Impact of Decarbonisation Policy Deceleration

The global policy work on decarbonization has slowed since 2016, exacerbated by Russia's invasion of Ukraine (2022), creating a more challenging outlook on emissions. The focus shifts from median scenarios to high-emission scenarios.

Implications for Bombay

• In high-emission scenarios, Bombay's sea level is expected to rise by approximately 25 cm by 2050 due to thermal expansion of seawater and global ice melting.
• Local geological subsidence, at about 2 mm per year due to factors like sediment compaction and groundwater extraction, will add approximately 5 cm to the sea level rise.
• Overall, Bombay's sea level could rise by about 30 cm (12 inches) by 2050, with worsening conditions expected by 2100.

Urban Implications of Sea Level Rise

• Coastal flooding events will become more frequent and severe, especially during high tides and storm surges.
• The existing drainage system will be less effective, exacerbating waterlogging post-precipitation events.
• Higher sea levels will degrade transportation networks, utility conduits, and building foundations, increasing maintenance costs and reducing asset lifespans.
• Public and private sector inadequacies in response are expected under current conditions in India.

Financial and Real Estate Considerations

Integrating climate risks into financial decision-making is crucial for accurate market pricing. For Mumbai's real estate sector, the projected sea level rise by 2050 is significant non-financial information impacting future utility and asset valuation.

• Anticipated flood risks and rising operational costs will decrease demand, pressuring property prices in vulnerable areas.
• Ownership costs will rise due to higher insurance premiums, floodproofing expenses, and structural repairs.
• Property markets in high-risk areas may become less liquid as informed buyer pools shrink.

Response from Financial Institutions

• The Reserve Bank of India is progressing towards rules for banks and financial institutions on climate-change risk disclosure and management. 
• These include regular disclosures about climate risks within loan portfolios and the integration of mitigation strategies.
• A three-year lead time is anticipated before mandatory disclosures are required.
• Initial disclosures may reflect compliance with RBI rules, with consultancy and software assistance requiring substantial knowledge-building for deeper data utilization.

Incentives and Strategic Changes

• Investors can prioritize firms better prepared for climate risks, favoring more climate-resilient assets.
• Properties resilient to hydrological changes may command premiums; vulnerable properties will face market value adjustments.
• Climate change considerations will be integrated into financial regulation across the system, affecting organizations like the Employees’ Provident Fund Organisation.