Pallavi: Greetings to all our listeners. Welcome to the Sustaining Sustainability series by the EY India Insights podcast, where we illuminate pressing environmental issues in observance of World Environmental Day. I am Pallavi, your host. For today's enlightening dialogue, we have the distinct honor of welcoming Nitesh Mehrotra, the EY India Partner in Sustainability and ESG practice.
With over two decades of experience, Nitesh excels in creating robust ESG frameworks and evaluating ESG performance across various business models. A pivotal member of EY’s global sustainability executive, his expertise is sharpened by esteemed programs and certifications from leading institutes like INSEAD and Stockholm Resilience Center. Nitesh's vision for sustainability transformation is both expansive and urgent, aspiring to match the scale of the industrial revolution with the pace of our digital era, ultimately delivering value to every stakeholder.
Today, we will navigate the climate change challenges and pathways India faces, exploring strategic mitigation and adaptation measures. Welcome to the show, Nitesh. It is a pleasure to have you with us today.
Nitesh Mehrotra: Thank you, Pallavi. It is great to be here. And I look forward to our conversation on such an important and critical topic. Thank you
Pallavi: Nitesh, before we dive in, could you share with our listeners the need for urgency in sustainability discipline for our planet?
Nitesh Mehrotra: As we all know, climate change and social inequity are among the biggest challenges faced by humanity today. Let me start by sharing with our listeners a quick, refreshing perspective on where we are today and, more importantly, where we are heading. If you look at our overall planetary compass, as analyzed by around 20,000 scientists, starting with climate change and global boiling, as the United Nations has termed it, we are currently at about 1.2°C above pre-industrial levels.
At the moment, all of us in the country are facing a heatwave, so we can all relate. We are seeing what is happening in Brazil and East Africa due to the impact of climate change. Just a reminder, in Paris in 2015, the world agreed to limit warming to 1.5°C, well below 2°C. As I said, we are already at 1.2°C, but where we are heading this century is about 3°C. This highlights the need for urgent action, considering all the pledges, NDCs, and commitments made by governments and companies.
Clearly, urgent action is needed on the climate front. Regarding the social aspect, believe it or not, over 50 million people are still living in modern slavery, with 85% in the private sector, embedded within the supply chain, as per the International Labor Organization. This is a cause for real concern and change.
Connecting all of this to the economic impact, in 2022, the GDP impact due to climate change was about 1.8 trillion dollars. Importantly, we are heading towards 10% of global GDP at risk annually due to climate change. To put this in perspective, we need about 3 to 5 trillion dollars yearly for both adaptation and mitigation. Considering the world GDP is around 100 trillion dollars, over 10 trillion dollars of GDP is at risk. It is still cheaper to save the world than to destroy it. So, this provides a quick perspective for our listeners.
Pallavi: Thank you, Nitesh. That is a very strong existential case for our survival. Moving on to India Inc., what does your research highlight about the overall impact and awareness on this subject?
Nitesh Mehrotra: That is a great point. We have been analyzing a lot of credible data on India's GDP exposure and population exposure to climate risk, and how leading companies in India are aligning with the UN Paris Agreement and their mitigation and adaptation plans for both climate and nature change.
Starting with India's GDP exposure, if we look at exposure to wildlife, floods, sea level rise, or storms, about 50% of India's GDP is at risk. Additionally, water stress is a major challenge, with around 10% of GDP at risk. The population exposure to heatwaves is also significant, at about 40%. We are all experiencing the impact of heatwaves in the country right now.
Regarding alignment with the UN Paris Agreement, about 56% of Indian companies are still strongly misaligned, with a trajectory towards 3°C, and only 25% of leading companies in India are aligned with the Paris Agreement, indicating a need for urgent action.
We have also analyzed the mitigation and adaptation plans that companies are disclosing for climate action. Fewer than 100 companies in India have publicly disclosed their plans and transition strategies. This emphasizes the need for action to mitigate risks and prevent surprises for leading companies in the country.
Pallavi: Thank you, Nitesh. Building on the previous question, with the effects of climate change becoming more apparent, India faces unique challenges and opportunities. Could you provide further perspective on the primary climate risks that India is currently facing?
Nitesh Mehrotra: Building on what we touched upon earlier, India faces a tricky balance of boosting the living standards of 1.4 billion citizens while adapting and mitigating climate change. Notably, India is ranked as the world's fifth most vulnerable country to climate change.
Despite having one of the lowest per capita energy and greenhouse gas consumption, India is on the frontline of this change. It is also important to note that three-fourths of the country is yet to be built, highlighting the challenge to reimagine policies and systems sustainably without leaving people behind. This underscores the need for a just transition, tailored to the global South and India's specific needs.
Pallavi: Thank you, Nitesh. For our listeners, could you share any leading frameworks for addressing climate-related risks, opportunities, and financial impacts?
Nitesh Mehrotra: Certainly. One of the most prominent frameworks is the TCFD, Task Force on Climate-related Financial Disclosures. It is a mature framework that many countries and companies are adopting. Even the RBI has asked financial companies to integrate it into their frameworks.
The TCFD framework is relatively simple, with four layers and 11 recommendations. It focuses on embedding climate change into business strategy, risk management, governance, and establishing meaningful metrics and targets for monitoring.
The framework highlights two main pillars: risks and opportunities. It addresses transition risks as the world shifts towards greener practices and physical risks from climate change. It also emphasizes the opportunities for energy transition, agricultural transition, and new products and services, particularly for a country like India, where much infrastructure is yet to be developed.
Importantly, TCFD translates these risks and opportunities into financial statements, helping businesses make informed decisions and capital allocations.
Pallavi: Thank you, Nitesh. Now pivoting towards digital advancements, how can emerging technologies like AI create real-time alerts for both risks and opportunities?
Nitesh Mehrotra: It is an important question, and no conversation today is complete without mentioning AI. Emerging technologies, especially AI and GenAI, can significantly accelerate the transition and mitigation processes. Here are a few mature use cases I have seen creating value for businesses:
First, data discovery. AI can simplify the process of locating data, understanding interdependencies, and evaluating trade-offs.
Second, climate scenario modeling and prediction. While we have data, predicting risks with accuracy remains a challenge. Geospatial AI, with about 200 satellites tracking climate scenarios, is enhancing transparency. For instance, a new satellite will soon track methane emissions, providing vital data.
Lastly, supply chain intelligence. Most progress is made within a company’s four walls, but significant changes need to happen in the supply chain, both upstream and downstream. AI can help trace data and strengthen resilience in the supply chain.
These are just a few examples of how AI can help address climate challenges.
Pallavi: Thank you so much for joining us today, Nitesh. Your insights have been invaluable in understanding the complexity of climate risks and the actions needed for a sustainable future in India.
Nitesh Mehrotra: Thank you. It has been a pleasure. Hopefully, we could provide some good context and emphasize the need for urgent action to mitigate risks and create opportunities for a more sustainable world.
Pallavi: Thank you, Nitesh, and thank you to all our listeners for tuning into this important conversation. Together, with the right knowledge and actions, we can create a resilient India in the face of climate change. Do not forget to subscribe to our podcast for more discussions like this. Until next time, stay informed and proactive about our planet's health. Thanks for tuning in. Goodbye.
