The physical impacts of climate change

Climate change is already driving more frequent and intense physical impacts in emerging markets and developing economies (EMDEs). These include extreme heat, droughts, floods, and storms, with significant risks to human health, agriculture, infrastructure, and productivity. By 2030, over 400 million people could be exposed to extreme heat globally, with EMDEs facing the most acute effects due to geographic and socio-economic vulnerabilities.

In India, heatwaves are increasing in frequency and severity, with outdoor workers especially affected. In Brazil, deforestation-linked climate shifts threaten rainfall patterns critical to agriculture. South Africa faces rising water stress and infrastructure risks. These physical changes are not abstract future threats—they are materially affecting development outcomes today.

The economic damages of climate change

Without stronger climate action, EMDEs could see GDP losses of up to 20% by 2050. Climate change affects economies by damaging physical capital, reducing labour productivity, and increasing public spending on disaster relief and adaptation. Agriculture, energy, and infrastructure are particularly exposed.

In India, economic modelling suggests that productivity losses from extreme heat alone could reduce GDP by 2.5–4.5% annually by 2030. Brazil’s economy could suffer from agricultural volatility linked to rainfall changes. In South Africa, water scarcity and infrastructure damage may increase costs and reduce economic resilience.

Costs of inaction outweigh mitigation investments, yet these economic risks are often excluded from core policy processes due to limited local data and modelling capacity.

The business case for climate action

Economic opportunities from climate action are substantial. Transitioning to a low-carbon economy could unlock investment, job creation, and health benefits. Clean energy, electric mobility, and energy efficiency offer significant co-benefits aligned with national priorities.

India’s renewables sector employed over 111,000 people in 2022, with further growth expected. In South Africa, clean energy investment could support over 500,000 jobs by 2050. Brazil can benefit from bioeconomy development and land use reform.

Health co-benefits from reduced air pollution—such as avoided premature deaths—also strengthen the economic rationale. However, these benefits must be communicated in terms of local development goals to be persuasive.

The barriers to economically rational climate action

Despite the clear economic rationale, action often lags. Decision makers face political, institutional, and technical barriers that limit the uptake of climate-economic evidence. These include short-term political horizons, misaligned incentives, and limited institutional capacity.

Economic evidence is frequently viewed as foreign, overly technical, or disconnected from local realities. Ministers and advisors often prioritise jobs, growth, and poverty reduction, and see climate action as a potential trade-off.

The report highlights a lack of trusted, locally relevant data and limited integration of climate analysis into fiscal and planning decisions. Existing models rarely address distributional impacts or implementation challenges, further limiting their influence.

Five priorities for leaders

• Reframe the message – Emphasise the local development benefits of climate action, such as jobs, health, and energy security.
• Empower trusted messengers – Use respected national institutions and economic voices to convey the message.
• Improve delivery mediums – Make evidence accessible through visuals, local languages, and concise formats.
• Target the right moments – Align communication with policy cycles and reform windows.
• Build local capability – Strengthen domestic data systems, modelling, and institutional capacity to produce and apply economic evidence.

Together, these steps can help national leaders better integrate climate risk and opportunity into economic planning.