Some do and some don't. The locations are generally warm enough for that not to be a factor, and often they don't care about prudery. Some of them do make crude clothing. One woman made herself a bra, but didn't bother with a loin-cloth, so presumably she was more worried about comfort than modesty. One chap got wiped out by sunburn on the first day. Another guy got a thorn in his foot that eventually warranted a medical evacuation. The lack of clothes does make the challenge harder - although a swimming costume would do as well, and be less distracting. The production blurs out any naughty bits (apart from bottoms which are apparently OK), quite aggressively. I'd prefer more clothing and less blurring.

I've seen more episodes now. I'm really struck by how long it takes them to make fire - several days, even when they know how, if they don't have a fire-starter.