries and carry out environmental information disclosure.In marine?sheries,relevant certi?cation activities have been included to ensure the sustainability of?shing operations,facilities and supply chains,thereby supporting the sustainable development of aquaculture?shing enterprises.In shipbuilding and maritime transport,support has been provided for green alternative fuels for ships and the application of new energy technologies,such as lique?ed natural gas,to promote the green manufacturing of ships and their supporting equipment.In port construction,e?orts have been made to promote the development of zero-carbon and near-zero-carbon ports,facilitate zero-carbon energy supply,optimize the energy consumption structure,and reduce the carbon footprint of the logistics chain.Additionally,local blue?nance standards have been developed by the governments of Weihai and Xiamen.China is currently promoting the development of a national blue?nance standard,with IFS involved in the process.274.4 Challenges and policy gapsFinancing sustainable ocean initiatives presents several challenges,including high upfront costs,uncertain returns,lack of precedent deals,poor data and a high-risk governance environment.Market dynamics,such as?uctuating commodity prices,further a?ect the viability of ocean-based industries(OECD,2016)71.Additionally,insu?cient technical capabilities and data,misalignment between costs and bene?ts,lack of uni?ed standards and lagging policies hinder?nancial support for the marine economy,complicating risk identi?cation,capital allocation and product in
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Building Economic Resilience to the Health Impacts of Climate ChangeI N S I G H T R E P O R TS E P T E M B E R 2 0 2 5In collaboration with Boston Consulting GroupImages:Getty Images,Midjourney,Lummi.aiDisclaimer This document is published by the World Economic Forum as a contribution to a project,insight area orinteraction.The findings,interpretations and conclusions expressed herein are a result of a collaborative process facilitated and endorsed by the World Economic Forum but whose results do not necessarily represent the views of the World Economic Forum,nor the entirety of its Members,Partners or other stakeholders.2025 World Economic Forum.All rights reserved.No part of this publication may be reproduced or transmitted in any form or by any means,including photocopying and recording,or by any information storage and retrieval system.ContentsForeword 3Executive summary 41 The economic impact of climate-driven health conditions:aframeworkfor action 51.1 The impact of climate change on health 61.2 The economic consequences of the health impacts of climate change 81.3 Enabling environment 91.4 Economic sectors of focus for this report 102 All-sector recommendations 123 Food and agriculture 153.1 The food and agriculture sector 163.2 Health impacts 163.3 Economic impact 173.4 Interventions 184 The built environment 214.1 The built environment sector 224.2 Health impacts 234.3 Economic impact 244.4 Interventions 255 Health and healthcare 285.1 The health and healthcare sector 295.2 Health impacts 295.3 Economic impact 305.4 Interventions 316 Insurance 346.1 The insurance sector 356.2 Health impacts 366.3 Economic impact 376.4 Interventions 38Next steps:acallto action 40Annex 41Contributors 43Endnotes 45Building Economic Resilience to the Health Impacts of Climate Change2ForewordThe impact of climate change on global health presents an urgent and complex challenge.Rising temperatures,extreme weather events and environmental degradation are not just environmental issues they directly threaten human health,business operations and global economic stability.The heaviest burdens will fall on communities with limited infrastructure,healthcare access and emergency preparedness particularly in developing countries,which currently account for 90%of deaths from weather-,climate-and water-related hazards.1 From the increasing prevalence of heat-related illnesses,the spread of mosquito-borne disease and the rise of food insecurity linked to crop failure,climate-induced health risks,hereinafter referred to as climate-health risks,are accelerating,and will have profound implications for supply chains,workforce productivity and financial markets if significant action isnt taken.This report provides a detailed analysis of the risks and opportunities facing four critical economic sectors:food and agriculture,the built environment,health and healthcare,and insurance.These industries sit at the core of the nexus of climate change and public health.Strengthening food systems,rethinking urban infrastructure,improving healthcare responses and reshaping insurance models are essential steps towards mitigating risks and building resilience.Companies that fail to adapt will face increasing operational disruption,workforce vulnerabilities and financial liabilities,while those that build resilience will unlock opportunities for innovation,competitive advantage and long-termgrowth.The private sector plays a pivotal role.As the largest employer and controller of capital and supply chains,it is uniquely positioned to set new industry standards and ensure workforce health amid increasing climate change.The cost of inaction is rising.Bold,systemic action,however,can protect communities and future proof operations.The World Economic Forum,in collaboration with Boston Consulting Group(BCG),recognizes that addressing these challenges requires cross-sector collaboration,forward-thinking leadership and decisive action.This report serves as an initial view of how businesses can accelerate solutions that create a healthier,more resilient and more prosperous global economy.Now is the time to lead through concrete investments and scalable solutions that protect people,businesses and the planet.Elia TziambazisManaging Director and Partner,Boston ConsultingGroupEric WhiteHead,Climate Adaptation,World Economic ForumBuilding Economic Resilience to the Health Impacts of Climate ChangeSeptember 20253Building Economic Resilience to the Health Impacts of Climate ChangeExecutive summaryEstimates suggest that,if left unaddressed,climate change could result in 14.5million excess deaths by 2050,2 concentrated in the most disadvantagedregions and populations globally.Inthese regions,deaths from extreme weather events have been 15times higher over thepastdecade.3Climate-health impacts also threaten business resilience.Today,less than 5%of global adaptation funding targets health protection4 adangerous gap that also presents an opportunity for private-sector action.This report defines a Climate and Health Business Framework and applies it to four highly exposed sectors to identify specific climate-health risks and opportunities for each.Food and agriculture:By 2050,an estimated 24 million additional people will face hunger.5 Agricultural workers are expected to face growing climate-health risks.This report estimates a likely,mid-range scenario of$740 billion in worker availability losses between 2025 and 2050.Businesses that invest in resilient and precision agriculture practices and modified working practices will be best positioned to meet growing global needs for consistently available,healthy foods.Built environment:Over half the worlds population live in urban areas,6 and most buildings and infrastructure are poorly adapted for climate extremes such as heat or air pollution.Construction workers are particularly vulnerable;this report projects a likely,mid-range scenario that the industry will lose at least$570 billion due to worker availability losses between 2025 and 2050.Climate-resilient design and retrofits have the potential to safeguard communities and yield economicbenefits.Health and healthcare:The health and healthcare sector is expected to face at least$200 billion in worker availability losses in a likely,mid-range scenario from 2025 to 2050.It will also bear an additional$1.1 trillion treatment burden due to climate change by 2050,7 necessitating a shift towards preventative care.There is tremendous opportunity for companies to lead this transformation and build resilience by creating new climate-resilient medicines and robust care pathways,and improving public healthengagement.Insurance:Climate change is driving up claims in health,life and casualty coverage,with Swiss Re forecasting 0.75%excess mortality annually by 2050.8 Meanwhile,only approximately 8%of people in low-income communities are covered by health insurance.9 Insurers can support and accelerate resilience by offering innovative products,improving forecasting capabilities and incentivizing risk reduction.Taken together,worker availability losses across food and agriculture,built environment,and health and healthcare are projected to exceed$1.5 trillion between 2025 and 2050(see Annex for methodology),underscoring the magnitude of the climate-health challenge.While institutions in each sector can act,no sector can tackle the climate-health challenge alone.Success depends on enabling coordinated action through supportive policies,interoperable climate-health data systems and innovative financing to mobilize capital.These foundations can help ensure long-term,scalable resilience.The cost of inaction on climate-health risks is enormous,yet there are opportunities for businesses to adapt,build resilience and create economic and social value,differentiation and sustainable growth.This report calls on business leaders to act now to safeguard their operations and secure a healthier future for all.The impact of climate change on health is already significant,and will only grow in magnitude.Building Economic Resilience to the Health Impacts of Climate Change4The economic impact of climate-driven health conditions:aframeworkfor action 1Climate-health impacts are a profound humanitarian issue that also carry significanteconomic implications forbusinesses worldwide.Building Economic Resilience to the Health Impacts of Climate Change51.1 The impact of climate change on healthClimate change is already impacting populationhealth.Climate change is not just an environmental concern it is also a health issue.Chronic climate stressors undermine the foundations of good health(e.g.clean air,safe water,stable temperatures,sufficient food,secure shelter),while extreme weather events directly threaten health.Without adaptation,these stressors could result in 14.5 million excess deaths and$12.5 trillion in economic losses by 2050.10Figure 1 lists 10 critical population health outcomes identified by the World Health Organization(WHO)that are expected to worsen with climate change.How climate affects population health outcomesFIGURE 1Vulnerability and social risk factorsSocial determinants of healthPregnancy and parentingAge,gender and biological factorsSystems resilienceAir pollutionWater scarcityCommunity inclusion and practicesEcosystem declineMigration and displacementClimate risk factorsPopulation health outcomesExtreme weather eventsInjury and mortality Heat-related illnessVector-borne diseasesFood-borne illnessRespiratory illnessMental health disorders Zoonotic diseasesWater-related illnessMalnutrition Non-communicable diseasesExtreme heatSea level riseSource:World Health Organization(WHO).(2021).Climate change and health:vulnerability and adaptation assessment.6Building Economic Resilience to the Health Impacts of Climate ChangeThe health impacts of climate change are compounded by existing health vulnerabilityfactors.Climate-driven health risks are disproportionately felt by the most vulnerable and disadvantaged,including women,children,the elderly,poor communities,migrants or displaced persons,and those with underlying health conditions.11 For example,between 30 May and 4 September 2022,Europe saw 56%more heat-related deaths among women than men.12 Human vulnerability is also either exacerbated or mitigated by governments,communities and the private sectors ability to provide infrastructure and services to support health.Climate-driven health risks and vulnerability factors are interconnected and often compounding,as a lack of resources makes it harder for affected groups to adapt,creating a vicious cycle in which climate shocks deepen existing health andeconomic inequalities.Together,chronic and acute climate risk factors and existing health vulnerabilities will lead to worse population health outcomes(see Figure 1).Injury and mortality:Weather events(e.g.hurricanes,floods,wildfires)cause direct injuries and fatalities.Developing countries are disproportionately affected,accounting for over 90%of deaths due to weather,climate and waterhazards.13Heat-related illness:Heatwaves lead to heatstroke and secondary effects like cardiovascular stress in vulnerable populations such as outdoor workers,women,the elderly,urban residents and those with underlying health conditions(including pregnancy).Although global warming may lower cold-related mortality,it is widely accepted that this impact will not compensate for the rise in heat-related deaths.14Zoonotic diseases:Ecosystem degradation(e.g.deforestation,habitat loss)brings humans,livestock and wildlife into closer contact,increasing the likelihood of animal-to-human disease transmission and outbreaks of zoonoses such as Ebola and COVID-19.15Vector-borne diseases:Warmer climates and shifting rainfall patterns expand and shift the range and seasonality of disease-carrying mosquitoes,ticks and other vectors,boosting the spread of malaria,dengue,Zika,Lyme disease and other illnesses while disrupting protection and control.Water-related illness:Changes in temperature and precipitation create favourable conditions for the spread of waterborne pathogens like cholera,typhoid and dysentery,asflooding contaminates water supplies while droughts concentrate pollutants.Food-borne illness:Higher temperatures and humidity accelerate the growth of pathogens(for example,salmonella,E.coli and norovirus)and,combined with supply chain disruptions and flooding,increase the risk of foodcontamination.Malnutrition:Droughts,flooding,heat stress and other climate impacts reduce agricultural yields and quality,disrupting food supply chains,ultimately leading to higher rates of food insecurity and malnutrition(including undernutrition andobesity).Respiratory illness:Rising temperatures,wildfires and the burning of fossil fuels contribute to particulate pollution and ground-level ozone(smog)formation,which can cause respiratory tract infections and other non-communicable diseases such as pneumonia,asthma,chronic obstructive pulmonary disorder and lung cancer.Non-communicable diseases:Climate-induced factors such as extreme heat,air pollution and poor diets linked to food insecurity increase the rates of pregnancy complications,adverse birth outcomes and chronic illnesses like cardiovascular disease,diabetes,kidney disease and even some cancers.Mental health disorders:The trauma and stress of climate-related disasters,displacement and livelihood instability are leading to increases in mental health issues,including anxiety,depression and post-traumatic stress disorder(PTSD).Beyond disasters,rising temperatures arelinked to increased stress,aggression and physical harm.more heat-related deaths occurred among women than men in Europe between 30 May and 4September 2022.56%Building Economic Resilience to the Health Impacts of Climate Change71.2 The economic consequences of the health impacts of climate change This report focuses on the economic consequences of climate-health risks.Good health is fundamental to economic productivity,while poor health slows economic growth and can entrench poverty andinequality.The Climate and Health Business Framework(Figure 2)provides a structure for assessing the interconnections between climate hazards,health risks,their economic impacts on business,and interventions to build resilience.The Climate and Health Business Framework FIGURE 2Interventions for adaptation and resilienceEconomic impactsOpportunities Changing demand and consumer needsRisks Workforce availability and productivity loss Supply chain disruptions Strain on physical and financial capital Employee protection initiatives Improving climate resilience of systems Products,services and community engagementEnabling environment(e.g.data and research,policy and regulation,financing mechanisms)Vulnerability and social risk factorsSocial determinants of healthPregnancy and parentingAge,gender and biological factorsSystems resilienceAir pollutionWater scarcityCommunity inclusion and practicesEcosystem declineMigration and displacementClimate risk factorsPopulation health outcomesExtreme weather eventsInjury and mortality Heat-related illnessVector-borne diseasesFood-borne illnessRespiratory illnessMental health disorders Zoonotic diseasesWater-related illnessMalnutrition Non-communicable diseasesExtreme heatSea level riseBuilding Economic Resilience to the Health Impacts of Climate Change8Economic impacts:climate-health risks present both opportunities and risks for businessEconomic opportunities Changing demand and consumer needs:Businesses that innovate rapidly to meet increased demand for health-protective goods and services for example,climate resilient buildings,artificial intelligence(AI)-powered climate monitoring systems or healthier foods can gain a competitive advantage,creating value while improving health outcomes for customers and communities.Economic risks Workforce availability and productivity loss:More frequent extreme heat or disease outbreaks can have significant productivity impacts due to increased staff absences and presenteeism.Across economies,talent pools may shrink as those with chronic conditions exit the labour force.Supply chain disruption:Businesses reliant on complex global supply chains are more exposed to risks from ill health.An epidemic affecting the productivity of upstream suppliers can delay shipments or cause shortages of raw materials or components.Such disruptions increase costs,reduce efficiency and lessen capacity to meet customer demand.Strain on physical and financial capital:Increased health risks translate into higher costs of doing business and place more demand on corporate assets for example,through rising insurance premiums,greater medical liabilities and escalating pressure on physical facilities thatsupport healthcare.Interventions:to capture opportunities and mitigate risks,businesses can take steps to adapt and build resilienceClimate-health risks will impact all economic sectors.Adaptation and resilience strategies can protect the health of a businesss workforce and consumers,supporting both operational continuity and future growth.These efforts should complement,but not replace,ongoing decarbonization and climate mitigation initiatives,which are beyond the scope of this report.There arethree distinct types of intervention:Employee protection initiatives:Investing in worker protection mitigates the risk of worker illness and lowers the direct cost of lostworkerproductivity.Improving climate resilience of systems:Improving operational processes and efficiency helps businesses prevent and respond to climate-driven health disruptions,supporting business continuity.Products,services and community engagement:These provide health-protective products and services that meet communities changing needs while enabling businesses tocaptureeconomic opportunities.1.3 Enabling environment While private-sector leadership is essential,the most successful climate-health strategies require complementary action across business,government and civil society.Specifically,three systemic enablers can help unlock and scale the multisector strategies outlined above:1 A strong policy and regulatory framework for climate-health actionGovernments can play a pivotal role in cultivating climate-health resilience.Clear policy signals and responsive occupational safety standards,such as labour protections for extreme heat,can guide private-sector investment.Consistent enforcement,coupled with incentives for compliance,can embed adaptation to climate-health risks as a standard business practice.2 A deeper,more interoperable climate-health data landscapeRobust,shared data systems are critical to understanding and managing climate-health risks.Public and private actors can co-invest in research and data-sharing infrastructure from disease early-warning networks to real-time heat monitoring.Advances in AI can enhance these systems by facilitating faster detection of emerging threats at lower costs.3 Innovative financing mechanisms to fund climate-health resilienceCollaborative financing models can spread the economic risks of adaptation and accelerate investment.Public-private partnerships,bringing together insurers,banks,governments,philanthropic institutions and businesses,can harness tools like co-funding,tax incentives,grants and resilience bonds to drive investment.Climate-health risks will impact all economic sectors.Adaptation and resilience strategies can protect the health of a businesss workforce and consumers.Building Economic Resilience to the Health Impacts of Climate Change91.4 Economic sectors of focus for this report This report applies the Climate and Health Business framework to four heavily affected economic sectors.Figure 3 depicts the initial analysis determining the extent to which individual sectors are affected by climate-health risks and opportunities for building resilience.Food and agriculture,the built environment,health and healthcare,and insurance stand out as having especially high risks and opportunities,presenting astrong business case for adaptation and resilience strategies(Figure 4).For each of these four sectors,this report identifies specific health impacts,economic impacts and priority interventions toguide action.Climate-health impacts on economic sectorsFIGURE 3SectorRisk to sectorOpportunity for sector1Food and agricultureBuilt environmentInsuranceHealth and healthcareSupply chain and transportRetail and consumer goods(excluding grocery)Banking and capital marketsEnergyManufacturingMining and metalsTravel and tourismMedia,communications and technologyAutomotive,aviation and aerospaceChemical and advanced materialsLowHighNote:1.Opportunity for a sector refers to its potential to generate economic value while contributing to meeting a social need.Building Economic Resilience to the Health Impacts of Climate Change10Unique role of the focus sectorsFIGURE 4Climate impact on:Worker health Consumer health Economic risk Economic opportunity1Sectors role in solution Economic sectorsFood and agriculture Built environment Health and healthcareInsuranceImpactLowHighDeliver nutrition to global populations and improve workforce health.Create health-protective environments and improve workforce health.Provide preventative and reactive healthcare to directly improve population health.Enable access to healthcare to indirectly improve population health.Note:1.Opportunity for a sector refers to its potential to generate economic value while contributing to meeting a social need.Potential changes in worker availability have been projected from 2025 to 2050 across the food and agriculture,built environment,and health and healthcare sectors,focusing on seven climate-related health conditions(heat-related disease and mortality,dengue,malaria,diarrheal diseases,nutritional deficiencies/malnutrition,ozone-related illness and death,and air pollution from ozone and particulate matter).The insurance sector was excluded from this specific analysis because its workforce has minimal direct exposure to climate-health risks.Health and economic impacts at the sector level are calculated using each sectors share of employment,which likely understates the true burden of climate-health impacts for these focus sectors,in which workers face disproportionate exposure to climate-health risks.The full methodology is included in the Annex.11Building Economic Resilience to the Health Impacts of Climate Change2Despite differences in climate-health risk exposure,protective actions are both relevant and applicable to all industries.All-sector recommendationsBuilding Economic Resilience to the Health Impacts of Climate Change12The health impacts of climate change cut across all sectors no industry is immune.The eight interventions outlined in this section are applicable to most sectors in the broader economy.In many cases,businesses will be able to go further,prioritizing actions that address their specificcontexts.All-sector interventionsFIGURE 5Employee protection initiativesImplement occupational health safeguards for workers in high-risk zones,e.g.personal protective equipment.Provide climate-responsive employee health coverage options,e.g.health plans for heat risk.1Improving climate resilience of systemsImplement risk monitoring and early warning systems following a comprehensive climate-health risk assessment.Invest in climate-health research to create data sources to identify the root causes of climate-related illnesses.Protect critical systems,including both built and ecological infrastructure,to reduce vulnerability.Products,services and community engagement Establish preparedness and response plans for climate-related health emergencies.Educate workers and communities on climate-related health hazards and proactive strategies to mitigate risks.Scale health-protective products and services that reduce long-term health burdens across the value chain.23456781 Implement occupational health safeguardsin high-risk zonesIn regions vulnerable to climate impacts,implementing proactive safeguards can significantly reduce illness and mortality.This could include providing workers with medical care,implementing cooling solutions and modifying work practices.These interventions reduce medical care costs andprotect workers,minimizing productivity losses.2 Provide climate-responsive employee health coverage Expanding employee health benefits to cover relevant climate-driven conditions strengthens resilience by ensuring a healthier and more productive workforce.3 Implement risk monitoring and early-warning systemsContinuous tracking of indicators including meteorological data,disease outbreak data and workforce health metrics,identified through a prior risk assessment can enable businesses to anticipate and reduce health and operational risk before crises escalate.4 Invest in climate-health researchAdvancing science and developing solutions for challenges linked to climate-health is a multisector imperative.By investing in research,businesses can help identify the root causes of climate-health risks and develop new treatments,technologies and preventative strategies.Building Economic Resilience to the Health Impacts of Climate Change135 Protect critical systemsClimate change is eroding the systems people depend on for food,shelter and health,for example through degraded farmlands and vulnerable infrastructure.Businesses can invest in strengthening both built and ecological infrastructure to reduce vulnerability and support the resilience ofthe broader sector and its supply chains.6 Establish preparedness and response plansBusinesses should prepare for climate-related health emergencies and the changing profile of climate risk,e.g.by training workers and spreading awareness of specific climate-health protocols.7 Educate workers and communitiesBusinesses can play a role in building climate-health literacy across their workforce and communities.Through training,workshops and clear guidance,companies can empower people to take informed action on their own health.Healthier communities experience fewer workplace illnesses as well as a more stable labour force and customer base,making education a key strategic investment toenhance systemwide resilience.8 Scale health-protective care products andservicesAs climate-health risks intensify,businesses will need to create and scale products that both prevent ill health and enable faster,more equitable access to care.These could be achieved through innovations that address the root causes of climate-exacerbated disease,as well as new tools to diagnose and treat emerging conditions.The following sections dive deeper into the unique health and economic challenges faced by the focus sectors.Once businesses have applied the climate-health framework to identify their biggest risks and opportunities,the next step is to develop specific interventions to protect health,build resilience and,in many cases,create value.Businesses can play a role in building climate-health literacy across their workforce and communities.14Building Economic Resilience to the Health Impacts of Climate Change3Climate change threatens health by disrupting global food systems,risking crop loss and harming workforce health.Food and agricultureBuilding Economic Resilience to the Health Impacts of Climate Change15Food and agriculture key takeawaysBOX 13.1 The food and agriculture sector3.2 Health impactsThe food and agriculture sector plays a fundamental role in sustaining human life,healthand well-being.The sector comprises a wide range of interconnected activities,grouped into four segments:agricultural technology,agriculture,livestock production,food processing,and distribution and retail.Agricultural workers make up roughly 30%of the entire global labour force20 and are present in all regions.The sector faces significant challenges,including declining crop nutrient density and the increasing cost of agricultural inputs.Without sufficient action,climate change will increase risks to crop yields,labour conditions and input availability.Strengthening resilience in food systems is vital for global health.Climate change threatens global food production,putting 24 million additional people at risk of hunger by 2050 under Shared Socioeconomic Pathway 2(SSP2).21Top climate-driven health risks for food and agriculture consumersTABLE 1Malnutrition High temperatures and extreme weather destabilize crop yields,increasing the prevalence ofmalnutrition,thereby exacerbating the severityofotherdiseases.Food-borne illnessHigher temperatures increase pathogen growth rates,and extreme weather events raise therisk of food contamination.Mental health Food disruptions and rising food prices lead to anxiety and other mental health issues,especially inlow-income populations.The food and agriculture sector provides nutrition for all and employs nearly a billion people globally(roughly 30%of the total labourforce).16 The sector is at the front line of climate-health risks.By 2050,climate change could cause up to a 35cline in production across staple and non-staple crops,17 a 20%rise in malnutrition rates18 and increases in food-borne illnesses and mental ill-health.Demand could increase by 50%over the sameperiod,however.19 Agricultural workers face significant climate-health risks,including extreme heat,vector-borne disease,zoonoses and respiratory disease.This report estimates that the global agriculture workforce will face at least 130 million disability adjusted life years(DALYs),resulting in at least$740 billion in lost output from select climate-health illnesses,from 2025 to 2050.Businesses have the opportunity to protect health by meeting demand for nutrient-dense food products and climate-resilient cultivation.Strengthening resilience in food systems and protecting workers are vital actions forglobalhealth.Agricultural and food-processing workers are often engaged in labour-intensive outdoor work with low pay or security,and are therefore particularly vulnerable.Modelling shows that,globally,the agricultural workforce is projected to incur at least600,000 deaths and 130 million DALYs from2025 to 2050 due to select climate-healthrisks.Building Economic Resilience to the Health Impacts of Climate Change16Top climate-driven health risks for food and agriculture workersTABLE 2Vector-borne diseasesAgricultural field workers are at an increased risk of vector-borne disease,as post-drought irrigation or excess rainfall creates stagnant water pools,increasing the risk of mosquito-borne diseases.ZoonosesFarmers are at a greater risk of contracting zoonoses due to close contact with wild and farmed animals and their waste.Food processors are also at greater risk due to exposure toanimalproducts.MalnutritionSubsistence farmers are at greater risk of malnutrition as they are more dependent on their own(orhighly localized)crop yields,which are increasingly volatile dueto climate change.Heat-related illness Both outdoor field workers and indoor food-processing workers are at risk from extremeheat,given the lack of adequate cooling or ventilation.The agricultural sectoris expected to account for 60%ofglobal working hours lost to heat stress in2030.22Respiratory illnessFarmers and transporters are more likely to suffer from respiratory illnesses due to exposure to pesticides and particulates,including dust from dry soils and mould spores.These illnesses are exacerbated byextreme weather events that contribute to worsening air pollution.These challenges are magnified for smallholder farmers,who manage 84%of the worlds farms23 and represent 500 million households globally.24Typically operating without adequate labour protections,health systems,technical training or modern equipment,subsistence and smallholder farmers face heightened risks from extreme heat,vector-borne diseases and declining crop yields.They are susceptible to a vicious cycle:poor healthlowers productivity,leading to food insecurity and income loss,which in turn worsenshealth outcomes.Breaking this cycle requires targeted investment in health infrastructure and education to build a resilient farming system.Proactive companies have a clear opportunity to gain a competitive advantage by developing products and services that align with shifting customer needs.Processors that can maintain consistent,high-volume production will be able to command premium prices,secure favourable contracts and build stronger relationships with buyers seeking supply reliability.Nutrient-dense crops can attract a larger share of the global market.Meanwhile,reducing food waste(currently about 25%of produce25)can increase availability while boosting revenue and reducingemissions.This analysis(based on seven key climate-related health conditions)shows that lost worker availability in the food and agriculture sector caused by select climate change-driven health risks is expected to amount to at least$740 billion from 2025 to 2050(see Annex for methodology).Rising worker illness rates reduce worker productivity.Labour shortages in agriculture are particularly costly,as tasks like harvesting are time-sensitive.During the peak season in Nigeria,for example,malaria-infected farmers harvest only roughly 40%of their crops,compared to nearly 100%for healthy farmers.26Worsening worker health and disease outbreaks disrupt supply chains by reducing labour availability and restricting transport and trade.Downstream industries like processing and retail are especially vulnerable to supply shocks as they rely on just-in-time inventory systems,face perishable product losses and experience higher consumer demand volatility.3.3 Economic impact Lost worker availability in the food and agriculture sector caused by climate change-driven health risks is expected to amount to at least$740 billion from 2025 to 2050.Building Economic Resilience to the Health Impacts of Climate Change173.4 InterventionsBusinesses can protect the health of their employees(and their bottom line)against climate change by mitigating worker risks and pursuing emerging opportunities for growth.Food and agriculture interventionsTABLE 3Health risks also place additional strain on capital.Upstream,declining productivity caused by illness or heat can reduce attention on land,livestock and equipment maintenance,resulting in short-term losses(for example,more pests and disease)and long-term asset degradation,lowering value.Downstream actors face volatile input costs and may need to hold larger inventories or seek insurance to manage supply shocks.For example,during the COVID-19 pandemic,Campbells Soup stockpiled 50%more key ingredients than usual to build a 90-day buffer.27Food and agriculture value chainAgritechAgriculture and livestock production Food processingDistribution andretailInterventions forconsumers1 Develop climate-resilient and nutrient-dense crops.3 Replace non-native crops and livestock with native crops found in local diets and livestock better suited to the regional climate.5 Optimize processing and storage of food to minimize food waste,incidence of food-borne disease and malnutrition.2 Scale alternative calorie production methods,e.g.lab-grown proteins,insects.4 Manage farm waste and run-off to improve soil quality and prevent cross-contamination.6 Develop and produce nutrient-dense food to improve nutrition.7 Encourage behavioural change through pricing and marketing to improve consumption habits.Interventions for theworkforce8 Apply agroecology methods to improve soil health,boost nutrition and lower air pollution from soil erosion.9 Improve irrigation and drainage systems to control mosquitoes and reduce vector-borne disease.10 Apply precision agriculture techniques to reduce farmers exposure to chemicals and lower input costs.11 Modify working practices to reduce heat stress,avoiding peak heat hours outdoors and using cooling solutions indoors.12 Change livestock handling and farming practices to improve animal health and reduce human exposure tozoonoses.Building Economic Resilience to the Health Impacts of Climate Change181 Develop climate-resilient and nutrient-dense cropsAdvances in technology such as breeding,hybridization and genome editing have enabled the development of crops and livestock that withstand climate stressors such as heat,droughtand flooding,boosting yields.Syngenta,for example,invests$1.4 billion annually in research and development(R&D),with drought tolerance representing a key focus.28 Syngentas Agrisure Artesian corn hybrids deliver yield gains of 12%under severe and extreme drought.29New techniques for agricultural resilience and food securityBOX 2Agrobiomics is developing products to boost agricultural yields in land affected by salinity,drought or heat stress using biological solutions.Their bio-stimulant solution induces resilience in crops against drought and salinity stress,resulting in an average 35%increase in yield for rice under saline stress and 10%increase for soybeans under moderate drought when applied as seed coating.While climate change is accelerating the loss of arable lands globally,this solution can help ensure food security and nutrition while alsocontributing to soil regeneration.2 Scale alternative calorie productionmethodsAs climate change strains traditional agriculture,alternative food production methods become more competitive.Vertical farming,insect protein and lab-grown meats offer climate-resilient solutions that use less land and water in controlled environments.In the UK,for example,vertical farming of strawberries yields five times more fruit per square metre than traditional forms of farming,uses 50%less water and cuts carbon emissions by 90%perkilogram.303 Replace non-native crops and livestock Shifting to native crops better suited to forecasted weather patterns can improve nutrition and climate resilience.Many of these crops are drought-resistant and require fewer inputs because they are naturally adapted to local soil and climate conditions.Farmers in Kenya transitioning from conventional to indigenous vegetables experienced a net gain of$4,000 per acre an increase of 335%.31 Using better-adapted livestock breeds and species can also be more climate-resilient.These“heritage varieties”are also often more nutrient-dense,helping combat malnutrition while contributing to amore sustainable and resilient food system.4 Manage farm waste and runoffImproperly managed agricultural waste and runoff can degrade soil,pollute waterways and spread disease.Implementing buffer zones and practices such as composting can help protect public health and ecosystems.Converting waste into biogas is a high-impact solution.Rather than sending manure to landfills,farmers can use anaerobic digesters to generate renewable energy and reduce emissions,creating additional revenue as well as health and carbon mitigation co-benefits.Smithfield Foods and Dominion Energy,for example,are investing$500 million to scale biogas systems on US hog farms.The initiative simplifies manure management,provides farmers with new income and is expected to cut emissions by 2.5 million tons annually.325 Optimize food processing and storageAdvances in food processing and storage including improved cold-chain logistics,solar-powered refrigeration and smart sensors can enhance food safety,reduce waste and boost access to fresh,uncontaminated food.Nigerias ColdHubs start-up installs solar-powered walk-in cold rooms in markets and farms,extending the shelf life of fruits and vegetables from 2 days to 21 days and cutting post-harvest losses by 80%.336 Develop and produce nutrient-dense foodsTo combat malnutrition,food processors can enhance the nutrient density of foods by using more nutrient-dense inputs or fortifying products.As an example,Nigerian food companies and farmers have embraced vitamin A-enriched cassava(a biofortified staple),with more than one million farming households growing the biofortified cassava five years after it was introduced.Biofortified cassava is highly profitable,with farmers who are growing or using the enriched product seeing profits of 79-190%.347 Encourage consumer behaviour changeDriving all consumers to make healthier food choices(e.g.by promoting more seasonal,climate-resilient and locally sourced food)should be a priority for the sector.This enhances nutrition security for the consumer and creates resilience against wider supply shocks for food businesses.Farmers in Kenya transitioning from conventional to indigenous vegetables experienced a net gain of$4,000 per acre an increase of 335%.Building Economic Resilience to the Health Impacts of Climate Change19Shifting consumer behaviour towards healthier,more sustainable dietsBOX 3According to the United Arab Emirates National Nutrition Strategy,over 80%of adults do not consume the recommended five servings of fruit and vegetables a day.35 As such,Majid Al Futtaims grocery retail business,Carrefour,launched the Choose Better initiative to promote healthier and more sustainable diets through labelling,education and incentives.The Choose Better programme aims to address the nutritional gap by offering affordable,clearly labelled healthy options.The initiative focuses on three key pillars:“better for you”,“better for the planet”and“better for communities”,encouraging informed purchases that benefit individuals,the environment and local economies.Majid Al Futtaim was the first retailer in the region to introduce environmental ratings and display embodied carbon footprint,driving a business uplift of up to 8%.8 Apply regenerative landscape methods forhealthAgroecology,land restoration and conservation practices like cover cropping,reduced tillage and rotational grazing restore soil structure and biodiversity,helping to preserve moisture and reduce wind erosion and dust pollution that harm respiratory health.Healthier soils also improve plant health,supporting nutrition.Beyond health,agroecology also offers economic and environmental benefits;scaling agroecology to 40%of global cropland could cut 600 million tons of emissions.36Boston Consulting Group(BCG)analysis projects that the shift to regenerative landscape methods will yield a 15-25%return over 10 years,though profits are likely to fall 30-60%over a 3-5 year transition period,before rebounding with 70-120%higher returns post-transition.37 9 Improve irrigation and drainage systemsIrrigation and drainage management can significantly reduce vector-borne disease risks for outdoor workers by removing stagnant water that enables mosquito breeding.These measures offer a short time to value,quickly lowering disease risk and boosting worker productivity.A project in Sri Lanka that cleared canals and improved water flow led to near elimination of malaria in a local village during a 1990s outbreak.The efforts reduced incidence of the disease from 46%to justnine cases between January 2001 and November 2002 following intervention.Suchengineering must be paired withcontinuousvector control andmonitoring tolock in the benefits.10 Apply precision agriculture techniques forhealthDigital and precision agriculture technologies improve yields while reducing chemical use,lowering worker exposure to pesticides and fertilizers,and cutting costs.Instead of treatingentire fields,farmers can target specificareas,limiting respiratory risks and environmental impact.The most advanced solutions include weeding robots and AI-driven crop protection systems,which use cameras to spot weeds,pests or disease,reducing chemical inputs by up to 70%.39 More affordable solutions for smallholders include advisory SMS(short message service)that can guide planting timing or notify farmers of pest threats,delivering a return on investment(ROI)ofupto 10:1.40 These interventions can increase yields within a single harvest cycle,in addition to benefitting the climate,biodiversity and community health.11 Modify working practices for heat Adapting working practices in agriculture and processing to limit heat exposure and improve worker protection is essential.Despite cultural and structural barriers(for example,low technical education and capacity for transformation),many solutions are low-cost and quick to implement,such as shifting working hours to cooler periods,improving ventilation and cooling in indoor spaces,and providing personal cooling and hydration tools.For example,a vineyard in Florence reduced productivity losses by 30%by starting shifts two hours earlier(6am-3pm instead of 8am-5pm),demonstrating the value of simple,scalable and low-cost solutions.4112 Change livestock handling and farmingpracticesImproving livestock handling reduces zoonotic disease risk and protects production.Livestock farmers face high exposure and should be a priority for low-cost measures like personal protective equipment(PPE),disinfection and vaccination that can drastically reduce infection risk.For example,consistent glove use,masks and handwashing can reduce the annualized risk of cryptosporidiosis infection from roughly 30%to 1%for dairy farmers.42 Enhancing animal health through husbandry approaches,reduced overcrowding,regular vet care,and monitoring and early disease detection can significantly decrease the spread of disease.Finally,preventing farmland expansion into forests is crucial to minimize human/livestock/wildlifeinteraction.BCG analysis projects that the shift to regenerative landscape methods will yield a 15-25%return over 10 years.Building Economic Resilience to the Health Impacts of Climate Change20The built environment4Strengthening the resilience of the built environment can protect human health andwell-being.Building Economic Resilience to the Health Impacts of Climate Change21 The built environment sector faces rising health risks due to climate change.These risks are exacerbated by urban heat islands(UHIs),infrastructure thats not tailored to current or projected climate conditions,and poor ventilation,affecting both urban populations and workers.The construction industry,employing approximately 8%of the global workforce,43 is particularly vulnerable.The health consequences of heat and extreme weather are leading to productivity losses,delivery delays and property devaluation.This report estimates that construction workers will face at least 30 million DALYs,resulting in at least$570 billion in lost output from select climate-health illnesses between 2025 and 2050.Much of the worlds existing infrastructure(including buildings)was not originally designed for todays climate extremes.This increases the risk of injury and mortality,threatening community safety.At the same time,climate-resilient building and urban design present significant opportunities for the sector.Resilient buildings can command higher rents,reduce insurance costs and attract premium tenants.Demand is growing for adaptation measures like green infrastructure and advanced retrofits,which can boost durability,cut operating costs and offer a competitive edge.As climate risks intensify,innovators in this space will be well-positioned to lead.Built environment key takeaways BOX 44.1 The built environment sectorToday,over half of the worlds population 4.2 billion people44 live in urban areas.The built environment shapes the spaces where people live and work,playing a critical role indetermining health outcomes.The sector spans urban planning,architecture,construction,operations and maintenance.Construction alone employs about 8%of the global workforce,45 building homes,commercial spaces and critical infrastructure.This is a global industry,with growth increasingly centred in developing regions.The sector faces significant challenges,with climate change adding additional pressures.Persistent labour shortages,particularly in the developing world,lead to heavy reliance on migrant labour.The sector is highly sensitive to macroeconomic conditions and input material prices(e.g.of steel,cement,lumber).Strengthening the resilience of the built environment can protect human health and well-being through sustainable design,adaptive infrastructure,responsive planning and climate-responsive policies.8%of the global workforce is made up of the construction industry.22Building Economic Resilience to the Health Impacts of Climate Change4.2 Health impactsAmid increasing climate stress,the design and condition of the built environment directly impact the health of the population.As global temperatures rise,risks to both urban populations and sector workers are growing especially in poorly planned areas(such as informal settlements in low-income cities)and among vulnerable labourgroups.Top climate-driven health risks for built environment consumersTABLE 4Heat-related illnessUrban areas with abundant concrete and limited green spaces trap heat,creating UHIs.During heatwaves,people in neighbourhoods without significant tree cover or cooling centres experience higher rates of heat stroke and mortality(particularly the elderly or those without air-conditioning).Injury and mortalityInfrastructure thats not designed for todays extreme weather is more vulnerable to storms,floods and other hazards,exposing communities and inhabitants to increased risk of injury or death.Respiratory illnessUrban heat and pollution(or smog)worsen respiratory health.This is compounded by poor ventilation and prolonged high temperatures.The UHI effect,in conjunction with transport-related air pollutants,has been found to increase hospital respiratory admissions.Construction workers in urban environments face the most direct health risks,including exposure to poor air quality,mosquitoes,extreme heat and severe weather.Its anticipated that the construction workforce will incur at least 120,000 deaths and 30 million DALYs worldwide from 2025 to 2050 due to select climate-health risks.Top climate-driven health risks for built environment workersTABLE 5Heat-related illnessRising temperatures increase the risk of heat stress for outdoor workers.Physically intense work and the UHI effect both exacerbate this risk.The construction sector is expected to account for 19%of global working hourslost to heat stress in 2030,46 despite making up roughly 8%of the global workforce.47Vector-borne diseasesStagnant water pools on construction sites create mosquito breeding grounds,increasing the risk of vector-borne disease.Injury and mortalityExtreme weather(high winds and storms,extreme heat)heightens hazards for construction workers,increasing the risk of accidents and fatalities on construction sites.Respiratory illnessConstruction workers are exposed to air pollution and particulates(urban smog),which increase the risk of respiratory disease.This effect is exacerbated by climate change and extreme heat.Building Economic Resilience to the Health Impacts of Climate Change23Migrant and temporary workers who make up a significant share of the global construction workforce are especially vulnerable due to informal or poorly regulated environments.Often living in inadequate housing and working in high-exposure jobs,these workers face elevated climate-health risks exacerbated by limited access to healthcare,lack of insurance and weak labour protections.Those in insecure employment(such as undocumented persons,temporary visa holders,the informally employed or contract workers)may avoid reporting illness or injury due to language barriers or fear of repercussions,leaving many climate-related health issues unaddressed.4.3 Economic impactThe growing need to protect urban populations from climate-related health risks is driving increased demand for climate-resilient infrastructure presenting an economic opportunity for the sector.Growing awareness of the health risks posed by non-resilient infrastructure is fuelling investment in climate-resilient urban planning,architecture,design and construction.Climate-resilient infrastructure can often drive premium prices.For example,in Alabama,climate-resistant homes built to a beyond-code standard command a 7%price premium.48Demand is also increasing for health-protective retrofitting of existing structures,including air conditioning,passive cooling and air filtration.These new business opportunities,however,need to be balanced with the economic risk posed by the impact of climate change on health.Construction will see the greatest impact,particularly due to productivity loss and supply chain disruptions.Its projected that the cost of worker availability losses caused by select climate change-driven health risks will amount to at least$570 billion from 2025 to 2050(see Annex formethodology).Increased health risks will also lead to higher health and safety compliance costs and increasedexpenditure on re-recruitment/training due to staff turnover.Climate-driven health impacts are also disrupting supply chains,limiting output and disrupting trade.Disease outbreaks and climate-related health emergencies reduce workforce availability,limiting material production and delivery.Supply chain disruptions cause delays and cost increases,especially in import-reliant regions like the US and Europe.Climate-driven health impacts will also put significant strain on financial capital in the sector.Increased localized health risks may lower land and property values,reducing capital returns as buildings become less fit for use(e.g.apartment blocks vulnerable to extreme heat).Properties at high risk of climate-health events(flooding,wildfires,heat)are becoming less attractive to buyers and investors.As an example,there has been a 4crease in house prices for Las Vegas homes that experience an additional 1 microgram per cubic metre of PM2.5(particulate matter)air pollution due to wildfire smoke.49Commercial real estate in vulnerable regions may also face higher vacancy rates or require costly adaptations(such as cooling systems)to meet new regulations.This creates climate-related credit risks for financial institutions and physical stranded asset risk in commercial real estate.Climate-resilient infrastructure can often drive premium prices.For example,in Alabama,climate-resistant homes built to a beyond-code standard command a 7%price premium.Building Economic Resilience to the Health Impacts of Climate Change244.4 InterventionsTo mitigate these economic impacts,the built environment sector can invest in interventions across the value chain to protect employee and consumer health,and to capture new opportunities.Built environment interventionsTABLE 61 Increase the use of local nature-basedsolutionsNature-based solutions(NBSs),e.g.restoring wetlands or planting trees,can provide storm protection and help reduce the severity of floods.While NBS projects have historically been publicly/government-led,incorporating NBS can lead to significant economic benefits for private developers,including lower construction and maintenance costs,reduced flood insurance premiums and enhanced property values.Properly designed and regularly maintained wetlands reduce vector-borne disease risk when designed with flowing water and predator habitats.A sustainable drainage system scheme in Lamb Drove,Cambridgeshire in the UK uses techniques like permeable paving to manage rainwater without a conventional piped drainage system.It saves 314 in capital costs per home,cuts maintenance costs by 20-25%,increases biodiversity and improves the quality of water discharged from the site.50 2 Expand areas of real and usable greenspaceUrban green spaces can improve air quality,reduce heat stress and enhance well-being.For private actors,green space investments can also offer a return.Proximity to parks or greenery can boost property values by 8-20Q and attract premium tenants who value healthier,more sustainable environments.3 Develop new Leadership in Energy and Environmental Design(LEED)-style voluntary climate resilience standardsVoluntary certifications such as WELL(for occupant health),Resilience Action List(RELi)(for resilience)and the Insurance Institute for Business&Home Safetys(IBHS)FORTIFIED(for disaster resilience)encourage resilient,health-focused building design,enabling developers and architects to attract premium tenants.Many insurers are also offering Built environment value chainUrban planning and zoningArchitecture and design ConstructionReal estate,operations and maintenance Interventions forconsumers1 Increase the use of local nature-based solutions to improve the resilience of buildings and infrastructure to extreme weather(e.g.afforestation to reduce flood risk).5 Construct and maintain climate-resilient buildings and infrastructure based on local climate risk(e.g.elevated foundations,passive cooling).2 Expand areas of real and usable green space(e.g.city parks,green rooftops and urban farming)in cities and new developments.3 Develop new Leadership in Energy and Environmental Design(LEED)-style voluntary standards for health-resilient buildings.4 Install or retrofit cooling systems and ventilation across the built environment,including housing.Interventions fortheworkforce6 Protect construction workers and maintenance staff with PPE(e.g.respirators)and better health and safety training.7 Modify working practices for outdoor workers to avoid heat stress,e.g.avoid peak heat hours,provide mandatory breaks.8 Improve site design and maintenance to eliminate stagnant water to reduce mosquito-borne disease.Proximity to parks or greenery can boost property values by 8-20%and attract premium tenants who value healthier,more sustainable environments.Building Economic Resilience to the Health Impacts of Climate Change25premium discounts for buildings that meet certain benchmarks.For example,homes in Alabama built to FORTIFIED Gold standards can get discounts of 45-55%on the wind portion of property owners insurance.52 It is important to note,however,that voluntary standards need incentives or mandates to scale effectively.4 Install or retrofit cooling systems andventilationIndoor cooling and ventilation are vital for preventing heat stress as temperatures rise.Climate-smart building design and passive cooling strategies like shading,natural ventilation,reflective roofing and insulation lower indoor temperatures without mechanical cooling.Retrofitting buildings for better cooling also offers significant additional benefits.The Empire State Building retrofit,for example,reduced energy use by 38%,saving$4.4 million annually.53Air conditioning is currently the main approach for mitigating the health effects of high temperatures.This can,however,create a maladaptive feedback loop where higher AC use leads to more emissions,exacerbating global warming.High-efficiency units can help reduce costs and emissions,but scale-up must be conducted carefully to avoid strains on electrical grids.5 Construct and maintain climate-resilient buildings and infrastructure Climate-adaptive design,such as floodable ground floors,wind-resistant structural reinforcements and fire-resistant construction in wildfire zones,reduces building failure risk,safeguards health and limits business disruption,inventory losses and liability.The US National Institute of Building Sciences reports that every$1 spent on designing above-code buildings saves$4 in future disaster losses.54 The use of climate-resilient materials can also improve overall resilience,as traditional materials degrade faster or fail under new extremes.As clients and investors increasingly prioritize resilience,developers who incorporate these features will gain a competitive edge and the ability to command premium pricing.Moreover,while upfront costs may be higher,they can often be offset by long-term savings in maintenance and insurance.Arup,a global engineering and design firm,supported the Asian Development Banks development of digital tools and analytics and the design of heat-resilient urban environments.A prototype Climate and Health Portal an integrated platform that brings together data,research and insights to support evidence-based urban planning represents a key output.Arup designed the portals digital framework and interface to ensure accessibility and impact,and,in parallel,conducted a detailed urban heat mapping study in a pilot city using advanced modelling tools such as UHeat and Terrain.The resulting heat stress and risk maps enabled targeted impact analysis and the prioritization of mitigation strategies,helping cities better prepare for rising temperatures.BOX 5Enhancing heat-resilient urban planning Every$1 spent on designing above-code buildings saves$4 in future disaster losses.Building Economic Resilience to the Health Impacts of Climate Change266 Protect workers with PPE andbettertrainingConstruction workers and maintenance workers require targeted interventions similar to those discussed in the food and agriculture chapter.Specialized PPE includes cooling apparel(neck wraps,phase-change cooling vests),ventilated helmets,ultraviolet(UV)-protective clothing(for extreme heat)and N95 or P100 respirators for smoky or high-pollution days.Studies have found that construction workers in Hong Kong had significantly lower heart rates and reported less exertion and heat stress when they wore cooling vests rather than normal work attire.55Risk of injury,mortality and preventable disease can also be reduced through improved training programmes to educate workers on recognizing heat illness symptoms,safe work-rest cycles,hydration practices and emergency procedures for extreme weather.Investing in worker health reduces productivity loss from illness and enhances retention in an industry with chronic labour shortages.7 Modify working practicesAvoiding peak heat hours,implementing mandatory breaks and establishing other acclimatization policies can help outdoor workers avoid heat stress and unnecessary exposure.As discussed in the earlier food and agriculture chapter,these types of changes are cost-effective to implement,and in many cases,regulators have stepped in to set minimum standards.For example,the United Arab Emirates bans outdoor construction work during midday from 15 June to 15 September each year.56 While this can incur overtime costs,it prevents worker illness and the associated productivity losses.8 Improve site design and maintenance Preventing the accumulation of standing water in uneven ground and containers can greatly reduce mosquito breeding and the risk of vector-borne disease.Embedding mosquito control into site design and housekeeping(for example,designing draining systems and removing receptacles that gather water)and conducting regular maintenance and inspections are key examples of best practice.In Dar es Salaam,Tanzania,a pilot programme to clear blocked drains and eliminate stagnant water around a construction area achieved an 88crease in the odds of malaria infection in the nearby community within six months.57 Low-cost adaptations of this kind offer significant economic benefits by preventing disease outbreaks that can reduce productivity or halt work.GS Engineering and Construction implements robust heat safety protocols to protect construction workers from increasing climate risks.Work is prioritized during cooler hours,and mandatory breaks are scheduled based on the heat index every hour for 10 minutes at 31C and 15 minutes at 35C or higher,exceeding global standards.On-site rest areas feature portable fans and air conditioners to maintain low-temperature zones,while cooling vests and ice packs are distributed during high-heat periods.Adaptive measures like these are increasingly important in the construction sector as outdoor workers are exposed to more hazardous environmental conditions.BOX 6Enhancing worker safety amid rising temperatures Avoiding peak heat hours,implementing mandatory breaks and establishing other acclimatization policies can help outdoor workers avoid heat stress.Building Economic Resilience to the Health Impacts of Climate Change27Health and healthcare5Amid increasing climate change,the gap inhealthcare support will lead to worsening public health outcomes overall.Building Economic Resilience to the Health Impacts of Climate Change28The health and healthcare sector accounts for roughly 10%of global GDP and is responsible for keeping populations healthy andproductive.61 The health and healthcare sector is broadly divided into two main industries:the development and sale of pharmaceuticals and medical devices,and patient care and treatment.Healthcare is a major global employer,comprising 65 million doctors,nurses,midwives and other patient practitioners.62 The pharmaceutical and medical device industries globally employ 8 million and 2 million people,respectively.63,64 Health resources,however,are very unevenly distributed,with high-income countries accounting for almost 80%of global health spending in 2021.65 Furthermore,the WHO projects a global shortfall of 18 million healthcare workers by 2030,with the widest gaps expected in regions with fast-growing health needs.66 Without action,climate change will leave a depleted healthcare sector with the burden of poorer population health.Demand for many critical products from the pharmaceutical and life sciences industry will undoubtedly rise particularly for preventive care measures like vaccines as well as screening and early detection of climate-sensitive chronic diseases such as cardiovascular disease.The sector will need to use all available tools and solutions to build resilience in the years ahead,adapting medicinal products and transforming care delivery to safeguard public health.5.1 The health and healthcare sector Healthcare represents approximately 10%of global gross domestic product(GDP),58 but faces a growing challenge from climate change.Climate-health needs are increasing,and the sector will need to transform to deliver better preventative care.Without significant adaptation,the climate-related disease burden could result in additional cumulative treatment costs of$1.1 trillion by 2050.59 Healthcare professionals face elevated risks of infection,injury and mental health strain.This report estimates that at least 8 million DALYs will occur from 2025 to 2050,resulting in at least$200 billion in lost output due to a set of climate-health illnesses.Current products and treatments will also come under pressure as heatwaves accelerate product spoilage and epidemics disrupt production.There are,however,also opportunities to protect health and create value;projections suggest the dengue vaccine market,for example,will expand at a compound annual growth rate(CAGR)of 11.2%from 2021 to 2030,reaching$1.3 billion.60 To build resilience,the health and healthcare sector needs to scale climate-adaptive care,retrofit facilities,develop climate-smart drugs and protect workers.Health and healthcare key takeawaysBOX 75.2 Health impactsIn addition to the chronic,long-term health impacts caused by climate change,acute impacts driven by extreme weather also hinder the sectors ability to deliver care.Chapter 2 outlined the many ways climate change causes chronic ill health the burden of which falls on the healthcare sector.Acute climate events add further strain,disrupting both preventative and reactive care delivery through infrastructure damage,resource shortages and emergency resource diversion.For example,hospital admissions rise by about 5%for each 1C temperature increase above 29C in Hong Kong.67 Typically,those most in need are less able to access care quickly,which leads to worse health outcomes and often costlier overalltreatment.Frontline healthcare workers face direct exposure to climate-driven health risks,including psychological strain,infection,injury and mortality.This report estimates that healthcare workers will experience at least 50,000 deaths and8 million DALYs from 2025 to 2050 globally dueto select climate-health risks.5%rise in hospital admissions for each 1C temperature increase above 29C inHong Kong.Building Economic Resilience to the Health Impacts of Climate Change29Top climate-driven health risks for healthcare workersTABLE 7Mental health Heightened patient treatment demand and severity increases workload and exposure to trauma,intensifying stress and burnout for healthcare practitioners.Hospital care workers who cared for COVID-19 patients were found to be 1.3 times more likely to suffer from depression,anxiety andPTSD.68Zoonoses and infectious disease exposureHealthcare professionals have an increased risk of contracting climate-related illnesses that spread from human contact due to exposure to infected patients.Injury and mortalityAs extreme weather events increase,first responders and frontline workers,especially in vulnerable regions,face higher risks of injury and death.5.3 Economic impactIncreasing rates of ill health across the globe will fuel demand for climate-focused treatments.Healthcare providers will face growing demand for treatment of chronic climate-related illnesses,with an emphasis on preventive care.Extreme weather events will also lead to an increased need for emergency care services.Rising rates of climate-related conditions will also drive demand for medical treatments and technologies such as cooling therapies and wearables.Surging demand will also increase the strain on physical capital(like care facilities).Climate-driven disease surges(for example,dengue outbreaks)can overwhelm patient care facilities and prevent them from effectively addressing their existing non-climate-related health caseload.Increased physical capacity may therefore be required to meet population needs during epidemics or heatwaves.This can require significant financial investment.Unless significant action is taken,its projected that the cost of lost worker availability in the healthcare sector due to select climate change-driven health risks will amount to at least$200 billion from 2025 to 2050(see Annex for methodology).Rising worker illness rates reduce labour productivity due to presenteeism,absences and mortality.The COVID-19 pandemic,for example,resulted in$200 million in productivity losses due to healthcare worker morbidity and mortality in the KwaZulu-Natal and Western Cape provinces in South Africa during the first year.69This reduction of labour productivity will worsen patient outcomes,creating a detrimental cycle of reduced care and increased strain on the sector.Consider that the loss of healthcare workers to Ebola during the 2014 epidemic is estimated to have increased maternal mortality by 38%in Guinea,74%in Sierra Leone and 111%in Liberia.70Climate change-driven illness will increasingly disrupt health and healthcare supply chains due to reduced labour availability and restrictions on transport and trade.Worker illness and disease outbreaks disrupt trade and reduce productivity at manufacturing sites,limiting output and weakening health supply chains.For example,illness among workers in a pharmaceutical manufacturing site during the COVID-19 pandemic resulted in supply shortages of critical medical products.71 In addition to health-related disruptions,supply chains are also vulnerable to physical climate risks such as floods,wildfires and extreme heat which can damage infrastructure,interrupt logistics and delay production.These disruptions are not limited to climate-health treatment they pose a risk to all medicines.At the same time,acute climate events create unpredictable demand surges,delaying preventive and elective care while sharply increasing the need for emergency medical supplies and services.Given these challenges,building supply chain resilience should be a priority for healthcare.This report,however,does not cover broader supply chain strategies,and instead focuses specifically on interventions for safeguarding health.The WHO projects a global shortfall of 18 million healthcare workers by 2030,with the widest gaps expected in regions with the fastest-growing health needs.Building Economic Resilience to the Health Impacts of Climate Change305.4 InterventionsHealthcare providers and businesses can act to protect their workforceand the communities they serve while capturing new economicopportunities.Health and healthcare interventionsTABLE 8As dengue escalates due to climate change,Takedas vaccine offers a critical preventive tool.Now,through active participation in the Collective Action on Dengue(CAD)initiative,Takeda is helping scale climate-resilient healthcare by aligning innovation with cross-sector coordination.The coalition,launched at the 2023 United Nations Climate Change Conference(COP28)and supported by over 30 stakeholders,cultivates collaboration across urban health,innovation and financing.Takeda contributes technical and strategic expertise,accelerating access to vaccines and strengthening health systems in climate-vulnerable regions.By working through the coalition,Takeda helps integrate vaccinationinto broader prevention strategies ensuring equitable delivery,informing policy and advancing joint planning.Overall,this partnership drives scalable,sustainable dengue prevention in an era of rising climate risk.Takeda and the Collective Action on Dengue initiativeBOX 81 Develop novel drugs,products andservicesPharmaceutical and medical device companies can adapt their R&D pipelines to address shifting disease patterns,emerging pathogens and conditions driven by climate change.In this effort,improved forecasting will be critical to unlocking investment and scaling innovation.Developing novel drugs,medical devices and diagnostics for climate-related illnesses is increasingly commercially attractive,with patient populations and demand growing across new markets.Similarly,care facilities can develop more effective patient treatment pathways(including community-based preventative care schemes),more efficiently treating those suffering from climate-related illnesses.Healthcare value chainPharmaceuticals and life sciencesSystem-level care planning and administrationPatient care and treatment Interventions forconsumers1 Develop novel drugs,products and services,focusing on diseases intensified by climate change.3 Establish care centres in climate-vulnerable regions(including telehealth and mobile care options equipped to address climate-health risks).2 Improve climate resilience of existing portfolios of drugs,products and services,e.g.thermal stability of drugs.4 Retrofit estates and care facilities to increase capacity for demand surges and ensure infrastructure is climate-resilient.5 Scale up provision of preventative healthcare to mitigate the effects of climate-related illness.Interventions fortheworkforce6 Implement cooling solutions in healthcare facilities,as well as heat stress monitoring and management.7 Protect workers with clothing/equipment and specialized training to raise awareness of growing climate health risks and reduce risk exposure.8 Implement comprehensive mental health support for practitioners,including proactive strategies and treatment.Building Economic Resilience to the Health Impacts of Climate Change312 Improve climate resilience of existing medical productsReformulating drugs for heat stability and improving packaging can reduce cold-chain dependency,decrease spoilage and extend shelf life.Medical devices can be redesigned for reliability in low-resource or emergency settings with features like battery backups or solar charging.These adaptations would cut waste and costs,and serveas a competitive advantage.Regulators can support climate resilience by updating stability guidelines to reflect future environmental conditions,ensuring medicines remain safe and effective under climate stress.It is important,however,to balance regulation increases with medicine availability,as increased regulation can have a significant impact on low-margin goods,including generics.Ferring Pharmaceuticals has developed a heat-stable version of carbetocin that can help prevent dangerous bleeding after childbirth a leading cause of death for mothers worldwide.In the largest study of its kind,involving nearly 30,000 women across ten countries,the medicine was shown to work just as well as the current standard treatment,oxytocin.Unlike oxytocin,which must be kept cold,carbetocin stays effective even in hot climates,making it ideal for use in low-income countries where refrigeration is hard to maintain.As climate change increases temperatures and disrupts cold supply chains,developing essential medicines that remain stable without refrigeration is becoming increasingly important forglobalhealth.Building resilience with heat-stable pharmaceuticalsBOX 93 Establish care centres in climate-vulnerableregionsHealthcare must be tailored to local climate-health risks,requiring a shift in care facility locations.These sites should provide healthcare access for underserved populations,deliver preventive care and support better health outcomes with leaner,more cost-effective set-ups.Providers can also harness innovative care delivery models,including telehealth and mobile care units,to ensure flexible and continuous care during climate disruptions.The Burjeel Holdings Center for Climate and Health integrates climate resilience into clinical care for the United Arab Emirates diverse and vulnerable populations.Serving construction workers,elderly adults,children,patients with chronic conditions and socially vulnerable groups,the centre addresses heat-related illnesses and climate-health impacts through preventative care protocols.Harnessing a cutting-edge generative AI platform,the centre will conduct proactive multilingual patient outreach via telephone,providing 24/7 climate risk alerts,hydration guidance and emergency preparedness instructions.This innovative approach will combine advanced AI healthcare technology with personalized medicine to tackle emerging climate-related health challenges.Integrating climate resilience into healthcareBOX 10Building Economic Resilience to the Health Impacts of Climate Change324 Retrofit health facilities for climate resilience and surge capacity Upgrading existing facilities using climate-adaptive design ensures that sites can withstand climate hazards such as extreme heat,extreme weather and flooding.These practices reduce the risk of building failures,ensuring continuity of care for patients,preventing injury and mortality,and reducing liability.In addition,expanding operational capacity through flexible-use spaces allows healthcare facilities to accommodate patient surges during climate-related health crises.5 Scale up preventive healthcare for climate-related illnessExpanding preventive care programmes targeting climate-sensitive conditions is essential as healthcare systems become increasingly strained due to the effects of climate change on population health.Prevention offers the most effective way to ease this pressure,reducing the high costs of treating more advanced conditions.Community health workers can provide education to the public on preventing climate-related illnesses through self-care pathways.Disease surveillance and screening for climate-sensitive illnesses enable early intervention for at-risk individuals.6 Implement sustainable cooling solutions inhealthcare facilitiesInstalling or retrofitting air conditioning and passive cooling measures can reduce the risk of heat-related illnesses for patients and staff.Where possible,low-cost passive cooling measures(for example,natural ventilation,reflective roofing and tree shading)should be prioritized to reduce indoor temperatures and energy use.While air conditioning may be necessary in some settings,it should be deployed strategically.High-efficiency units should be used to minimize emissions and operating costs,and large-scale roll-out must consider the use of renewable energy to avoid excess greenhouse gas emissions.7 Protect workers with equipment andtrainingHealth providers can consider targeted measures to safeguard workers essential to health supply chains and frontline patient care.PPE should be tailored to local climate-health hazards,and include cooling apparel and respirators/masks to lower infection risk.Employers should also offer targeted training to address emerging climate-related health threats like heat-related illness,vector-borne disease and respiratory issues related to air pollution.In particular,training workers involved in patient care ensures they can identify climate-health conditions quickly and respond effectively,improving care.8 Implement comprehensive mental health support for practitionersAs climate-related health crises intensify,frontline healthcare workers face rising mental health pressures.Employers must prioritize comprehensive support,including counselling services,peer support programmes and burnout prevention training,backed by regular monitoring of employee well-being.Proactively addressing stress,trauma and fatigue sustains practitioner well-being,reduces turnover and maintains quality of care during climate events.Expanding preventive care programmes targeting climate-sensitive conditions is essentialas healthcare systems become increasingly strained due totheeffects of climate change.Building Economic Resilience to the Health Impacts of Climate Change33Insurance6Without adaptive action,climate-driven health impacts could erode insurer profitability and push coverage costs higher for consumers across markets.Building Economic Resilience to the Health Impacts of Climate Change34The insurance sector,accounting for over 7%of global GDP,72 plays a vital role in protecting people from the economic impact of ill health and subsequent financial hardship through health,life and casualty coverage.Yet climate change threatens to erode profitability.Its forecasted that climate change will cause 0.75%excess mortality annually by 2050 under a moderate warming scenario.73 As climate-health risks escalate,insurers face rising medical,life and casualty claims,straining capital and pushing premiums higher.Insurers have a unique opportunity and responsibility to build resilience.By developing innovative products,building climate expertise and helping prevent climate-related illness,insurers can protect both communities and the bottom line.As enablers of resilience,insurers also play an important role in incentivizing other sectors to reduce their own risks.Insurance key takeaways BOX 11With global insurance premiums totalling more than 7%of global GDP,the insurance sector plays a vital role in providing financial protection against climate-related public health risks for individuals,businesses and communities.74 While property insurers have so far been most affected by physical climate risks and mounting losses from extreme weather events,climate change now poses an existential risk across all insurance lines.75 Health,life and casualty insurance lines are particularly important for climate resilience.Coverage gaps persist,however,across both developing and developed markets.Unlike other focus sectors in this report,the workforce for the insurance sector is not disproportionately exposed to climate-health risks,so the following analysis focuses on consumer-level interventions.Insurance can lower individuals risk of health impacts and support other sectors.The primary role of the insurance sector is to pool resources and evenly distribute risk,thereby reducing the financial impact of losses.The insurance sector can,however,also support other sectors in mitigating their climate exposure by sharing data,quantifying risk and incentivizing action through tailored pricing of premiums.Without adaptive action across the economy,climate-driven health impacts are likely to erode insurer profitability and push coverage costs higher for consumers,further widening the protection gap in vulnerable markets.6.1 The insurance sector Without adaptive action across the economy,climate-driven health impacts are likely to erode insurer profitability and push coverage costs higher for consumers.35Building Economic Resilience to the Health Impacts of Climate ChangeWater-related disease and illnessMental health disordersZoonoses and infectious disease exposureInjury and mortalityVector-borne diseasesNon-communicable diseasesFood-borne diseasesMalnutritionHeat-related illnessRespiratory illnessInsurance is a critical mechanism for enabling access to healthcare worldwide both directly(through health insurance provision)and indirectly(through life and casualty coverage).Health insurance spreads medical costs,while life and casualty insurance help cover the costs associated with poor health for sufferers and their families.Climate change is putting significant pressure on this mechanism as the risk of ill-health rises.Health threats can be divided into two categories,each with different impacts:1.Acute climate-driven health events:Such instances are rising in frequency and severity as extreme weather and disease outbreaks heighten the risk of short-term illness,injury andmortality.2.Chronic climate-driven health shifts:Core health inputs such as food,water,air and even sleep are degrading,increasing the long-term risk of illness and mortality for the widerpopulation.6.2 Health impactsAcute and chronic climate-driven health risks FIGURE 6These risks are most applicable to individuals disproportionately exposed to the determinants of climate-health risks.Unlike the other focus sectors workforces,the workforce for the insurance sector is not exposed to a heightened degree of climate risk as employment tends to be more stable,concentrated in developed regions and office-based.The communities most at risk from climate-driven health impacts are the least likely to be insured.In low-income countries,only 8%of people have health insurance,compared to about 53%in upper-middle-income countries.76 Underinsurance and gaps in coverage,however,are also present in high-income countries,where many individuals still face high out-of-pocket costs or lack adequate protection.For the under-or uninsured,the cost of climate-induced illnesses or disasters can be financially crippling.In exposed regions,insurers are responding to climate risks by raising premiums,tightening coverage or even withdrawing from the market.This is creating“insurance deserts”communities that cannot obtain affordable coverage.77 This is a dynamic already seen in property insurance for disaster-prone areas and is likely to emerge for health and life insurance in climate-exposed regions.Growing insurance costs and coverage gaps are emerging as their own mental health challenge in fact,66%of US adults cite the cost of health insurance as a significant source of stress.78These trends are deepening health inequalities both across and within countries.Those with the means can adapt,while vulnerable populations remain unprotected.Insurers committed to addressing climate-health challenges can act toclose these gaps.8%of people have health insurance in low-income countries,compared to about 53%in upper-middle-incomecountries.Building Economic Resilience to the Health Impacts of Climate Change36Insurers face key challenges at the intersection of climate change and public health.By offering innovative,comprehensive and cost-effective coverage,they can address these challenges and unlock growth opportunities.Climate risks are driving demand for innovative insurance solutions.In recent years,there has been a rapid expansion of climate-health insurance offerings.Additionally,insurers are working to incentivize proactive and preventative action.Providers who offer these policies are capturing an emerging market and building stronger relationships with consumers.Worsening climate-health risks are prompting customers to seek more comprehensive,tailored coverage.A Swiss Re Institute survey found that 40%of respondents were concerned about the adequacy of their existing coverage.79 Leading insurers are broadening traditional health and life policies to address climate-driven conditions,with many offering coverage extensions for illnesses that are becoming more prevalent due to climate change.This approach can serve as a competitive differentiator.Harnessing advanced data and analytics to price coverage for climate-health risks more accurately can be a competitive advantage for insurers.Traditional actuarial models are not equipped to predict the non-linear,evolving nature of climate impacts on health.This has led to a surge in demand from insurers for improved data and risk assessment tools to reduce risk.This is an attractive opportunity for reinsurers,who can offer their advanced risk-modelling capacities and data to support insurance clients.Despite new opportunities,rising and unpredictable claim volumes driven by climate-health risks threaten the fundamentals of the insurance business model.Rising volume of claims:More frequent and severe climate events are driving up insurance claims across health,life and casualty lines.As climate-related shocks intensify,payouts will continue to climb,which could erode profitability if premiums and reserves do not keep pace.Moreover,a single extreme event can trigger many claims at once,undermining the traditional risk-pooling model.Insurers may have to raise premiums and hold more capital to cover thesecorrelated losses,further driving up costs forconsumers.Unpredictable trend of claims:Climate volatility makes it increasingly difficult for insurers to predict future losses,define project capital allocation requirements and manage reserves effectively.Historical data are unable to predict future losses.Instead,forward-looking models are required that translate climate science into claims projections.Life and health insurers can take cues from the property insurance sector,where forward-looking climate scenarios are used to stress test risk exposure.When it comes to climate-health risks,however,developing truly reliable forecasting tools may take years.Further capital investment will be required to develop the risk management capabilities needed to monitor and predict complex climate phenomena and avoid unforeseen costs.This evolution will be partly driven by regulators,who are increasingly pushing insurers to extend climate stress testing beyond property portfolios to include life and health lines.6.3 Economic impact Despite new opportunities,rising and unpredictable claim volumes driven by climate-health risks threaten the fundamentals of the insurance business model.Building Economic Resilience to the Health Impacts of Climate Change376.4 InterventionsInsurers can take proactive measures across the value chain to build resilience against climate-health challenges and capture opportunities.Insurance interventionsTABLE 91 Close the coverage gap with tailored insurance products and distribution channels Affordable insurance products for low-income communities can expand an insurers customer base while offering quick financial relief for climate-related health shocks.They protect vulnerable households from harmful coping strategies.For example,a Japanese insurer launched a single-day heatstroke micro-insurance policy costing around$0.73,and nearly 7,000 policies were sold on a single hot day,highlighting a new customer segment.80 2 Design innovative climate-health insuranceproductsInsurers can develop creative products for emerging climate-health risks,such as parametric insurance,which pays out in response to specific triggers(for example,temperature,air quality)offering fast,transparent relief and specialized health riders for climate-exacerbated conditions.Short-term cover,like the single-day heat insurance mentioned earlier,can protect informal workers exposed to high-risk conditions.In 2024,the Womens Climate Shock Insurance Programme,backed by the Self-Employed Womens Association(SEWA)and Swiss Re,provided parametric heat insurance and cash assistance to approximately 46,000 women in informal work facing extreme heat,paired with an early warning system.81 Temporary premium waivers can also be used to support health during natural disasters,building customer goodwill and community trust.In response to rising heat-related health risks in Japan,Sompo Japan enhanced its personal accident insurance to expand the scope of the coverage for heatstroke.Initially launched as an optional benefit in 2021 for children frequently engaged in outdoor activities,the policy provided fixed payments for outpatient care,hospitalization,surgery or death due to heatstroke.The increased risks,intensified by extreme heat and ongoing mask use,led to expanded eligibility across age groups in 2022,and by early 2025,heatstroke coverage had become a standard feature.This reflects an industry-wide change among Japanese insurers,which are offering heatstroke coverage in response to growing public concern and climate-induced health challenges.Innovative insurance solutions for treating climate-driven diseaseBOX 12Insurance value chainProduct development anddistribution UnderwritingCare and prevention Claims managementInterventions forconsumers1 Develop tailored insurance products and distribution platforms for underinsured and vulnerable communities.5 Research to understand the climate impact on health to improve modelling of future claim frequency/severity.7 Institute preventative care programmes at the individual and community level(e.g.air conditioning,food as medicine).9 Fast-track claimsmanagement for objective triggers during acute events.2 Design innovative products to meet changing needs,e.g.parametric and temporary waiver insurance.6 Integrate multimodal data(e.g.meteorological and wearables)to dynamically determine risk and update models,guiding premiums and coverage.8 Incentivize health-protective behaviours through differentiated premiums or other structured rewards.3 Expand range of existing products/add-ons to encompass coverage for growing climate-health risks.4 Strengthen advisory services and educate customers to raise awareness ofgrowing climate-health risks and reduce risk exposure and subsequent payouts.Building Economic Resilience to the Health Impacts of Climate Change383 Expand coverage within existing products Insurers can expand traditional coverage to cover illnesses exacerbated by climate change for example,for infectious diseases spreading into new regions(such as dengue fever in temperate zones),respiratory illnesses caused by air pollution or wildfire smoke,or climate-linked mental health conditions.Insurers in Europe may start to consider dengue fever coverage as warming temperatures allow mosquito-borne diseases to spread into newregions.824 Strengthen climate-health advisoryservicesExpanding advisory services can help reduce risk for current policyholders and attract new customers by raising awareness of climate-health risks.These services can be bundled with products or offered through targeted community outreach for example,workshops or free consultations for high-risk groups.Investing in proactive customer education can also help lower risk exposure and claims.For example,insurers can share timely alerts during extreme events like heatwaves,with personalized safety tips.Cigna Healthcare offers a zip code-based tool that US residents can use to find low-cost local support.835 Strengthen risk insights through researchInsurers can invest in research on climate-health risks to improve modelling of future claim risks and assess effective interventions.Leading insurers are increasingly collaborating with academia and global institutions to build and share expertise.Insurers can also build internal climate expertise as climate knowledge becomes vital for risk assessment,pricing and strategic decision-making.6 Integrate multimodal data forsmarterpricingInsurers can enhance pricing accuracy by integrating real-time environmental data on factors like heat and pollution with personal health data from wearables and mobile apps.While this shift from static to dynamic risk factors could help to improve modelling and encourage preventative behaviours,linking these inputs to actual claims outcomes will be crucial in unlocking its full potential.As data systems mature,analysing claims patterns alongside environmental and biometric data will be key to identifying climate-health risk drivers and improving underwriting.In fact,integrating wearables data can cut underwriting errors by up to 50%and allow insurers to detect early signs of health issues 30ster than when using traditional methods.847 Invest in preventive careInsurers,especially health insurers,could support preventive care to reduce future claims.This proactive approach could include medical solutions such as vaccines,but also extends to actions like funding transport to cooling centres during heatwaves,distributing air purifiers or cooling gear,or partnering with companies that provide climate-health solutions.8 Incentivize health-protective behavioursInsurers can adopt a“shared value”approach by offering premium discounts or rewards for preventive actions that reduce climate-health risks.Wellness incentive models,like those used by Vitality Insurance in the UK,have proven effective,with participating employers seeing 4%lower claims costs and a 180%ROI,driven by smart incentives that drive targeted behaviour change(e.g.more regular exercise,improved nutrition,quitting smoking).859 Fast-track claims managementInsurers could streamline claims management and payout mechanisms to allow quick access to medical care or recovery funds after a climate-related disaster.Potential solutions include parametric triggers,rapid-response claims teams,cash advances and AI-based assessments for faster approvals.By speeding up payouts,insurers can help prevent health issues from escalating,delivering better outcomes for customers while boosting claims performance.In Delhi,India,winter air pollution often halts construction work,costing roughly 1.5 million daily-wage workers nearly two-thirds of their income.86,87 To protect the livelihoods of these workers,the Migrants Resilience Collaborative and a partner reinsurance broker created a parametric insurance scheme that pays up to INR 6,000(Indian rupees),or about$70,whenever the Air Quality Index exceeds 400 for three out of five consecutive days.88 This provides financial relief to workers thats delivered faster than government compensation.Such interventions can ensure workers maintain both their health andtheirincome.Insurance as a tool to protect vulnerable populationsBOX 13 Insurers can adopt a“shared value”approach by offering premium discounts or rewards for preventive actions that reduce climate-health risks.Building Economic Resilience to the Health Impacts of Climate Change39Next steps:acallto actionClimate change is a present and growing risk to both human health and the continuity of all businesses.From extreme heat affecting the safety of workers to climate-driven supply chain disruption,no sector is immune.Investing early in health resilience can save lives and significantly reduce economic losses.For business leaders,three strategic actions can guide an effective climate-health resiliencestrategy.1.Understand the health risks most relevant to theworkforce,customers and communities.Assess climate-health exposure across operations and supply chains:Conduct a risk assessment to pinpoint how climate hazards could directly affect employee well-being,customer safety and community health.Prioritize the most severe and likely health threats:Focus on risks that have the highest potential impact on health and business continuity in the specific sector and region.Use data and early-warning systems to anticipate health impacts:Harness climate data(for example,heatwave forecasts,disease surveillance)and health information to identify vulnerable hotspots.Data-driven insights can help pinpoint which locations or groups need urgent protective measures.2.Prioritize,plan and carry out interventions tosafeguard health and
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