Extreme Heat Is Hitting Businesses Across MENAAP, World Bank Warns

The World Bank's analysis shows a direct connection between rising temperatures and weaker business performance.

Rising temperatures are already affecting business performance across the Middle East, North Africa, Afghanistan and Pakistan (MENAAP), with a new World Bank report warning that extreme heat is reducing sales, lowering productivity and cutting wages for millions of workers.

The report, Competing in the Face of Climate Risks: Evidence from Firms and Policy Priorities in MENAAP, highlights the growing economic costs of climate change and urges governments to adopt reforms that can strengthen resilience while improving competitiveness. According to the study, nearly three in ten firms across the region operate in extreme heat conditions for more than 100 days each year, exposing businesses and workers to mounting economic pressures.

Heat Is Reducing Productivity and Earnings

The World Bank's analysis shows a direct connection between rising temperatures and weaker business performance. Researchers found that an additional 17 days of extreme heat per year is linked to a six per cent decline in company sales, a four per cent drop in labour productivity and an eight per cent reduction in wages.

These impacts are already being felt across multiple sectors, affecting both businesses and workers. Lower productivity can reduce company profits and investment, while declining wages place additional strain on household incomes.

World Bank Regional Vice President for the Middle East, North Africa, Afghanistan and Pakistan, Ousmane Dione, said climate shocks are no longer a future concern but a present-day challenge facing firms throughout the region. He noted that effective reforms can help countries improve productivity while also increasing resilience to climate-related risks.

Trade Rules Add New Pressures

The report also examines how emerging climate-related trade policies could affect exporters in the region.

New mechanisms such as the European Union's Carbon Border Adjustment Mechanism and a similar system planned by the United Kingdom are expected to create challenges for carbon-intensive industries.

While the overall economic impact on regional gross domestic product is projected to be relatively modest, estimated at a 0.1 per cent decline or around US$1.4 billion, some industries face greater exposure.

Among the sectors identified as particularly vulnerable are Libya's iron and steel industry, Tunisia's cement sector, Oman's fertilizer production and Egypt's aluminium industry.

The report argues that future competitiveness will increasingly depend on companies' ability to demonstrate lower carbon emissions and meet international sustainability standards.

Climate Action Could Create New Opportunities

Despite the challenges, the World Bank says climate-responsive reforms can generate significant economic benefits.

The report highlights green competitiveness as an important growth area, with businesses gaining advantages through improved access to finance, stronger quality infrastructure and better carbon certification systems.

One promising sector is cooling technology. Demand for cooling solutions such as energy-efficient buildings, insulation systems, cool roofs and climate-smart urban design is expected to grow rapidly, creating a market worth an estimated US$46 billion by 2050.

These investments could generate employment opportunities, support new skills development and help communities adapt to rising temperatures.

The report recommends expanding access to financing for climate adaptation and green investments, reducing regulatory barriers that worsen heat-related losses and strengthening systems that help firms meet international environmental requirements.

According to the World Bank, countries that move quickly to improve resilience and support green business practices will be better positioned to protect jobs, attract investment and maintain access to high-value global markets as climate risks continue to grow.