Three out of ten companies in the Middle East, North Africa, and South Asia region experience more than one hundred days of extreme heat per year. The World Bank has just quantified the cost: approximately 17 additional days of extreme heat are associated with a 6% decline in sales, 4% reduction in labor productivity, and 8% lower wages. Losses are particularly severe for small businesses and financially constrained enterprises.

The Essentials

  • In the MENAAP region, increased exposure to extreme heat is associated with measurable losses in company performance: approximately 17 additional days are linked to 6% fewer sales and 8% lower wages (World Bank, June 2026).
  • Small businesses and financially constrained enterprises suffer greater losses: heat and unequal access to cooling can worsen existing social and territorial inequalities.
  • The stakes extend beyond comfort: workplace cooling and building resilience are important levers for adaptation and productivity, complementary to other economic and infrastructure reforms.
  • Daniel Yergin frames the issue: the energy transition is an addition of needs, not a replacement of sources, and heat forces an added layer of electrical demand that regional grids must be modernized, strengthened, and more interconnected to reliably meet.
  • Early action is necessary: countries that have not built robust electrical grids, adapted buildings, and heat-sensitive labor laws risk seeing their economies hampered by reduced long-term productivity. Some infrastructure, particularly transport and electrical networks, can take more than a decade to become operational.

One Hundred Days of Heat, and Businesses Absorb the Cost Alone

The World Bank published in June 2026 a press release announcing the report “Competing in the Face of Climate Risks: Evidence from Firms and Policy Priorities in MENAAP.” It covers the MENAAP region: the Middle East, North Africa, and South Asia from Pakistan to Morocco. It documents a simple and little-discussed mechanism. In this study, extreme heat is measured by days exceeding a thermal threshold chosen by the authors. An increase in exposure to extreme heat is associated with declining sales, reduced productivity, and lower wages.

Approximately 17 additional days per year are associated with a 6% decline in sales in the data studied. Approximately 17 additional days of extreme heat are associated with an 8% reduction in wages. These figures are based on correlations observed in actual company data across several countries in the region.

Three out of ten companies in the region experience more than one hundred of these days per year. For them, the cumulative annual impact far exceeds these figures. A construction company in Karachi, a textile factory in Dhaka, a mechanical workshop in Cairo: their productivity losses accumulate week after week, without anyone aggregating them into national budgets.

The report clarifies how the shock is distributed. Large formal enterprises, equipped with air conditioning and capital, absorb heat better. Small businesses and financially constrained enterprises suffer greater losses.

Air Conditioning as a Structural Competitive Advantage

An air-conditioned building is expensive to build and expensive to operate. In countries where electricity is subsidized but grids are fragile, and where small business capital is limited, investing in thermal protection remains out of reach for the majority of economic actors.

The paradox is visible: Gulf countries, which experience the region’s most extreme temperatures, also have the best-protected businesses. Saudi Arabia, the United Arab Emirates, and Qatar have massively invested in air-conditioned buildings, enclosed workspaces, and staggered schedules. Their workers, often South Asian migrants, benefit from material protection that their counterparts remaining in Dhaka or Lahore do not have.

This geography of adaptation creates a self-reinforcing competitive advantage. Businesses capable of investing in thermal protection maintain their productivity and attract capital. Others lose competitiveness as summers lengthen. The gap widens not through management decisions but through the physical mechanics of climate.

Labor law sometimes worsens the problem. In several countries in the region, legal obligations to protect workers against heat remain vague or poorly enforced. Construction workers continue working at midday at temperatures that would trigger a health alert in Belgium. Labor inspection lacks resources, and informal employers lack the means to invest in protection even when law requires it.

The Transition as Addition, Not Replacement

Daniel Yergin, whose work on energy geopolitics has been foundational for decades, advances a thesis that illuminates what the World Bank report documents. In his reading of the energy transition published in Foreign Affairs, Yergin argues that we are experiencing an “energy addition” rather than a true transition: new solar and wind energies add to old fossil fuel systems instead of replacing them. Total energy demand continues to grow.

Heat forces us to read this framework differently. In the MENAAP region, climate adaptation does not consist of choosing between coal and solar. It consists of adding an entire layer of energy demand—air conditioning for buildings, factory cooling, water pumping—to grids already struggling to meet existing demand. The electrical blackouts during Pakistan’s 2025 heat peaks illustrate the mechanics: at the precise moment when thermal protection becomes vital, the grid fails.

Yergin’s addition takes on a particularly demanding dimension here. Each degree gained on the regional thermometer triggers increased air-conditioning demand, which triggers increased electrical demand, which requires investments in grids that take ten to fifteen years to build. Regional economic growth therefore depends on energy infrastructure whose needs are rapidly increasing with heat.

Mariana Mazzucato, whose work on directed public investment has documented similar cases, offers a complementary reading here. Thermal adaptation will not happen spontaneously through the market, for the same reason thermal protection for small businesses does not happen spontaneously today: capital is scarce where risk is greatest. Directed public investment in building standards, electrical grids, and climate credit for small and medium enterprises is necessary for adaptation to reach those who need it most.

The tension between these two readings remains open. Yergin pleads for realism about physical and temporal constraints: you cannot switch a regional energy grid in five years. Mazzucato pleads for political intentionality: without public direction, the market will leave the most vulnerable unprotected. World Bank data proves both simultaneously right.

Data on Informal Workers

The report documents businesses. It says less about workers not in businesses. In the MENAAP region, a significant share of employment remains informal: agriculture, artisanal construction, street commerce, domestic work. These workers do not appear in company statistics. Their productivity losses are not aggregated.

Their thermal protection is even less funded.

A farmer in the Ganges delta who goes home early because heat is unbearable appears in no report. His lost income is not in the 8% wage loss measured across formal businesses. It is on top.

Independent research by MSCI, which documents climate risks for investors, converges with the World Bank diagnosis. Labor-intensive sectors—agriculture, construction, logistics—suffer larger productivity losses than covered sectors. For an economy like Bangladesh’s, where textiles employ millions in factories with partial air conditioning, cumulative losses over a hot summer approach macroeconomic amounts.

This statistical invisibility of informal workers is itself a political issue. Governments that do not measure thermal productivity loss in the informal economy systematically underestimate the cost of climate inaction. The 6% sales loss documented by the World Bank is probably a floor, not a ceiling.

Buildings, Grids, and Labor Law: What 2035 Already Requires

The window to act is closing. Infrastructure built today—commercial buildings, electrical grids, transportation systems—will have a lifespan of thirty to fifty years. A warehouse built in 2027 without thermal insulation will face the summers of 2055. An electrical grid sized for current demand risks being saturated in coming decades under warming climate scenarios.

The report identifies three reform priorities to reduce climate losses and support adaptation. The first is building regulation. Mandatory thermal standards for new construction—reflective roofs, insulation, natural ventilation—cost less to integrate during construction than to retrofit twenty years later. Several countries in the region have begun: the United Arab Emirates strengthened their building code in 2023, Morocco launched a green building certification program. But several countries in the region still build without binding thermal requirements.

The second lever is the electrical grid. Air conditioning consumes energy: the hotter summers are, the higher peak demand and the more likely blackouts. Investing in production capacity, particularly solar, whose curve matches heat peaks, as well as distribution networks, is necessary for thermal protection to be physically possible. Yergin’s thesis applies here: the additional energy needs are already present, the capacity to meet them is not yet there.

The article published on the heat pump advance in the United States shows that a similar trade-off can be resolved when industrial policy aligns with price signals.

The third lever is labor law and insurance. Mandatory breaks, schedules adapted to heat, temperature thresholds beyond which outdoor work is prohibited: these rules exist in some Gulf countries and are poorly enforced elsewhere. Insurance systems covering economic losses related to heat for farmers and small and medium enterprises remain nascent in the region. As noted in a previous article on mapping climate risk, measuring risk and financing it are two distinct steps: the first is advancing, the second remains to be built.

Economic trajectories depend on investments made in coming years. In a scenario of active adaptation—strengthened building standards, expanded electrical grids, enforced labor law—the losses documented by the World Bank remain contained even if temperatures continue rising. In a scenario of inaction—construction without thermal requirements, insufficient grids, workers without legal protection—losses accumulate and begin weighing on long-term growth potential of the most exposed economies. The World Bank posits a “double dividend” hypothesis: investments in thermal adaptation can reduce economic losses and, if they improve energy efficiency or use low-carbon energy, contribute to reducing emissions.

The Wager of Adaptation as Industrial Policy

The most unexplored angle of the World Bank report may be the most important. If heat destroys measurable economic value, and if this destruction is avoidable through targeted investments, then thermal adaptation becomes an industrial policy in its own right.

Investments in building standards, electrical grid robustness, and worker protection can strengthen regional business competitiveness. Their workers will be more productive. Their wages will be less exposed to thermal shocks. Their small and medium enterprises will have access to climate capital enabling them to modernize their spaces.

India launched a national cooling program in 2019, the India Cooling Action Plan, integrating energy efficiency and universal air-conditioning access. Its funding remains insufficient relative to needs, but the framework exists. Morocco is developing solar capacity at a pace allowing it to meet additional cooling demand without resorting to coal. Bangladesh is discussing thermal standards for textile factories under pressure from international buyers.

These initiatives remain fragmented and must be amplified to influence regional trajectory. But they show thermal adaptation can be conducted as active policy, with identified actors, measurable investments, and verifiable results. The question posed by World Bank data is this: how many lost summers will it take before governments in the region treat thermal adaptation with the same budgetary urgency as a debt crisis?

Sources

  1. World Bank, Delivering a Double Dividend for MENAAP Firms in Extreme Heat, June 2026, https://www.worldbank.org/en/news/press-release/2026/06/22/delivering-a-double-dividend-for-menaap-firms-in-extreme-heat-new-world-bank-report
  2. Daniel Yergin, The Troubled Energy Transition: How to Find a Pragmatic Path Forward, Foreign Affairs, https://www.foreignaffairs.com/united-states/troubled-energy-transition-yergin-orszag-arya
  3. MSCI, Too Hot to Work? (report on climate risks and labor productivity)
  4. India Cooling Action Plan, Ministry of Environment, Government of India, 2019