Increased risks in hotter cities
Cities and asset owners will need to mitigate the effects of “extreme heat” due to global warming, MSCI warns.
The index company claims: “Adaptation costs related to extreme heat may increase four-fold for companies if the world stays closer to its current trajectory (3°C) of warming, compared with a 1.5°C scenario.”
MSCI defines extreme heat as a day when the temperatures rises above 30°C. Under a 3°C scenario, by 2050, many cities could see 30-50 such days a year. “In the 3°C scenario, our model showed that the 10 cities would experience an average of 12 more extreme heat days a year in 2050 compared to 2022. For New York City, London, Los Angeles, Seoul, Shanghai, Moscow and Beijing this figure was at least 20% higher than in 2022,” MSCI researchers Matthew Lee and Anna Gevecke wrote.
A higher number of very hot days means more pressure on cooling systems, higher energy usage and the risk of infrastructure degradation due to hot weather, such as melting asphalt.
“Institutional investors, employers and governments may benefit from understanding the risks of business disruptions from extreme heat by comparing outcomes across a range of climate scenarios,” Lee and Gevacke said.