Despite Current Challenges, The Climate Risk Software Market Will Grow At An 18% CAGR

Despite Current Challenges, The Climate Risk Software Market Will Grow At An 18% CAGR

According to the latest Verdantix research, the climate risk software market will grow from $504 million in 2022 to over $1.3 billion by 2028. The market will grow at a compound annual growth rate of 18%, driven primarily by the global rollout of mandatory climate disclosures.

A previous Verdantix study indicated a higher growth rate than our updated figure; while our current predictions mostly signify a change in study scope, it also indicates lower investment throughout the full period of the forecast. This prognosis is due to a number of dampening factors. Firstly, the global economy has slowed, with elevated inflation and the threat of a recession driving organizations to deprioritize climate risk for more immediate concerns. Secondly, climate disclosure regulations are facing delays; the SEC climate rule faces setbacks and Canada and South Korea are awaiting movement in the US before finalizing their disclosure laws. Finally, limited corporate climate risk expertise and the challenges of long time horizons mean that firms struggle to align the complexity of climate risk analysis with modern business practices, hence requiring more support from consultancies. Accordingly, where climate risk software does see investment, we anticipate sales to be frequently paired with consulting engagements.

Market growth will be driven by mandated climate disclosures such as the EU’s Corporate Sustainability Reporting Directive, coming into effect in 2024 and impacting tens of thousands of organizations. EU firms face additional scrutiny through the Corporate Sustainability Due Diligence Directive, while the European Central Bank is cracking down on banks not meeting climate risk management expectations. Climate disclosure regulations are not just coming into effect in Europe; they have already rolled out across the APAC region in New Zealand, the Philippines, Singapore, Taiwan and Thailand. The regulatory imperative, alongside the expanding numbers of climate litigation cases, extreme weather events and ongoing voluntary sustainability reporting, will drive spend on climate risk software.

To learn more about how climate risk software market growth differs by region and industry, read our Market Size And Forecast: Climate Risk Software 2022-2028 (Global) and watch the webinar Climate Risk Software: Navigating A Challenging Market.