Physical climate risks are reshaping asset prices and investment strategies

Physical climate risks are moving from a long-term sustainability concern into a near-term investment variable that should influence valuations, capital allocation and security selection.

• Robeco's 2026 survey of 300 financial firms found that 66% of investors expect physical climate risks to have a moderate or significant impact on asset prices within five years, rising to 82% within 10 years and 87% within 20 years.
• The risks include acute events such as storms, droughts, wildfires and floods, as well as chronic effects such as rising sea levels, thawing permafrost, ocean acidification and declining crop yields; insurance withdrawals and infrastructure disruption already show financial consequences.
• Physical risks are expected to affect risk budgeting for 64% of respondents and strategic asset allocation for 63%, while more than half also see implications for tactical allocation, capital-market assumptions, manager selection and stock picking.
• Adaptation and resilience solutions attract potential risk-adjusted returns for 47% of investors over the next three to five years, versus 44% for mitigation; current interests include water management at 41%, vaccines or drugs for new diseases at 40%, resilient energy systems at 39% and resilient infrastructure and transport at 38%.
• Mitigation remains supported by structural demand, with 59% expecting renewable-energy and low-carbon technology demand to remain strong, but policy uncertainty is a barrier for 45% globally and 48% in Europe; only 21% see a sufficient listed-company universe for scaling public-market exposure to adaptation and resilience.

Takeaway: Investors should combine physical-risk assessment and corporate-resilience analysis with selective exposure to adaptation, infrastructure, grids, storage and other climate solutions, while treating policy-sensitive mitigation opportunities more selectively.