India: Heat stress a growing business cost

Research evidence excerpt

India: Heat stress a growing business cost

Barclays | Sustainable Investing

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India is emerging as one of the world's most heat-exposed major economies, with heat

exposure structurally challenging businesses through direct and indirect cost increases. Besides

domestic companies, investors should also focus on multinational companies with India

exposure. We identify sectors that are exposed and how the companies disclose and address

the challenges.

• Heat exposure impacts business margins: Our analysis suggests reduced labour

productivity is the most direct transmission channel, with projected declines of ~2–4% for

indoor and ~18–35% for outdoor settings for every 1°C rise above the threshold

temperature. Other effects include agriculture yield loss, energy costs and supply-chain

disruption without adequate adaptation.

• High-risk location overlaps with key industrial activities: Our geographical exposure

assessment of 70 multinational companies finds 75% of the company facilities exposed to

medium-high to very-high heat-risk regions located in 10 Indian states, including

Maharashtra, Andhra Pradesh, Gujarat, Rajasthan and Karnataka. Sector exposure is

especially concentrated in Agribusiness, Metals & Mining, Autos & Auto Parts, and Capital

Goods.

• Disclosure and adaptation is limited to a few: Only 13 out of the 70 multinational

companies have disclosed the heat-stress risks specific to their India operations or supply

chains. Out of the 13, even fewer companies have elaborated on adaptation measures and

quantified the financial impact. We spotlight Alstom and Novartis with better transparency.