Climate risk is rising – but boardroom attention is falling

A critical role of directors is keeping an eye on the horizon: scanning for emerging risks, testing assumptions and ensuring the organisation is prepared to pivot as conditions change. Whether driven by industry disruption, geopolitical shifts, technological change, environmental pressures or financial market volatility, the ripple effects for New Zealand organisations may be distant for some, and material or even destructive for others.

The World Economic Forum’s Global Risks Report, released last week, has become a key annual reference point for boards seeking to understand this wider risk landscape. Drawing on insights from its large global survey of business, government and academic leaders, the report assesses the most significant risks facing the world across short- and long-term horizons. Importantly, it also highlights how risks interact and compound, offering a lens not just on what is changing, but on where governance attention is most needed.

The 2026 report lands at a time when uncertainty is no longer episodic but has become structural. The Institute of Directors’ 2025 Director Sentiment Survey shows boards are already grappling with global economic and geopolitical uncertainty, identified by 45.2% of directors as a significant impediment.

An “age of competition”

The report describes the current context as an “Age of Competition”, characterised by intensifying geoeconomic rivalry, security-driven policy settings and weakening international cooperation. In the short term, geoeconomic confrontation is identified by respondents as the risk most likely to trigger a material global crisis.

This framing reflects what many are already experiencing. Trade, finance, technology and supply chains are increasingly shaped by geopolitical considerations. What once seemed like high-level policy is now influencing how organisations operate.

This matters because many of the risks organisations face – climate impacts, supply chain dependencies, access to critical resources, technology infrastructure – are inherently global. As multilateral coordination shifts and weakens, the assumption that governments or international institutions will provide stable, predictable frameworks becomes less reliable and governance responsibility is shifting accordingly.

Short-term pressure, long-term risk

One of the more challenging signals in the 2026 report is the decline of environmental risks in short-term rankings relative to other categories. Climate change, biodiversity loss and ecosystem collapse remain among the most severe long-term risks identified, yet they are increasingly crowded out by immediate geopolitical and economic pressures.

The report is explicit that this shift does not reflect reduced environmental danger. Rather, it reflects changing priorities in a world focused on near-term stability.

At the same time, 73% of respondents expect a turbulent environmental decade, making this category the most pessimistic of all risk groupings. From a governance perspective, this creates a familiar tension: risks that unfold over time but compound rapidly are easier to defer, particularly when boards are managing acute shocks elsewhere.

Interconnected risks, not isolated threats

For the second year running, inequality is identified as the most interconnected global risk over the next decade. It is not framed as a social issue alone, but as a driver of political polarisation, erosion of trust and institutional fragility. This matters because trust, legitimacy and social licence increasingly shape organisational resilience.

The report also highlights a sharp rise in the perceived severity of artificial intelligence-related risk over the longer term. AI ranks relatively low in the short term but moves into the top five over a ten-year horizon – the largest upward shift in the risk rankings.

The report does not predict a single outcome, instead it reflects uncertainty about how rapidly AI adoption, infrastructure demands, governance gaps and unintended consequences may emerge. This reinforces the need to govern not just current technology risks, but system-level impacts including energy demand, water use, data infrastructure and workforce disruption.

A quieter vulnerability: critical infrastructure

One of the more striking aspects of the 2026 report is that disruptions to critical infrastructure rank relatively low over the next decade, despite moving up in the overall risk rankings.

In the report, critical infrastructure refers to the systems that underpin economic and social functioning, including energy, water, transport, digital networks and communications. These systems are increasingly exposed to a combination of extreme weather events, cyber incidents, geopolitical conflict and competition for resources.

What makes this risk particularly challenging is interdependence. Energy systems rely on digital networks; water systems depend on power; transport and logistics rely on all three. Failure in one system can cascade rapidly into others, amplifying disruption well beyond the original point of failure.

From a governance perspective, this raises an important question: are some risks being assessed too narrowly? Infrastructure resilience often spans organisational, sectoral and national boundaries, making it harder to anchor within traditional enterprise risk frameworks.

Boards may therefore need to look beyond ranking tables, and test how exposed their organisations are to system-level failures that sit outside direct operational control, but have material consequences for continuity, reputation and financial performance.

From global risk to balance-sheet impact

Environmental and nature-related risks are becoming increasingly financial.

The energy transition, digitalisation and AI deployment are driving unprecedented demand for critical minerals and strategic resources. Many of these are located in environmentally sensitive or geopolitically complex regions. The report identifies biodiversity loss as the risk showing the sharpest deterioration in perceived severity over the next decade.

Marsh, a lead strategic partner to the Global Risks Report, reinforces this point in its analysis, noting that climate and nature-related risks are increasingly material through physical damage, supply-chain disruption, insurance availability and asset valuation, not just through regulation.

This underscores the need to treat climate and nature as core business risks, embedded within enterprise risk management and long-term strategy, rather than as separate sustainability considerations.

Technology helps – but does not remove risk

The report recognises the role of innovation, including advanced climate modelling, early-warning systems and data-driven decision-making. However, it also cautions against assuming that technology neutralises risk.

AI infrastructure, for example, drives increased energy and water demand. Data centres can exacerbate local resource constraints. Competition for technological leadership can accelerate extraction pressures and environmental degradation if not governed carefully.

This highlights the importance of asking not just what technologies are adopted, but how their broader impacts are understood, monitored and managed.

What this means for directors in 2026

The Global Risks Report reinforces several governance priorities already emerging in New Zealand, many of which are reflected in the Institute of Directors’ Top 5 issues for directors in 2026.

• • Governing in conditions of persistent uncertainty, rather than assuming a return to stability
  • Strengthening board capability across geopolitics, AI, climate and nature through board composition, committees or advisory support
  • Maintaining focus on long-term resilience, even as short-term shocks dominate agendas
  • Recognising trust, inequality and social licence as strategic risks
  • Embedding climate and nature into core governance processes, rather than managing them in isolation

Perhaps the most significant governance signal in the report is implicit rather than explicit: waiting for clearer global coordination or political certainty is unlikely to be a viable strategy. As multilateralism weakens, the strategic importance of board-level leadership increases.

A final reflection

The Global Risks Report does not suggest that every risk can be predicted or controlled. It does, however, reinforce that how boards prioritise, connect and govern risks will shape organisational resilience more than any single external factor.

Environmental breakdown, inequality, technological disruption and geopolitical competition are not sequential challenges. They are interacting forces.

The task is not to forecast the future with precision, but to ensure organisations are positioned to navigate it without assuming that the conditions for action will become easier with time.