The AI reckoning
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A super El Niño climate phenomenon will make 2027 the hottest year on record. Near term, this increases the risk of extreme weather worldwide, from drought in Sub-Saharan Africa and India to wildfires in Southeast Asia, flooding in North America and extreme heat in Europe and South America. As well as hundreds of thousands of heat-related deaths, infectious disease outbreaks, crop failures, regional migration, and hydropower shortages will ripple across a sweltering globe.
Longer term, 2027 will confirm that organisations need to be planning for global warming to exceed the 1.5 C limit governments committed to in 2015. Climate change is a strategic challenge. Adaptation is urgent. It will also be politicised and weaponised.
Sources: NOAA, Australia BOM
Organisations must navigate El Niño’s impacts and beyond, focusing on four key areas:
A hot 2027 will test near-term stability
Extreme weather will negatively impact harvests and animal husbandry in Sub-Saharan Africa, Latin America, and South Asia, adding food price pressures propelled by fuel and fertiliser disruptions. Food insecurity is likely to feed anti-government sentiment and boost recruitment by militant and organised criminal groups. Extreme heat will also raise social tensions and corresponding unrest risks. Geopolitical stability will be further tested by competition for resources, migration pressures and the weaponisation of climate change.
Pressure on infrastructure will intensify
Record heat will drive higher need for cooling at home and in the workplace.[1] At the same time, drought will trim hydropower output, increasing the risk of power shortages – and clashes between local communities and power-hungry industries like data centres. Competition for global fuel supplies will increase, raising prices and accelerating energy transitions to solar and wind. Political questions will intensify over who gets access to cooling and the duty of the state versus the private sector in funding mitigation.
Supply chains face increased disruption risk
Storms and flooding are familiar risks, but extreme climate conditions make extreme weather less predictable and more likely to exceed tolerances. Notably, El Niño conditions are coinciding with record Atlantic Ocean temperatures, which are associated with elevated flood risk in Europe. At the same time, drought also threatens to limit navigation along critical waterways, from the Rhine to the Panama Canal, increasing pressure on global shipping. Organisations should map their vulnerability to supply chain disruption, including dependence on suppliers exposed to natural hazards.
Climate policy will shift towards adaptation
A hot 2027 and the realisation that we will overshoot the international 1.5 C temperature goal will reset global expectations. Adapting to climate change will become a major driver of national strategy, commercial investment, and consumer preferences. There will be new regulatory risks as some countries embark on crash decarbonisation programmes. It will also confound generational aspirations, turning younger people further against government and corporate “establishments”. But the hottest year will also drive demand for new solutions for living with climate change.
Annual number of cooling degree days at 21C
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What to do
Organisations must focus now on resilience, both to the immediate risks of 2027 and the long-term risks of a hotter planet. No place – and no business model – will be unaffected. Everyone will have to adapt sooner or later.
Focus on four areas:
- Assess how environmental stress could impact local security dynamics and be prepared to surge support to affected operations. Over the longer term, organisations may need to rethink strategic objectives to incorporate awareness of how climate insecurity will affect the stability and viability of areas and projects. Geopolitical scenarios will need to account for the possibility of climate-driven conflict.
- Review stakeholder engagement to ensure good access to intelligence on prioritisation and power supply. Organisations should also budget for higher fuel and power costs and, in some places, be prepared to operate critical sites off-the-grid. Capital spending may need to be reallocated to ensure that organisations retain competitive advantage in climate-challenged environments or to strengthen resilience.
- Map vulnerability to supply chain disruption, including dependence on suppliers exposed to natural hazards.
- Start thinking strategically about new opportunities, from exploiting an ice-free Arctic to building climate-resilient infrastructure to optimising energy efficiency.
[1] In 2024, so far the hottest year on record, higher temperatures accounted for over 10% of the increase in global power demand. During northern hemisphere summer months in 2024, there were 10 more cooling degree days than the 20-year average. Read more
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