Indian companies stand to lose ₹7.14 lakh crore to climate change — but they could end up making ₹2.9 lakh crore too

Indian companies stand to lose ₹7.14 lakh crore to climate change — but they could end up making ₹2.9 lakh crore too
Black smoke emanate out of chimney of mixing plant near Jharkhand Assembly Building in Dhurwa area in Ranchi on 9 August 2020BCCL
  • Indian companies stand to lose ₹7.14 lakh crore to the impact of climate change if they do not take mitigation measures over the next five years, according to the Carbon Disclosure Project’s (CDP) 2020 annual report.
  • If they do it right, the firms also stand to gain ₹2.9 lakh crore from the opportunities that will emerge.
  • This means having more efficient production and distribution processes, using lower-emission sources of energy — like solar — and manufacturing low-emissions goods and services.
Climate change is not just making skies more grey, killing off biodiversity or risking coastline flooding — it may also cost Indian companies a whopping ₹7.14 lakh crore ($100 billion) over the next five years.

Indian companies stand to lose ₹7.14 lakh crore to climate change — but they could end up making ₹2.9 lakh crore too
According to the CDP, acute physical risks are a greater threat to companies involved in 'direct operations. Meanwhile, chronic physical risks, which are more long-term risk factors like rise in sea levels, change in temperature, and the loss of biodiversity, are a bigger concern with downstream players. Upstream players see emerging regulation as the biggest threat to their business.BI India

A new report by the Climate Disclosure Project (CDP) highlights, “India is walking down a parallel and inconsistent pathway.” On the one hand, it is pushing for electric vehicles, solar power and other forms of renewable energy. And, on the other hand, it is also promoting coal mining and allowing private investors into the market to dig up more fossil fuels.

Which, is why it is unsurprising that companies within India see regulation and the uncertainty around it as one of the biggest risks in pursuing climate mitigation initiatives.
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Indian companies stand to lose ₹7.14 lakh crore to climate change — but they could end up making ₹2.9 lakh crore too
According to the CDP, regular compliance checks, increased stakeholder concern and sustainably evolving consumer demands, climate-related risk assessment procedures can help companies become better equipped to handle longer-term uncertainties and liabilities as a fix for the risk posed by regulation.BI India

If done right, it also puts up an opportunity worth ₹2.9 lakh crore on which these same companies can capitalise.

The main drivers behind these opportunities were use of more efficient production and distribution processes, use of lower-emission sources of energy and the development or expansion of low-emission goods and services.

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Indian companies stand to lose ₹7.14 lakh crore to climate change — but they could end up making ₹2.9 lakh crore too
According to the CDP, resource efficiency is a priority for companies involved in 'direct operations'. Downstream players see product and services as the bigger opportunity, while upstream players are banking on energy source changes as well.BI India

Countries like India will bear the brunt of climate change
The worrying aspect is that countries like India are more at risk from the negative effects of climate change than others. According to a working paper by researchers at the Princeton University, the welfare loss for hotter countries — like India, and those in South America and Africa — is much higher than its counterparts.

Indian companies stand to lose ₹7.14 lakh crore to climate change — but they could end up making ₹2.9 lakh crore too
Glacier Burst at Reni Village of Chamoli District triggered a massive flood in Uttrakhand's Joshimath area on February 7BCCL

Welfare loss accounts for migration costs, trade costs, and the cost of innovation. The sooner companies get ahead of the curve, the easier it will be to stay on top of the climate crisis before it reaches a point of no return.

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The impact of climate change is different not only between countries but there are large deviations within a country. The Reserve Bank of India (RBI), in a report released in April 2020, said that agricultural states, like Punjab and Bihar, will be more affected by global warming than others.

Indian companies stand to lose ₹7.14 lakh crore to climate change — but they could end up making ₹2.9 lakh crore too
Narayanan, a farmer at Kuzhippoyil near Kottathara in Wayanad, who lost his entire plantain farm during the 2018 Kerala floodsBCCL

More Indian companies are taking the fight against climate change seriously
Around 220 businesses in India disclosed their climate action plans to the CDP this year. Among them, four Indian companies have received the prestigious CDP A-grade for the first time.

A score of ‘A’ means that a company is at leadership level. The companies are scored based on the comprehensiveness of disclosure, awareness and management of environmental risks and demonstration of best practices associated with environmental leadership — like setting ambitious and meaningful targets. That means not only do they have to look good from a branding perspective, but also be backed by actual action.
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Top ten Indian companies on the CDP’s list:
CompanyGrade given by the CDP*
Hindustan ZincA
IndusInd BankA
Mahindra and MahindraA
Tech MahindraA
Godrej Consumer Products LimitedA-
InfosysA-
JSW SteelA-
MaricoA-
MindtreeA-
Tata CommunicationsA-
Source: CDP *Based on the information that companies provide they get a score from A to D. A=Leadership level, B=Management level, C=Awareness level, and D=Disclosure level.

Around 51 Indian corporates announced science-based targets to aid India’s transition to becoming a next-zero carbon economy — putting India ahead of Switzerland and the Netherlands.

Top 10 countries with science based targets (SBTs) to mitigate climate change:
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CountryNumber of companies with SBTs
US200
UK128
Japan107
Sweden57
India 52
Germany52
Switzerland33
Netherlands29
Spain29
Australia27
Denmark26

The CDP believes that the business community is uniquely positioned to innovate and execute solutions with greater rigour and efficiency by integrating sustainability in the core business decision making.

This is in line with what the billionaire founder of Microsoft, Bill Gates, disclosed at World Economic Forum (WEF) Davos 2021, “I think the way forward here is to connect these private sector payments to innovation. If you just have some wealthy companies that are not in the industrial sectors, where the extra-green cost would make their products non-competitive. If they are just dealing with their portion, it is a very small percentage.”

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