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BII: Most businesses in emerging economies already facing “significant impacts” of climate emergency

Published: 19 March 2024

Annual survey by UK’s development finance institution shows the extent of the impact already being felt by companies operating in countries most vulnerable to climate change.

Almost two-thirds of survey respondents in Africa, Asia and the Caribbean said they were concerned climate change could hamper the future growth of their businesses in the next five years | Photo by Milind Ruparel for Unsplash

Seventy-nine percent of companies in Africa, South and South-East Asia and the Caribbean say they are struggling with the consequences of global warming, a survey by British International Investment (BII) of 106 of its investee businesses and funds in these regions found. That’s up from 68% in 2022.  

BII’s third annual Emerging Economies Climate Report further revealed 59% had experienced an extreme weather event in the last five years with droughts, floods and heat cited as the biggest risks.  

“Businesses and entrepreneurs across the emerging economy markets in which we operate are on the front lines of the climate emergency,” said Amal-Lee Amin, managing director and head of climate, diversity and advisory, at BII.Their businesses are already feeling the significant impacts of the climate emergency.”

In the report, respondents stressed the importance of closing the climate finance gap needed to boost economic, political, and social prosperity of emerging economies. According to the Climate Policy Initiative, climate finance may jump to over $10trn each year from 2031 to 2050, from $1.3trn in 2021/2022.

“Clearly it is monumental challenge and not doing enough to transition early enough towards net zero economies will serve to increase physical climate risk and the associated costs of climate-related impacts,” Amin told Impact Investor, when asked what it will take to close the funding gap.

A concerted global effort is needed both to increase availability of climate finance as well as action to establish domestic and international enabling environments that accelerates and scales investment into projects and assets for emerging economies sustainable development,” Amin added.

Companies that aren’t equipped to manage and respond to the climate crisis are at risk of becoming “stranded assets”, warned Amin. “But what we are seeing in our markets are increasing opportunities for businesses to deliver necessary local solutions, that enable them to become part of the global economic transition to net zero and climate resiliency.”

‘Lacking knowledge’

Although many companies confirmed they were aware that taking action against climate change can be cost-saving and add long-term business value, they said they lacked the knowledge and resources to respond to climate risks and opportunities.

Respondents to the survey, which covered sectors ranging from financial services to fund managers, called for more technical training on how to respond to the climate emergency, as well as targeted investment and policy and regulatory action.  

“There is a cost that can make transitioning challenging,” said one respondent. “A smaller hospital providing healthcare in a rural area can’t afford the upfront cost of solar. The current frameworks and industry papers make it challenging for smaller SMEs to adopt.”

 As long-term investors in climate finance “it is the role of BII and others to equip these businesses with the capital and expertise to play a key role in the fight against the climate emergency and to safeguard their long-term viability”, said BII’s Amin.  

Future growth

Sixty-one percent of investee businesses in Africa, Asia and the Caribbean said they were concerned the climate emergency could hamper the future growth of their businesses in the next five years, compared to 56% in 2022.

“This report shows the overwhelming demand among firms in emerging economies for targeted investment to enable them to respond to the climate crisis,” said Nick Robins, professor in practice – sustainable finance at the Grantham Institute.

For business and investors in the Global South, there is now a strategic imperative to scale up capital flows in ways that bring a just transition for workers and communities, shaping the transition so it boosts quality jobs and gender equality,” Robins said.

There was progress in some areas, with a majority of firms saying they have  adapted their strategies to deal with climate change, while there was an increase of 7% in those surveyed saying they were calculating their carbon footprint compared to the year before.

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