Retail pricing is indirectly exposed to climate and nature risks through their impacts on upstream supply chains, including raw materials, production, and logistics. Extreme weather events, resource scarcity, and environmental degradation can disrupt supply and increase input costs globally, with cascading effects on retail prices across both developed and developing markets. Consumers in most markets are sensitive to price increases, but the degree and nature of sensitivity differ. In some markets, rising prices may shift consumer behaviour toward value alternatives, private labels, or reduced discretionary spending. Â
In other markets, where a larger share of income is spent on essentials, even small price increases can significantly reduce purchasing power and access to goods. High inflation linked to climate impacts (e.g., food and energy) further increases sensitivity across both contexts.
Vulnerabilities
What could affect pricing & affordability?Â
The climate and nature pressures that make pricing & affordability unpredictable.
Climate and nature-related hazards such as extreme weather events, resource scarcity, and ecosystem degradation directly influence the cost base of goods and services across global value chains. These hazards can disrupt production and logistics systems, contributing to cost volatility and inflationary pressures. Where economies are often more exposed to climate-sensitive sectors (e.g. agriculture, natural resources), these hazards can have more immediate and pronounced effects on input costs and supply availability.
Acute disruptions and long-term environmental change can increase the frequency and scale of price fluctuations, affecting retail affordability.
Where do pricing & affordability risks originate?Â
How exposed pricing & affordability are to climate and nature risk.
Exposure to changing consumer needs is shaped by the alignment between a retailer’s product portfolio and climate-sensitive demand drivers. Businesses with product ranges tied to stable seasons, specific environmental conditions, or discretionary consumption are more exposed to shifts in demand. In markets where exposure may arise from reliance on established consumption trends and slower product cycles.
In other markets, exposure is often heightened by concentration in climate-sensitive categories (e.g. food, basic goods) and evolving consumer preferences influenced by income volatility and environmental pressures. Limited visibility into rapidly changing demand patterns can increase exposure to misalignment.
How dependent are businesses on price & affordability?Â
Why some retailers are more sensitive to cost and price pressures.
Sensitivity reflects how retailers and consumers respond to changes in price levels and cost pressures. It is influenced by competitive pricing environments, margin constraints and consumer willingness to switch brands, reduce discretionary spending or trade down.
Sensitivity is typically higher, as a larger share of household income is spent on essential goods, and consumers have less capacity to absorb price increases. Limited flexibility in pricing strategies, low-margin business models, and highly price-sensitive customer segments increase vulnerability to even modest cost increases.
How could price & affordability disruption spread?
What are the wider knock-on effects of pricing & affordability disruption.
Retailers may face margin compression, increase in promotional intensity and shifts in demand toward lower-cost or substitute products. Impacts are often more immediate and severe, including reduced consumer purchasing power, contraction in demand and shifts toward informal or lower-quality alternatives.
Sustained affordability pressures can increase revenue volatility, complicate pricing strategies, and require adjustments to product mix and market positioning, ultimately affecting competitiveness and growth.
