Heat adaptation gap grows as climate spending lags
McKinsey Global Institute researchers say heat could affect more people and drive more adaptation spending than floods, drought or wildfires.
By Sofia Marchetti · World Affairs Correspondent
3 min read
Global climate adaptation plans are giving too little attention to extreme heat, according to McKinsey Global Institute researchers. Their analysis says heat is likely to affect more people than other major climate hazards and could take the largest share of future adaptation spending.
Sylvain Johansson, Mekala Krishnan, Kanmani Chockalingam and Annabel Farr wrote in Fortune that the Northern Hemisphere summer has opened with severe heat across multiple regions. They cited record temperatures in Europe, a heat dome over much of the United States, heat-related deaths in several countries, melted roads in Germany and rising cooling demand that has pushed some U.S. utilities to ask customers to raise air-conditioning settings and add outage crews.
The authors said the response to climate risk has often centered on flooding, while heat now requires comparable attention. A recent McKinsey Global Institute report found that spending on heat protection can pay off, with each dollar invested today avoiding an estimated $3 to $5 in damages.
McKinsey’s researchers said air conditioning is only one part of the response. Other measures include fans, cooling shelters, improved building and infrastructure design, reflective roofs, urban trees, weather forecasts and early warning systems. They also cautioned that some tools have limits and cannot shield people from every heat-related risk.
Billions have limited protection
The institute’s analysis examined four hazards: heat, drought, wildfires and flooding. It also assessed 20 established adaptation measures, according to the authors.
They estimated that current global adaptation spending of about $190 billion a year protects 1.2 billion people. Roughly three billion people have limited protection, they said. Among people currently living in areas exposed to heat stress, only 18% have access to air conditioning, according to the analysis.
Extending protection to all 4.1 billion people exposed to the four hazards would require annual spending of about $540 billion, the researchers said. That would be nearly three times today’s spending level.
The gap widens under further warming. At 2 degrees Celsius above preindustrial levels, which the authors said the world is expected to reach around 2050 on its current emissions path, another 2.2 billion people may face heat stress. That increase would be larger than the projected rise in exposure to drought or flooding, according to McKinsey Global Institute.
At that level of warming, protecting against all four hazards would cost about $1.2 trillion a year, the researchers said. Nearly three-fifths of that total would go to heat adaptation.
Companies face rising costs
The authors said climate risks are becoming a bigger concern for businesses as more severe impacts affect workers, supply chains and physical sites. Their analysis found that more than half of total adaptation costs at 2 degrees Celsius would fall on private actors, including individuals and companies.
Government planning can change corporate decisions, the researchers said. A company operating in a city with a heat-action plan, resilient building rules or publicly built cooling shelters faces a different set of choices than one in a place without those protections.
Businesses can also act directly, according to the authors. They cited investments in air conditioning and temporary cooling shelters as steps that can protect people during dangerous heat while helping factories, warehouses, offices and service operations keep working.
The researchers said many companies already take steps that amount to adaptation, such as designing sites for extreme weather, holding extra inventory against supply shocks and installing backup power for storms. But they said corporate efforts often focus on direct operations rather than supply chains, distribution networks and the communities where companies operate.
McKinsey’s authors described three broad business responses: protecting assets with cooling systems, firebreaks, microgrids or lower-risk site selection; strengthening suppliers, customers, workers and communities; and building businesses around resilient infrastructure, adaptation technology or financing. They said companies that move early may protect their finances while helping build a more resilient economy.
This story draws on original reporting from Fortune.