Resilience in construction – physical climate risk

The construction industry has a vital role to play in mitigating climate change and building a sustainable future. However, the sector is also particularly vulnerable to the impacts of climate change and its related risks. With a proactive approach to risk mitigation and adaptation, companies within the construction industry can build their resilience against both current and emerging climate-related risks.

Understanding the risk

CIimate change is a major global risk in the short, medium and long-term, with far-reaching direct and indirect implications for the construction industry.

The World Economic Forum’s Global Risks Report 2024, published in partnership with Marsh McLennan, places “natural disasters and extreme weather events” as the second-most severe risk over the next two years, only behind the cost of living crisis, and identifies “failure to mitigate climate change” as the top risk over the next decade. 

In relation to specific perils linked to climate change, Marsh McLennan analysis shows that the number of catastrophic floods has increased by 181% worldwide since the 1980s.

By 2030, there could be four times the amount of heatwaves, twice the amount of droughts, and extreme rainstorms could rise by 50%, according to the Intergovernmental Panel on Climate Change.

The impact on construction

Research shows that each year, adverse weather events (such as flooding and snowfall) delay 45% of construction projects worldwide, costing billions of dollars in additional expense and lost revenue. In addition, for every 1ºC rise in temperature above 28ºC, construction worker productivity can decrease by as much as 57%, according to an Air Force Institute of Technology report.

Construction companies may also face climate change-related exposures in their supply chains. Suppliers located in areas prone to climate-related hazards may experience physical damage to their facilities, transportation networks, or infrastructure. This can lead to long delays in the delivery of materials and equipment, further impacting construction projects.

In addition to impacting the availability of goods, climate change can impact the infrastructure on which supply chains rely on.  For example, in October 2023 water levels along the Mississippi dropped by as much as 11ft from those recorded a year prior after a drought struck the region, forcing barges to carry less weight in order to sit higher in the water.

With more than a trillion pounds of freight – including aluminium, coal, steel, soybeans, corn, animal feed, coke, sand and gravel, oil, fertilizer, salt and alcohol – per year travelling on the Mississippi and the rivers that feed it, this led to delays in goods arrivals and caused cost rises felt across numerous industries, including construction.