Executive summary

Extreme heat is already impacting companies and the global economy, with rising temperatures expected to amplify these effects. Analysis of company disclosures indicates that workforce impacts are the most identified transmission channel for extreme heat, appearing in 50% of extreme-heat disclosures. Modelling suggests a substantial drag on global economic output, particularly in the Asia-Pacific (APAC) region and heat-sensitive sectors such as real estate and consumer staples. Currently, 81% of MSCI ACWI Index constituents experience some estimated heat-related revenue impact.

Rising temperatures, rising heat extremes

The years 2015–2025 were the 11 warmest on record globally, with 2025 temperatures approximately 1.43°C above the 1850–1900 pre-industrial average. As global warming approaches 1.5°C, extreme heat events that historically occurred once a decade are projected to occur 4.1 times per decade and be around 1.9°C hotter. Recent 2026 heatwaves in Western Europe, which saw temperatures 2.54°C above the seasonal average, illustrate how heat exposure constrains electricity supply, weighs on agricultural production, and directly affects the workplace.

Companies are already reporting heat-related workforce impacts

Extreme heat was the third-most frequently cited physical climate peril in analysed company reporting from 2023 to 2025, trailing only flooding and drought. Companies like Hapag-Lloyd AG reported slower terminal operations due to additional hydration breaks, while DHL Group incurred additional operating expenses to provide delivery workers with cooling equipment. Disclosures regarding workforce impacts are notably concentrated in Eastern and Southeastern Asia, reflecting both high exposure and corporate awareness.

Quantifying the financial impact of heat on labour productivity

The financial impact of heat is measured using wet-bulb globe temperature (WBGT), which incorporates temperature and humidity. Productivity declines more rapidly for physically demanding work, such as construction and agriculture. The modelling accounts for air-conditioned environments and physiological acclimatisation, where populations that frequently experience heat become more tolerant. However, acclimatisation provides only partial protection and does not eliminate productivity losses at high heat levels.

Extreme heat could place a growing drag on economic output

Under current climate conditions, global annual labour-productivity losses amount to roughly USD 3.9 trillion, or 2% of global GDP. Holding the current economy constant, this drag rises to 2.5% under the SSP2-4.5 intermediate-emissions scenario and 3.3% under the SSP5-8.5 high-emissions scenario over the next 75 years. This represents an increase of approximately 65% relative to current productivity drag. Unusually severe heat years could create episodic pressure exceeding 5% of GDP in extreme cases.

Physical intensity helps drive differences across sectors

Potential productivity losses vary significantly by sector. Real estate faces the largest impact under current conditions, equivalent to 4.7% of global economic output attributed to the sector. This is followed by consumer staples at 2.6%. These sectors rely heavily on physically intensive or outdoor work. In contrast, communication services and financials record the lowest impacts, as they are weighted toward sedentary and indoor occupations where workers are protected by air conditioning.

Sector and geography exposure compound one another

Estimated labour-productivity losses are highest in APAC at 2.8% of regional GDP (USD 2.4 trillion), compared with 1.7% in the Americas and 1.1% in EMEA. This regional disparity is amplified by economic composition; APAC has a 51% concentration of GDP in heat-sensitive sectors like real estate, consumer staples, industrials, and materials. Local climate conditions combined with economic structure can lead to substantially different productivity effects for the same type of economic activity depending on its location.

Deep dive on the real estate sector

The high sensitivity of the real estate sector reflects its link to construction activity. Heavy physical work capacity falls to only 8% at an outdoor WBGT of 40°C, representing a 92% reduction in productive capacity. These labour constraints can slow project completion, increase operating costs for protective measures, and affect revenue timing. Within individual markets, hotspots like Jakarta experience real estate productivity losses reaching nearly 12%.

Company exposure to heat is widespread but uneven

Around 81% of analysed companies show a heat-related revenue impact today. While the median estimated loss for affected companies is 1.25% of revenue, 19% face risks exceeding 2% of revenue. A smaller group of 32 companies, primarily property developers in APAC markets like Thailand and India, have more than 5% of revenue at risk. This indicates significant operational exposure for companies with physical operations concentrated in high-heat markets.

Companies are responding to heat, but adaptation varies widely

Nearly 40% of MSCI ACWI Index constituents do not disclose heat-related adaptation measures. Disclosure rates are highest in the utilities and real estate sectors (over 75%) and lowest in financials and energy. Monitoring and assessment account for 45% of disclosed activities, while infrastructure deployment, such as cooling infrastructure, accounts for 30%. Infrastructure and policy measures are more likely to translate into direct reductions in worker heat exposure than monitoring alone.

A warmer climate raises the stakes for workers and investors

For investors, heat risk is not always apparent from sector classification or domicile alone. Companies may face exposure through global operations and workforces across multiple markets. Combining asset-level heat exposure, workforce sensitivity, and evidence of adaptation can help distinguish which holdings face the greatest financial risk. As temperatures rise, understanding which companies are best positioned to manage this exposure will become increasingly critical for security selection and portfolio construction.