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According to study released on September 13 by Schroders (SDR.L) and Cornell University, extreme heat and flooding could wipe out $65 billion in garment export revenues from four Asian countries by 2030 as workers suffer in the high temperatures and factories close.
The study also analyzed the supply chains of six unnamed international clothing companies that operate in the four countries under investigation—Bangladesh, Cambodia, Pakistan, and Vietnam—and discovered that all six would suffer material losses. That might represent 5% of the annual group operating profits for one example brand.
According to a Reuters report, the findings should serve as a wake-up call for investors who are faced with a lack of information about firms' risks as well as the garment industry, which is experiencing huge financial losses.
None of the suppliers or customers we spoke with had either heat or flooding on their mind, according to Jason Judd, executive director of Cornell Global Labor Institute.
According to Judd, "the industry's response to climate change is all about mitigation, about emissions and recycling, and little to nothing with regard to flooding and heat."
In a warming world, it is crucial to understand the physical dangers that climate change poses to businesses. However, the process is still in its infancy, with few companies sharing sufficient information and few investors conducting accurate analyses.
According to Angus Bauer, head of sustainable investing research at Schroders, "there is so little data on this. Some [apparel] brands do not disclose the factory locations of their suppliers."
Schroders, which oversees more than 700 billion pounds ($874 billion) in assets, would interact with companies more about their disclosures, according to Bauer. Bauer also urged businesses to collaborate with suppliers and politicians to develop adaption strategies that take workers' needs into account.
The researchers estimated what would occur in a "climate adaptive" scenario and a "high heat and flooding" scenario using forecasts to analyze future heat and flooding levels.
As the wet-bulb globe temperature, which measures heat and humidity, rises, worker output would decrease as they would experience more "heat stress" under the second scenario.
The four nations, which account for 18% of global garment exports and employ 10.6 million people in apparel and footwear manufacturers, will also be forced to shut down their operations due to flooding.
According to the report, the entire reduction in productivity would result in a $65 billion shortfall in predicted earnings between 2025 and 2030, or a 22% decline, and 950,000 fewer jobs being generated.
Lost export revenue will amount to 68.6% by 2050, and there would be 8 millions fewer jobs.
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