Businesses in emerging economies are increasingly feeling the consequences of the physical risk of climate change, according to a new study published by British International Investment (BII). It’s annual Emerging Economies Climate Report which gathers data from businesses in Africa, Asia and the Caribbean finds growing concern amongst corporates in developing countries.

“Businesses and entrepreneurs across the emerging economy markets in which we operate are on the front lines of the climate emergency. Their businesses are already feeling the significant impacts of the climate emergency,” says Amal-Lee Amin, Managing Director and Head of Climate, Diversity and Advisory, BII who said the physical impact of climate change is felt most acutely in sectors like agriculture.

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Flooding and heat

The report found 79% of companies surveyed said that climate change was already impacting their business, a 10% jump from 2022 levels. It also found nearly three quarters of surveyed corporates had experienced an extreme weather event in the last five years with droughts, floods and city heat the greatest cause for concern.

“Flooding is biblical, flooding is huge… if [rice] overflows with too much water, it’s a problem,” said survey respondent Okey Nwachukwu at Coscharis Farms, a Nigerian agricultural group.

Although long term respondents noted climate action leads to more long-term business success, corporate respondents flagged short-term concerns that lowering emissions and climate proofing their businesses will impede growth and viability.

The research found the majority of respondents (65%) have adapted their business strategies in response to climate change. Meanwhile, more are calculating their carbon footprint compared with last year (45%).

Still, despite many respondents highlighting that acting on climate can save costs and add long-term business value, they also noted they did not have the knowledge and resources to respond to climate risks and opportunities and build resilience – despite most of these economies having done little to contribute to it. It reflects a call for support around technical training and how to best target investment and policy around physical risk, said Nick Robins, Professor in Practice – Sustainable Finance at the Grantham Institute.

“This report shows the overwhelming demand among firms in emerging economies for targeted investment to enable them to respond to the climate crisis. 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,” he said.

One of the most pressing areas businesses need support is calculating their emissions. A total of 45% of respondents are calculating their carbon footprint (up from 38% in 2022), with 30% calculating only scope 1 and 2 emissions, and 15% calculating scope 1, 2 and 3 emissions.

Out of those calculating their carbon emissions, 23% have set reduction targets. Some firms are keen to monitor GHG emissions but lack the resources to do so – 80% of respondents who do not calculate their carbon footprint would like to start. Interviewees suggested they lacked sufficient expertise and advisory or capacity building support to measure their GHG emissions.

The survey found the most common strategic approach amongst businesses is to exclude investments in products and services that have a negative impact on the planet. Another common approach is to offer green or climate-friendly products, which 5% of respondents are doing. Keeping operational expenditures low is key to maintaining healthy profit margins. 48% of those who responded that climate change was affecting their financial planning said climate change has increased their operational expenditure, up from 30% in 2022.

Of those who responded that climate change was affecting their financial planning, 46% said climate change had affected their access to capital, down from 59% last year.