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ESG climate change risk in EM: Indian subcontinent heatwave reminder

  • Record extreme heat in recent weeks across the Indian subcontinent draws attention to climate change risk in EM

  • Measures of relative climate change risk include elevation (rising sea level) and water stress (drought)

  • Brazil, China, Sth Africa less risky than Saudi, Korea in large EM; Kenya, Turkey less than Egypt, Pakistan in small EM

ESG climate change risk in EM: Indian subcontinent heatwave reminder
Hasnain Malik
Hasnain Malik

Strategy & Head of Equity Research

Tellimer Research
12 May 2022
Published by

Temperatures recorded in March and April in parts of India and Pakistan were some of the highest ever recorded. Extreme heat, well above seasonal norms, across the Indian subcontinent draws attention to climate change risk more broadly in emerging markets.

Two measures of climate change risk for a country are:

  1. Elevation above sea level, ie protection from rising global sea levels – although the largest urban centres are often located in coastal areas, the availability of land at higher altitudes should mitigate the risk of rising sea levels; and

  2. Water stress, defined as annual fresh water withdrawal as a percentage of fresh water resources – although desalination technology offers an alternative to fresh water, the costs are clearly much higher.

Climate change risk in emerging markets

In this data, the following are noteworthy:

  • In large EM, Brazil, China and South Africa, for example, appear less at risk from climate change than Saudi Arabia and South Korea;

  • In small EM, Chile, Kenya, Morocco and Turkey, for example, appear less at risk than Bangladesh, Egypt, Pakistan and the UAE. Fresh water supply is one of the drivers of longstanding friction between Egypt and Ethiopia, and between Pakistan and India;

  • Exposure to the risk of rising sea level, at the overall country level rather than individual coastal cities, is most acute in Bangladesh; and

  • Water stress is extreme in the GCC countries of Kuwait, Qatar, Saudi Arabia and the UAE – literally off the scale in the chart above, so we recreate the chart below, with these countries highlighted.

Water stress is extreme in Kuwait, Qatar, Saudi, UAE

Our EM Country Index in this context

Our Tellimer EM Country Index includes a climate change risk factor, comprised of elevation, water stress and forestation. The index has customisable weights that can vary the importance of climate change risk or other ESG factors in the overall score.

Related reading

What is not considered above is the ethical question of how a country contributes to global pollution, measured, for example, by greenhouse gas emissions, fossil fuel subsidies or plastic waste generation. But we have explored those issues extensively before.

Environmental data on EM

The 'E' in ESG: 8 charts showing greenhouse gas emissions in emerging markets, Oct 2021

The 'E' in ESG: 4 charts on plastic waste in emerging markets, October 2021

The 'E' in ESG: 4 charts on water stress and deforestation in emerging markets, October 2021

Environmental geopolitics in EM

Success of COP26 depends on China and US: the rest are onlookers, Oct 2021

Biden's Climate Summit: The US-China cold war and the ESG context, April 2021