Heat Stress

By Linnet Cotterill, ESG Analyst

21 September 2022

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More heat, more stress, more workplace regulation

Impact of heat stress on labour productivity will be profound.

The impact of heat stress on labour productivity is likely to be among the most serious economic consequences of climate change, with the percentage of working hours lost to it set to exceed 2% by 2030 (ILO). The agriculture and construction sectors are most affected as outdoor work is most prevalent here, and often involves high levels of physical exertion. Textiles, tourism and food delivery are other sectors at risk.

Chronic kidney disease is one of the more severe outcomes of heat stress.

Chronic kidney disease of uncertain cause (CKDu) has been well documented among sugarcane workers in Central America – predominantly healthy young males whose kidneys should not be failing. There are clear links to repeated heat stress and evidence is starting to build of CKDu emerging among other cohorts, such as migrant workers returning from manual labour in the Middle East and other hot countries.

We expect heat stress regulations will continue to proliferate and tighten.

A clear example of this is the US where, after a record hot summer in 2021, the Occupational Safety and Health Administration (OSHA) finally initiated the process of developing a federal level heat stress prevention rule following decades of pressure to do so. Elsewhere, Qatar last year extended its summer outdoor work ban period, and Costa Rica has introduced regulation specifically aimed at preventing CKDu.

Heat stress risk should be disclosed and reported under proposed ESRS.

Under the proposed EU Sustainability Reporting Standards (ESRS), where workplace heat stress is identified as a material issue, its actual and potential impacts on the workforce – including workers within the supply chain – should be disclosed, along with actions to prevent, mitigate or remedy it, and any targets related to reducing the negative impact.

We think companies and investors should get ahead of the heat stress curve.

We think companies should assess – in both their own operations and their supply chains – whether local laws and regulations are sufficiently protective against heat stress, and implement best-practice policies where they are deemed to fall short, or do not yet exist. In addition, we think companies should have forward-looking assessments in place to anticipate where heat stress risk is likely to increase as the planet warms, with clear plans to address it if it does.

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Disclosure appendix

The following analyst(s), who is(are) primarily responsible for this document, certifies(y) that the opinion(s), views or forecasts expressed herein accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Linnet Cotterill, Amit Shrivastava, Polo Heung and Wai-Shin Chan, CFA
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