Rising Urban Heat Could Shrink South Asia's Economy Without Urgent Climate Action: World Bank

South Asia's extreme heat is emerging as a major economic and development challenge, threatening jobs, productivity, infrastructure and urban growth, with the World Bank warning that delayed action could significantly reduce regional GDP by 2050. The report urges governments, development partners and the private sector to invest in heat-resilient infrastructure, sustainable cooling, stronger urban planning and coordinated policies to protect lives, livelihoods and long-term economic competitiveness.

South Asia's cities are becoming hotter at a pace that threatens not only public health but also economic growth, employment and long-term development, according to a new World Bank report. Prepared by the World Bank Group with support from the Global Facility for Disaster Reduction and Recovery (GFDRR), the City Resilience Program, and the UK Government's Climate Action for a Resilient Asia (CARA) programme, the report argues that extreme heat has evolved from a seasonal weather event into a structural development challenge. Covering Bangladesh, Bhutan, India, Maldives, Nepal and Sri Lanka, it warns that rising temperatures could undermine the region's ability to create jobs, attract investment and sustain urban growth unless governments act quickly. The report estimates that South Asia must provide productive employment for nearly 280 million additional working-age people by 2050, even as extreme heat is already erasing the equivalent of around 31 million full-time jobs every year. Without adaptation, the region's economy could be nearly 7% smaller by 2050, making heat resilience an economic necessity rather than only a climate concern.

Cities Face a Growing Economic and Infrastructure Challenge

The report highlights that more than 617 million people already live in urban areas across the six countries, and rapid urbanisation is making cities significantly hotter. Green spaces, wetlands and open land are increasingly being replaced by concrete, asphalt and steel, creating urban heat islands where temperatures remain much higher than surrounding rural areas, especially at night. At the same time, average temperatures across South Asia have already risen by more than 1.2°C above pre-industrial levels, with further warming expected throughout the century.

The consequences extend across the entire economy. Heat reduces labour productivity, particularly for construction workers, transport operators, street vendors and other outdoor workers, whose earnings can decline by as much as 40% during heatwaves. Rising temperatures also increase electricity demand while reducing the efficiency of power systems, creating a greater risk of blackouts. Roads soften, railway tracks expand, airports face operational challenges and public transport systems become less reliable. Hospitals, schools and informal settlements are especially vulnerable because many buildings lack adequate cooling or ventilation, exposing millions of people to dangerous indoor temperatures.

Policy Action Must Move Beyond Emergency Response

The report argues that governments should no longer treat heatwaves simply as disaster management events. Instead, heat resilience should become an integral part of national economic planning, urban development and infrastructure investment. It recommends expanding Heat Action Plans, strengthening heat early warning systems, improving weather forecasting, protecting outdoor workers through labour regulations and integrating heat resilience into housing, healthcare and social protection programmes.

Urban planning also requires significant changes. Cities are encouraged to preserve wetlands, expand urban forests, increase tree cover and develop shaded public spaces that naturally reduce temperatures. Modern building codes should promote passive cooling designs, while investments in resilient electricity grids and transport infrastructure can help maintain essential services during extreme heat. The report also recommends formally recognising heatwaves within disaster management systems so governments can access emergency financing and strengthen coordination across health, labour, energy and urban development agencies.

Development Partners and Businesses Have a Critical Role

The findings present important opportunities for international development partners, including multilateral development banks, bilateral donors and climate finance institutions. The report suggests that heat resilience should become a core component of future urban development financing because investments in resilient infrastructure, cooling systems, healthcare preparedness and sustainable urban planning deliver multiple benefits, including improved public health, stronger productivity and greater climate resilience.

For private-sector stakeholders, the report identifies both risks and new business opportunities. Companies operating in manufacturing, logistics, construction, agriculture-linked industries and commercial real estate face increasing operational costs, productivity losses and supply chain disruptions as temperatures rise. However, demand for affordable cooling technologies, energy-efficient appliances, climate-smart buildings, reflective construction materials, renewable energy and resilient urban infrastructure is expected to grow rapidly. Expanding public-private partnerships could accelerate investment in sustainable cooling solutions, green buildings and modern power systems while supporting new industries and job creation.

Building Resilient Cities for Long-Term Growth

One of the report's strongest messages is that the next decade will determine whether South Asia's cities remain engines of economic growth or become increasingly constrained by climate risks. Much of the region's future urban infrastructure has yet to be built, providing governments with a unique opportunity to integrate resilience into new investments rather than paying far higher costs to retrofit cities later.

The report concludes that the knowledge, technologies and financing mechanisms needed to address extreme heat already exist. What is required now is stronger political commitment, coordinated policies and sustained investment. For governments, heat resilience offers a pathway to protect productivity, strengthen public finances and safeguard vulnerable communities. For development partners, it presents an opportunity to align climate finance with inclusive economic growth. For businesses, early investment in resilient infrastructure, sustainable cooling and green technologies can reduce long-term risks while opening new markets. As South Asia's cities continue to expand, adapting to extreme heat will become essential for protecting jobs, sustaining investment and ensuring long-term economic development.