Climate Resilience in South Asia: Harnessing Private Action, Guiding Public Investment

The World Bank's report highlights how households and firms in South Asia are adapting to intensifying climate risks, mostly through basic measures due to financial and institutional constraints. It urges governments to enable private adaptation by improving access to information, finance, and resilient infrastructure.

Produced by the World Bank’s Office of the Chief Economist for South Asia and developed in collaboration with leading research institutions such as the Abdul Latif Jameel Poverty Action Lab (J-PAL), Yale University, and the 21st Century India Center at the University of California San Diego, "From Risk to Resilience" provides one of the most comprehensive and timely assessments of climate adaptation challenges and opportunities in South Asia. Based on new household and firm-level data collected under the South Asia Climate Adaptation (SACA) initiative, the report reveals how individuals and businesses across the region are facing up to rising heat, floods, and other extreme weather events, often with limited means and inadequate support. With more than 1.8 billion people projected to be exposed to extreme heat by 2030 and over 460 million at risk of severe flooding, the urgency is clear: the region’s future depends on how well its people can adapt and how effectively its governments can help.

Vulnerability is Deep and Unequally Shared

Climate risk in South Asia does not fall evenly. The poorest households and those reliant on agriculture are significantly more exposed to weather shocks. Analysis of geospatial data shows that areas with lower wealth tend to experience more intense heat and more frequent flooding. In Bangladesh’s coastal zones and Bihar’s riverine districts, agricultural households are 5 percent more likely to experience climate shocks and 10 percentage points more likely to suffer flood damage. These shocks translate into cascading effects: nearly half of the affected households report illness, water contamination, or damage to sanitation, while many lose crops, earnings, and access to key infrastructure.

The story is similar for firms. Three out of four businesses surveyed in India, Pakistan, and Bangladesh have experienced weather-related damage in the past five years, resulting in an average annual revenue loss of 17 percent. They anticipate the worst in the future. Notably, better-managed firms and those with more educated managers are less vulnerable, suggesting that institutional and human capital are essential buffers. Still, most firms respond with simple fixes, fans, air conditioning, reinforced buildings, rather than transformative changes like relocation, supplier diversification, or capital upgrades.

Adaptation is Happening, But It’s Not Enough

Encouragingly, adaptation is already underway. Nearly 80 percent of households and 63 percent of firms have taken some form of adaptive action. Yet the majority of these are basic, low-cost measures. Among households, the most common responses include reinforcing housing, planting trees, and harvesting rainwater. High-impact strategies such as adopting climate-resilient seeds, switching to off-farm employment, or purchasing weather insurance are rare. For firms, only a minority have invested in energy-efficient technologies or made strategic adjustments to operations based on anticipated climate risks.

A key insight is that expectations shape behavior: households and firms that believe they are likely to face future shocks are significantly more likely to invest in adaptation. However, beliefs often diverge from expert forecasts. Households tend to underestimate flood risk, especially if they haven’t recently experienced a flood, while firms tend to overestimate extreme heat exposure. This gap suggests that improving access to accurate, localized climate information could substantially boost preparedness.

What’s Holding Adaptation Back

The report identifies several major obstacles that limit deeper, more effective adaptation. First and foremost is access to finance. Households and firms with access to formal credit are significantly more likely to invest in protective or resilient measures. Informal credit is less reliable and more expensive. Land tenure insecurity is another critical barrier, especially for rural households. Those who own land are more likely to adopt technology-based adaptations like irrigation or improved seeds. Education and information also matter: better-educated households are more inclined to use high-value adaptation strategies and less likely to rely on migration as a last resort.

Among firms, access to credit, managerial skill, and regulatory flexibility emerge as crucial factors. Firms facing tight labor laws or bureaucratic hurdles are less able to reorganize work schedules or adjust supply chains in response to weather threats. A behavioral study embedded in the report reveals that small-firm managers are often “loss averse,” preferring suboptimal insurance products to avoid the feeling of wasted expenditure, even when risk is high. These cognitive barriers further reduce the uptake of financial tools that could reduce long-term damage.

A Smarter Public Role: Enabling Private Action

The report argues that while governments in South Asia face real fiscal constraints, they still have powerful tools to support and scale private adaptation. Targeted investments in public goods, such as weather information systems, drainage networks, and transportation infrastructure, can significantly reduce vulnerability while enabling private actors to take meaningful steps. Early warning systems, for instance, increase preemptive household action and reduce damages. Yet, across the surveyed areas, access to flood and heat warnings remains limited, with most households only receiving cyclone alerts.

Infrastructure maintenance, particularly in irrigation and water supply, also offers large resilience dividends. The report highlights a successful initiative in Pakistan’s Punjab province that improved irrigation efficiency through cost-sharing, reducing water loss, and increasing crop reliability. Likewise, adaptive social protection, such as anticipatory cash transfers or scalable employment programs, can help households prepare for, rather than merely react to, shocks.

The macroeconomic stakes are enormous. If current temperature trends continue unchecked, South Asia could lose up to 7 percent of its output by 2050, more than 50 percent above the average losses projected for other developing regions. However, if households and firms are empowered to adapt flexibly, nearly one-third of that damage could be avoided. Directed public investments in climate-resilient agriculture and infrastructure could offset even more.

The report’s core message is that climate adaptation is not just about infrastructure or technology; it is about enabling people. Governments must focus not only on what they build, but on how they unlock the capacity of individuals and firms to respond. Resilience, in South Asia, will be a shared effort, but only if markets work better and the right public support is in place.