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Study Reveals Potential $65 Billion Export Loss for Asian Apparel Hubs Due to Extreme Weather


LAHORE MIRROR — A recent study conducted by Schroders and Cornell University has raised concerns about the potential devastating impact of extreme heat and flooding on apparel export earnings in four Asian countries by 2030.

The research suggests that these environmental challenges could wipe out $65 billion in earnings, affecting both workers and global apparel brands operating in Bangladesh, Cambodia, Pakistan, and Vietnam.

The study also shed light on the vulnerability of six undisclosed global apparel brands with operations in these countries, revealing that all of them would face significant material impacts. For one of these brands, the losses could amount to as much as 5% of their annual group operating profits.

The report’s authors have emphasized that these findings should serve as a wake-up call to the apparel industry, which is confronted with substantial financial risks, and to investors who currently lack adequate information about these companies’ exposures.

Jason Judd, the executive director of Cornell Global Labor Institute, noted that among the suppliers and buyers they spoke to, none were actively addressing the issues of heat and flooding. He expressed concern that the industry’s focus has predominantly been on mitigation efforts related to emissions and recycling, with little attention paid to the physical risks associated with climate change.

Understanding the physical risks that climate change poses to businesses is crucial, but it remains a relatively new field with limited disclosure by companies and insufficient assessments by investors. Angus Bauer, the head of sustainable investment research at Schroders, announced the firm’s intention to engage more with companies regarding their disclosures and urged businesses to collaborate with suppliers and policymakers to develop adaptation strategies that take into account the well-being of workers.

The study analyzed future projections of heat and flooding levels, considering both a “climate adaptive” scenario and a “high heat and flooding” scenario. In the latter, workers would experience more heat stress, leading to a decline in productivity as the wet-bulb globe temperature, which measures heat and humidity, rises. Additionally, flooding would force factory closures in the four countries, which collectively contribute to 18% of global apparel exports and employ 10.6 million workers in apparel and footwear factories.

As a result, the study estimates a $65 billion earnings shortfall between 2025 and 2030, equivalent to a 22% decline, and a loss of 950,000 jobs. Looking further ahead to 2050, the projected losses in export earnings would reach 68.6%, with a staggering 8.64 million fewer jobs in the sector. These findings underscore the urgent need for businesses and investors to address the growing climate-related risks facing the apparel industry in Asia.

Source: Reuters