Climate1 min read

Commentary: Extreme weather risk is scaring big firms away from poor countries

By · Published by Everything Blog

In short

Multinational businesses are reconsidering capital investments as ecological vulnerabilities make operations in poorer nations increasingly precarious and costly to insure or finance. An analysis across 159 countries revealed that foreign direct investment drops significantly as climate vulnerability climbs. High-profile tech firms have already paused massive developments in response to regional environmental stress and water depletion. Consequently, this pulling back of private capital leaves developing nations without necessary industrial investments while cutting global firms off from emerging consumer markets.

Key points

  • Extreme weather threats are driving multinational corporations away from building mines,…: Extreme weather threats are driving multinational corporations away from building mines, factories, and offices in vulnerable regions.
  • The withdrawal of corporate investment deprives poorer countries of critical foreign tech…: The withdrawal of corporate investment deprives poorer countries of critical foreign technologies, employment opportunities, and economic growth.
  • Past events like Thailand's 2011 floods show how disasters inflate operational costs and…: Past events like Thailand's 2011 floods show how disasters inflate operational costs and make emerging market projects far more expensive to finance.

Sources checked by our analysis pipeline: 1

Companies rarely say why they’re avoiding a particular location, but their climate-related concerns occasionally become visible, says this academic.

PHOENIX, Arizona: When multinational companies decide where to build a factory, open a mine or establish a regional office, they have to consider whether the investment will still be profitable years into the future.

Making that decision increasingly means thinking about risks, like whether surrounding roads will flood, worker safety will be compromised by extreme heat in the summer, and clean water will be available.

As climate change increases the frequency and intensity of extreme weather events around the world, these effects can be especially severe in poorer countries that lack the resources to prepare for disasters or recover quickly after they hit.

I study how political and environmental risks affect international business. In my new book, Multinational Corporations and Climate Change: Risks, Responsibilities, and Resilience, I explore how disaster risk is affecting the ways global companies see these climate-vulnerable markets, and how those views are leading some foreign investors to avoid these developing nations altogether.

Low- and middle-income countries aren’t…

Climate