Rising business risks seen in developing economies due to climate change – Report

• Businesses in EM feeling impact of climate change

• Drought, extreme temperature top risks for African businesses

Joy Agwunobi

Climate change poses a significant threat to businesses and economies across the globe, and its impact is being felt the hardest by businesses in developing countries, according to the British International Investment’s Emerging Economies Climate Report.

The report, which focused specifically on businesses in developing countries such as Nigeria, said countries are particularly vulnerable to the effects of climate change, due to their geographical location, their reliance on sectors such as agriculture, and their lack of adaptive capacity.

The findings of the report were released at an event co-hosted by the Grantham Research Institute on Climate Change and the Environment and the Overseas Development Institute, two organisations that are committed to understanding and addressing the challenges of climate change. The findings highlight that the impacts of climate change are accelerating, with the number of businesses affected by its effects increasing from 68 percent in 2022 to 79 percent in 2023.

The report found that 72 percent  of corporate organisations surveyed had experienced an extreme weather event in the last five years, such as droughts, floods, and heat waves. It stated further that these extreme weather events are expected to become more frequent and severe in the future, which will pose an even greater threat to businesses and economies.

Notably, the survey revealed that different sectors and types of businesses reported varying levels of impact from extreme weather events. Agricultural businesses were particularly impacted, as the nature of their work makes them particularly vulnerable to the effects of droughts, floods, and other extreme weather events.

The survey also examined the specific physical climate risks that businesses in Africa are facing, both at present and in the future. Drought was found to be the most pressing risk at the moment, with flooding and extreme temperatures close behind. For the next five years, businesses are most concerned about the risks posed by drought and extreme temperatures.

The survey asked businesses to look ahead 10 years and assess the physical climate risks they expected to face. The findings revealed that drought and extreme temperatures were considered the top two risks, with flooding a close third.

To effectively address the physical climate risks facing businesses, the report highlights the need for more information and support. This includes access to better data and risk modelling, more comprehensive climate science research, and financial tools to help businesses plan for and adapt to climate change.

The survey also found that although businesses are aware of the long-term benefits of climate action, they often lack the know-how and resources to implement the necessary changes. The majority of respondents said they would benefit from more technical training on how to implement climate-friendly solutions, as well as targeted investment and policy support.

Commenting on the report, Amal-Lee Amin, managing director/head of climate, diversity and advisory at British International Investment,  said: “Our research shows that businesses in emerging economies are already feeling the impacts of climate change. As investors, it is our responsibility to provide capital and expertise to help businesses in these markets adapt to and mitigate the effects of climate change.”

Nick Robins, professor in practice – sustainable finance – at the Grantham Institute, said that the survey findings demonstrate the importance of targeted investment for businesses in emerging economies that are seeking to tackle the climate crisis. The expert in sustainable finance noted  that it is crucial to ensure that this investment is fair and just, so that the people and communities who are most affected by climate change are also able to benefit from the transition to a low-carbon economy.

Robins pointed out that the report highlights the need to increase access to capital for businesses and communities in emerging economies, in a way that is fair and just. He added that this should include promoting quality jobs and gender equality, as well as investing in infrastructure and other initiatives to improve living standards in these economies.