The Office for Budgetary Responsibility published its Fiscal Risks and Sustainability Report on 8 July. It makes for grim reading. The headline is that public finances are fragile with the UK’s debt likely to hit 270% of GDP by 2070. This compares with just short of 100% today and climate risks are a major driver. 

The OBR’s report points out that investment in reaching net zero is far cheaper than previously thought – 50% less. Meanwhile, estimates of the cost of climate-related damage are higher, based on a central scenario where temperatures rise to just below 3°C above pre-industrial levels. Last year, the UN warned that we are on track for a 3.1C trajectory. 

The OBR modelling estimates that these impacts will reduce the level of UK gross domestic product by 8% by the early 2070s, three percentage points more than in the 2024 report, with a worst-case estimate of a 27% drop. 

The key point – one that is also central to ICAEW’s position on sustainability – is that these crises of planet and people are also a looming economic crisis and therefore a core business and financial issue. This has significant implications for UK businesses. 2100 may seem a long way off, but the effects are already happening. 

Adaptation needed now

In July, a report published by scientists led by Mike Kendon of the Met Office National Climate Information Centre in Exeter says that extreme weather is now the norm in the UK. Heatwaves and intense rain and flooding have all increased dramatically in intensity and frequency. This results in a host of social and economic impacts. Alongside increased deaths (600 people are believed to have died due to the heatwave that hit England and Wales at the end of June), health issues and social disruption, there is damage to infrastructure, significant business interruptions, loss and increased costs, supply chain turmoil and reduced productivity and profitability. 

The UK is unprepared. The Climate Change Committee’s Progress in adapting to climate change: 2025 report to Parliament had three key messages: 

• The UK’s preparations for climate change are inadequate. Delivery of effective adaptation remains limited and, despite some progress, planning for adaptation continues to be piecemeal and disjointed.
• The government has yet to change the UK’s inadequate approach to tackling climate risks.
• The government must act without further delay to improve the national approach to climate resilience. A new approach is still possible.

Society needs to adapt fast, acting now to build resilience into the economy – for example, through investment in climate resilient infrastructure and agriculture, nature-based solutions and early warning systems. 

However, even with aggressive emissions cuts, there will be some impacts we can’t avoid – such as water scarcity, heat stress on workers and ecosystem losses. We can adapt, but only up to a point. Adaptation is essential, but must go hand in hand with deep emissions cuts through transitioning to low carbon business models. 

Net zero key to growth

The good news is that a sustainable economic transition is also key to delivering resilient future growth. As the government’s Industrial Strategy makes clear, sustainable and green economic sectors are among the fastest growing, offering significant productivity gains. 

The UK net-zero sector grew by 10.1% between 2023 and 2024, generating £83.1bn in gross added value and supporting 951,000 fulltime jobs. Each job in this sector generates £105,500 in economic value, 38% above the UK average. The green economy has the potential to grow from 0.8% to 6% of GDP by 2050. 

For growth to be sustained, it must be sustainable. Bold government action is needed now to capture this prize. 

Acting on these sustainability issues also makes good business sense. 

The sector plan for Professional and Business Services within the Industrial Strategy also sees sustainability as a key growth area.

In addition, the government is looking to develop a UK sustainability reporting framework that is “fit for the long term” and aims to “deliver decision-useful and credible information about sustainability and climate-related financial risks and opportunities to investors”. The government sees this framework as “fundamental to building and promoting secure and sustainable growth”. 

It has begun by consulting on the endorsement of the UK’s Sustainable Reporting Standards; the regulation of the sustainability assurance market; and the implementation of its manifesto commitment to bring in transition plans for large businesses and financial institutions.

The aim is not compliance but strategy, providing decision-useful information to the markets to enable the effective allocation of capital to drive a sustainable economy and secure public finances.

Role of accountants

The accountancy profession has a big role to play in enabling organisations to respond to the climate crisis, both within industry and in practice. 

ICAEW’s latest 2025 market-wide research on the evolution of mid-tier UK accountancy firms showed that 44% of firms plan to start offering environmental, social and governance services within the next three years. 

Many businesses are already taking steps, integrating climate, nature and wider sustainability issues into their risk assessment, strategy and reporting processes. 

With physical risks rising fast – and markets showing an increasing trend towards improved corporate sustainability performance and transparency – sustainability is also becoming a core element of any resilient long-term business strategy.

Finance professionals have the skillsets to help organisations navigate the complexities of measuring emissions, valuing non-financial capital, assessing risks and building the business case for action now. As the OBR’s Fiscal Risks and Sustainability Report highlights, change cannot wait.