The export-focused industries of India, including aluminium, iron, and steel, are increasingly vulnerable to risks from climate inaction. These regulatory shocks threaten their profits, operations, and long-term prospects, PTI reported, citing global consulting firm BCG.
India ranks among the top 10 countries most affected by extreme weather events, as the ‘Climate Risk Index 2026’ launched at COP30 reveals, and the cost of inaction for India is too significant to ignore, BCG Managing Director and Senior Partner, Asia Pacific Leader, Climate & Sustainability, Sumit Gupta, told the news portal.
Referring to data from the Reserve Bank of India (RBI) and the World Economic Forum, he pointed out that up to 4.5% of India’s GDP could be at significant risk of decline due to climate-induced extreme events by 2030. Additionally, by the end of the century, climate-related issues might cost India between 6.4% and over 10% of its national income.
“Businesses face the direct brunt of these risks,” Gupta was quoted as saying. He further explained that climate-induced extreme events destroy physical infrastructure, cause a loss of labour hours, and reduce productivity. These events can also cause indefinite delays in project completion and lead to decreased investment efficiency in regions with high climate risk.
What are the financial consequences of climate change?
Speaking on the financial implications of climate change on Indian companies and businesses, BCG Managing Director and Partner, India Lead, Climate & Sustainability, Anirban Mukherjee told PTI, “The impact is more pronounced today for export-driven businesses in India, especially hard-to-abate ones such as aluminium, iron and steel, that face international regulatory shocks.”
The EU’s carbon border adjustment mechanism (CBAM) is projected to affect approximately $7.7 billion, or 10-11%, of India’s exports to the EU, he noted.
Mukherjee said, “Climate inaction is increasingly exposing businesses to escalating risks that threaten profits, operations, and long-term viability.”
BCG’s estimates indicate that direct climate risks alone could threaten between 5% and 25% of the 2050 EBITDA for global businesses, he added.
However, Gupta and Mukherjee pointed out that Indian companies are aware of the seriousness of the climate challenge, which threatens both their profitability and long-term sustainability.
Citing Corporate Sustainability Assessment, Gupta stated that one-third of large Indian companies consider climate strategy among their top three material issues. These companies are among 187 India-based firms, which account for 85 per cent of the market capitalisation.
He noted that while roughly 40 per cent of firms based in India perform physical risk assessments, a significant portion of corporate India remains behind.
Climate change risk on MSMEs
Regarding the impact of climate shocks on supply chains, particularly on MSME suppliers, Mukherjee stated that the inability of MSMEs to manage such climate risks directly affects the supply chains of Indian corporations.
He mentioned that most large companies in manufacturing, automotive, consumer goods, textiles, and construction source nearly 60-70% of their components or services from MSMEs. For example, in the automotive sector, approximately 70% of parts and sub-assemblies are supplied by tier-2 and tier-3 MSMES.
Recognising that MSMEs are also a vital part of India’s export economy, contributing about 45% of the country’s total export value, Mukherjee remarked, “Almost 20-30 per cent of India’s MSME exports could eventually face direct or indirect CBAM-related compliance or cost exposure.”