Six ways climate change could affect your financial plan

Climate change is often discussed as an environmental issue, but it can also have an impact on our finances.

While no one can predict exactly how events will unfold, climate-related trends may have financial consequences for households over time. The Intergovernmental Panel on Climate Change (IPCC) has reported that human-caused climate change is already affecting many weather and climate extremes in every region of the world. These changes can contribute to wider economic pressures, including higher repair and insurance costs, disruption to supply chains, and changes in the value or performance of certain assets.

In the short term, natural climate patterns can also amplify weather disruption. For example, the Met Office reported that an El Niño event had been declared for 2026 as the Pacific warmed, while NOAA confirmed in July 2026 that conditions were strengthening and expected to persist into early 2027, with an increased chance of a very strong event. Although El Niño is not the same as climate change, it can temporarily influence global temperatures and rainfall patterns, which may add to existing financial pressures through impacts on food prices, energy demand, property damage and market volatility.

The good news is that the principles of good financial planning remain the same: stay diversified, think long term, and regularly review your plan. Climate change does not mean abandoning a carefully considered strategy, but it does highlight the importance of building flexibility into your financial decisions.

Here are six aspects of financial planning that could be affected by climate change:

1. Your investments

Climate change is influencing how businesses operate and how economies develop. Some industries may face increasing regulation, higher costs or changing demand as governments, consumers and companies seek to reduce carbon emissions. These are often described as transition risks, as they relate to the move towards a lower-carbon economy.

There are also physical risks, such as the impact of extreme weather on supply chains, infrastructure and property. The Bank of England has noted that climate change can create financial risks through both physical impacts and the transition to net zero, and that these risks may affect asset values over the short and long term.

What you can do:

Rather than trying to predict which sectors will succeed or struggle, it may be worth reviewing whether your portfolio remains appropriately diversified and aligned with your objectives, time horizon and attitude to risk. Diversification can help spread risk, but it does not remove risk entirely or guarantee positive returns.

If responsible investing is important to you, a financial planner can help you understand the options available and how they may fit within your wider plan. Different approaches will carry different risks, costs and limitations, so it is important to consider them carefully rather than making decisions based on headlines alone.

2. Your home and property

For many people, their home is their most valuable asset. Climate change may affect some properties through increased flood risks, coastal erosion, overheating, or subsidence caused by hotter and drier weather conditions.

In the UK, these risks are not evenly spread. A property’s location, age, construction type and surrounding infrastructure can all influence how exposed it may be to flood, storm, heat or ground movement risks. Over time, this could affect maintenance costs, the availability and cost of insurance, or how attractive the property is to future buyers.

These factors could potentially influence:

• Insurance costs (more on this below).
• Property maintenance expenses.
• Future buyer demand.
• Property values in certain locations.

What you can do:

Understanding any environmental risks associated with your property can help support informed financial decisions. You may wish to review publicly available flood risk information, consider whether resilience measures are appropriate for your circumstances, and factor potential maintenance or insurance costs into your long-term planning. These steps cannot remove risk, but they may help you make more informed choices.

3. Insurance costs

Extreme weather events can lead to higher claims for insurers, which may affect premiums, excesses or the availability of cover in some areas. In 2026, the Association of British Insurers reported that UK insurers paid out a record £6.1 billion in property claims in 2025, including £1.2 billion in weather-related property claims.

Flooding, storms and subsidence can all create significant costs for households. The ABI also reported that domestic flood claims rose to £312 million in 2025, while domestic subsidence payouts reached £307 million after a record hot UK summer created conditions linked to soil shrinkage.

Homeowners may therefore see:

• Rising insurance costs.
• Higher policy excesses in certain areas.
• Additional requirements for flood protection or resilience measures.

What you can do:

Regularly reviewing your insurance arrangements can help you understand whether your cover remains appropriate for your needs and whether any policy exclusions, excesses or limits have changed.

It may also be sensible to keep records of property maintenance and consider whether flood or weather-resilience measures are relevant to your home. This does not guarantee lower premiums or prevent losses, but it may help you prepare more effectively.

4. Retirement planning

Retirement planning often spans several decades, making it important to consider long-term economic trends.

A retirement plan is usually built on assumptions about investment growth, inflation, spending needs, tax and life expectancy. Climate-related disruption could affect some of these assumptions indirectly, for example through energy prices, food costs, market volatility or government spending priorities.

Climate change may contribute to:

• Periods of market volatility.
• Inflationary pressures.
• Changes in government spending and taxation.
• Shifts in global economic growth.

What you can do:

While these factors are difficult to predict, building a robust retirement plan with realistic assumptions, appropriate diversification and regular reviews can help you understand whether you remain on track. It is important not to assume that any plan will remove uncertainty, but reviewing your position can help you make considered adjustments if your circumstances or the wider economic environment change.

5. Business owners

If you own a business, climate change may influence operating costs, supply chains, customer demand, or future regulatory requirements.

For some businesses, these changes may create challenges. For others, they may present opportunities for growth and innovation.

For example, higher energy costs, disruption to suppliers, changing customer expectations, or new reporting and regulatory requirements could all affect profitability and business value. Conversely, businesses that adapt their operations, improve resilience or respond to changing demand may be better placed to manage disruption.

What you can do:

Business owners may wish to consider climate-related risks and opportunities as part of wider succession, protection and exit planning. This could include reviewing key dependencies, insurance arrangements, cash reserves and the assumptions used when valuing or preparing to sell a business. These steps cannot guarantee a particular outcome, but they may help identify areas where additional planning is needed. At Attivo, we have business financial planning experts who can support with these considerations – and more.