Why does this matters now?
Climate change is no longer just an environmental issue; it is a financial one. It impacts personal and corporate finances, often in unseen ways.
Investors need to understand climate risk. Banks need to understand it. Companies must understand it. Insurance companies are learning it the hard way—by losing huge amounts of money.
India is facing this crisis head-on. The government is building policy. Companies are spending money. The financial system is changing. The utilities are transforming. Renewable energy is booming. This will define investment returns for decades.
The planet is getting hotter and creating significant disruption in the global economy.
In 2024, global temperatures reached a milestone. The world's average surface temperature exceeded 1.5 degrees Celsius above pre-industrial levels for the first time. This may not seem substantial, represents a massive tipping point that climate scientists have been warning about for decades.
Exhibit 1: Global surface temperature anomaly (1980–2024): Crossing the 1.5°C threshold
Source: Berkley Earth, Ambit Asset Management
Why is 1.5 degrees a critical threshold? Because at this level of warming, many of the most severe climate impacts begin to occur with greater frequency and intensity. Heat waves become deadly. Rainfall patterns become unpredictable. Droughts last longer. Floods become more intense. Storms are growing more severe.
To understand this, consider what happens at different temperature levels. At 0.5 degrees of warming—which we have already passed are mild. At 1 degree—which we have already exceeded—impacts are significant. At 1.5 degrees—which was reached in 2024, impacts become serious. If we reach 2 degrees, the impacts are projected to be catastrophic. Current trajectories indicate we are heading toward 2-3 degrees of warming by 2100 if no significant changes are made.
Practically, the atmosphere now holds more moisture, as warm air holds more water vapor. Consequently, when it rains, precipitation is heavier. When it is hot, temperatures are higher. When it is dry, conditions are more arid. The weather is becoming more extreme.
Exhibit 2: Atmospheric carbondioxide concentration rise over 60 years
Source: National Oceanic And Atmospheric Administrations, Ambit Asset Management
Carbon dioxide levels in the atmosphere are now around 420 parts per million. Fifty years ago, they were 330 parts per million, and the rate of increase is accelerating. More CO2 leads to more heat being trapped in the atmosphere, which in turn drives more extreme weather.
Sea levels are rising, not rapidly, but noticeably at about 3-4 millimeters per year. While this seems minor, it accumulates over decades. Coastal cities are now experiencing regular flooding from "king tides”, normal high tides that now exceed flood levels because the baseline ocean level is higher.
The Arctic is melting.
Exhibit 3: Arctic sea ice extent decline from 1979 to 2024: A 30% reduction
Source: National Oceanic and Atmospheric Administrations
There is 30 percent less sea ice in the Arctic than there was 20 years ago. This melting accelerates warming because white ice reflects sunlight while the darker ocean water absorbs it, creating a reinforcing feedback loop.
Heat waves are becoming the norm. The hottest years on record have all occurred in the last 10 years.
Exhibit 4: Increased frequency of extreme heatwaves: past vs present
Source: Carbon Brief, Ambit Asset Management
In some parts of the world, temperatures that once occurred every 100 years now occur every 10 years. In other regions, what was once a once-in-50-years event now happens every 5 years.
Exhibit 5: Atmospheric CO2 Concentration parts per million (ppm)
Source: Clark, Ambit Asset Management
This physical change in the atmosphere directly causes economic damage. And that is where the financial crisis begins.
What happened in 2024
Climate disasters cost the world $368 billion in 2024. This is significantly higher than the annual average. The alarming part is that only $145 billion was covered by insurance. The other $223 billion was completely uninsured. This capital was effectively erased from the economy.
In the Asia-Pacific region which includes India the situation is even more severe. There was $74 billion in damage, but insurance only covered $4 billion. That is a 95% protection gap. It means India and the surrounding countries lost $70 billion with no mechanism for recovery.
This was not a one-time event. This is the ninth year in a row where annual losses exceeded $300 billion, establishing a new normal. Furthermore, a crucial point many people do not realize is that climate-related disasters have caused over $3.6 trillion in economic damage since 2000. Most of it went unrecovered.
Exhibit 6: Annual global climate disaster losses (2016–2024): A new normal above $300 billion
Source: Swiss Re Insight, Ambit Asset Management
Why this is different from before?
For decades, financial models were built on historical data, primarily from 1980 to 2005, to forecast future events. However, 2024 proved that those old models are wrong.
In the US alone, 31 disasters each caused over $1 billion in damage. This is an exceptionally high figure. One type of storm—severe thunderstorms with tornadoes—caused 17 of those 31 disasters. Historically, these were not even considered major risks.
Exhibit 7: Number of events above $1billion
Source: Aon Climate and Catastrophe Insight, Ambit Asset Management
In the old normal, the world saw about 5-6 major billion-dollar disasters per year globally. The climate system has changed. The rules have changed. And most financial models have not yet adapted.
Exhibit 8: Climate change investments & loss avoided
Source: World Economic Forum, Ambit Asset Management
What is worse, if changes are implemented, global GDP could drop by 16 to 22 percent by 2100. That is equivalent to losing $20-30 trillion in economic value over the century. Some research suggests the impact could be even worse and occur sooner than anticipated. The only positive aspect is that if the world invests 2-3 percent of global GDP in climate action now, we could prevent 10-15 percent of those losses. This means every dollar spent on climate action saves $5-6 in future losses. Acting now is sound economics.
The real cost of waiting - What inaction actually costs
A primary concern for corporate leaders and investors is that companies taking no action on climate are already at risk—not in 30 years, but right now and over the next 20 years.
For most companies across different sectors, climate risks could put 5 to 25 percent of their EBITDA at risk by 2050. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is a key measure of a company's profitability. For a company generating $1 billion in EBITDA, losing 10-15 percent means a reduction of $100-150 million.
Exhibit 9: Average financial impact of physical risks by 2050
Source: World Economic Forum, Ambit Asset Management
Infrastructure companies—utilities, water, and power companies—face the biggest risk, with potential EBITDA losses of 20-25 percent. Food and agriculture companies could lose 15-20 percent. Even technology and communication companies face a 5-10 percent risk.
Exhibit 10: Economic cost of climate-related disasters1
Source: World Economic Forum, Ambit Asset Management
Here is a real example: A European highway operator calculated that it used to spend 5 percent of its annual profit on repairing damage from storms and flooding. By 2050, it is expected that it to double to 10 percent. The more concerning aspect is that while the number of storms might only increase by 10-15 percent, their severity, geographic scope, and impact on previously safe areas will cause the damage to multiply.
The chain reaction nobody talks about
The Philippines Insight:
A1% increase in typhoid damage led to 2.3% increase non-performing loans, revealing the direct link between physical and financial damage.
Three ways climate hits business costs
Businesses are experiencing financial pressure from climate change in three distinct ways.
First is worker productivity. In extreme heat, people work more slowly, require more breaks, and fatigue faster. In outdoor sectors like agriculture and construction, productivity could drop by 25-33% during intense heatwaves. In India, 733 people died from heat in 2024, but millions more experienced reduced productivity or took more time off, which has a direct financial cost. According to the International Labor Organization, by 2030, heat stress alone could reduce global work hours by 2 percent. In India specifically, 300 million people could be affected by heatwaves.
Second is the capital expenditure required to protect buildings and equipment. Constructing a factory designed to withstand floods and extreme weather costs approximately 2% more. For an average factory, that could be an additional $20 million. Multiplied across thousands of companies, this amounts to hundreds of billions of dollars just to protect existing and future assets.
Third is the rise in day-to-day operational costs. Air conditioning expenses skyrocket during heat waves; during one European heat wave, electricity prices jumped 100-175%. Maintenance bills increase after storms. Insurance costs rise. All of these factors erode profitability.
Shipping and Transportation costs explode
Ninety percent of global trade travels by ship. When ports close or shipping routes are blocked by climate disasters, costs escalate sharply.
In 2024, drought reduced the Panama Canal to one-third of its normal capacity, forcing ships to wait for weeks. To maintain schedules, some ships paid as much as $4 million each for priority passage. That cost is passed on to customers.
When the Amazon River experienced record low levels, barges could not navigate. Companies had to switch to trucks, which cost three times more. A shipment that would have cost $10,000 by barge costs $30,000 by truck. These costs are absorbed into global supply chains.
Climate crossroads: Sectoral risks and emerging opportunities
Climate risks impact various sectors and businesses impacting each industry differently. It is essential to understand the impacts of these for effective management of the implications in order for a business to come up with better strategies to overcome the realities faced to build resilience and take on opportunities emerging in the transition to a sustainable economy.
Our world is becoming unpredictable, so lasting business success now depends on a healthy planet. Companies need to rethink how they operate, with strong leaders who plan ahead and adapt quickly. It's more than just dealing with problems; it's about building a robust system where every decision helps the business stay strong for the long term and creates a valuable legacy.
Task Force on Climate-related Financial Disclosures (TCFD) framework
This framework demonstrates a clear and comprehensive guide for companies to report how climate change affects their business. It helps investors and stakeholders understand the financial risks and opportunities related to climate, so they can make better decisions. The framework is built around four main pillars, each with specific points to focus on:
Using this framework work companies can improve their climate resilience and make better strategic decisions and be able to communicate better on how climate change is impacting their business.
Creating transparency and comparability on climate-related disclosure across companies helps in managing climate-related risk better and supports capital allocation towards a more reliable and sustainable business and low low-carbon business and reducing financial impact.
Conclusion
Climate change is no longer a distant threat—it is an urgent financial reality reshaping economies, businesses, and nvestments today. The rising frequency and severity of climate disasters, along with the vast insurance protection gap, expose immense economic vulnerabilities and demand immediate action. Yet, within this crisis lies a clear investment opportunity: proactive climate resilience and sustainable strategies not only protect profitability but unlock long-term growth. Every rupee spent to mitigate climate risk today multiplies many times in future savings. The path forward requires decisive leadership, disciplined risk management, and bold investment to secure a sustainable and prosperous future for business and society alike.
Ambit Coffee Can Portfolio
At Coffee Can Portfolio, we do not attempt to time commodity/investment cycles or political outcomes and prefer resilient franchises in the retail and consumption-oriented sectors. The Coffee Can philosophy has an unwavering commitment to companies that have consistently sustained their competitive advantages in core businesses despite being faced with disruptions at regular intervals. As the industry evolves or is faced with disruptions, these competitive advantages enable such companies to grow their market shares and deliver long-term earnings growth.
Exhibit 11: Ambit Coffee Can Portfolio point-to-point performance
Source: Ambit Coffee Can Portfolio inception date is Jun 20, 2017;
**1M Return: 1st - 31st Oct'25; 3M Return: 1st Aug'25 – 31st Oct'25; 6M Return: 1st May'25 – 31st Oct'25; 1Y Return: 1st Nov'24 – 31st Oct'25
*Nifty 50 TRI is the selected benchmark for the Ambit Coffee Can Portfolio. The performance related information provided herein is not verified by SEBI.
Exhibit 12: Ambit Coffee Can Portfolio calendar year performance
Source: Ambit Coffee Can Portfolio inception date is June 20, 2017;
*Nifty 50 TRI is the selected benchmark for the Ambit Coffee Can Portfolio. The performance related information provided herein is not verified by SEBI.
Ambit Good & Clean Midcap Portfolio
Ambit's Good & Clean strategy provides long-only equity exposure to Indian businesses that have an impeccable track record of clean accounting, good governance, and efficient capital allocation. Ambit’s proprietary ‘forensic accounting’ framework helps weed out firms with poor quality accounts, while our proprietary ‘greatness’ framework helps identify efficient capital allocators with a holistic approach for consistent growth. Our focus has been to deliver risk-adjusted returns with as much focus on lower portfolio drawdown as on return generation. Some salient features of the Good & Clean strategy are as follows:
1. Process-oriented approach to investing: Typically starting at the largest 500 Indian companies, Ambit's proprietary frameworks for assessing accounting quality and efficacy of capital allocation help narrow down the investible universe to a much smaller subset. This shorter universe is then evaluated on bottom-up fundamentals to create a concentrated portfolio of no more than 20 companies at any time.
2. Long-term horizon and low churn: Our holding horizons for investee companies are 3-5 years and even longerwith annual churn not exceeding20-25% in a year. The long-term orientation essentially means investing in companies that have the potential to sustainably compound earnings, with these compounding earnings acting as the primary driver of investment returns over long periods.
3. Low drawdowns: The focus on clean accounting and governance, prudent capital allocation, and structural earnings compounding allow participation in long-term return generation while also ensuring low drawdowns in periods of equity market declines.
Exhibit 13: Ambit Good & Clean Midcap Portfolio point-to-point performance
Source: Ambit Good & Clean Mid cap Portfolio inception date is Mar 12, 2015;
**1M Return: 1st - 31st Oct'25; 3M Return: 1st Aug'25 – 31st Oct'25; 6M Return: 1st May'25 – 31st Oct'25; 1Y Return: 1st Nov'24 – 31st Oct'25
*BSE 500 TRI is the selected benchmark for the Ambit Good & Clean Mid cap. The performance related information provided herein is not verified by SEBI.
Exhibit 14: Ambit Good & Clean Midcap Portfolio calendar year performance
Source: Ambit Good & Clean Mid cap Portfolio inception date is Mar 12, 2015;
*BSE 500 TRI is the selected benchmark for the Ambit Good & Clean Mid cap. The performance related information provided herein is not verified by SEBI.
Ambit Micro Marvels Portfolio
We aim to create a portfolio that invests predominantly in micro-cap companies with the potential of delivering superior earnings growth and generating relatively better risk-adjusted performance over a long period of time.
Ambit’s proprietary ‘forensic accounting’ framework helps weed out firms with poor quality accounts while our proprietary ‘greatness’ framework helps identify efficient capital allocators. The result is a concentrated portfolio of 20-25 stocks that draws down less than the market in corrections and has low churn.
Key Features of Portfolio Companies:
1. High earnings growth companies with low leverage,
2. Market leaders or challengers with strong moat around brand, distribution, technology, and innovation,
3. Strong corporate governance coupled with apt capital allocation.
Exhibit 15: Ambit Micro Marvels Portfolio point-to-point performance
Source: Ambit Micro Marvels Portfolio inception date is Jul 29, 2024;
**1M Return: 1st - 31st Oct'25; 3M Return: 1st Aug'25 – 31st Oct'25; 6M Return: 1st May'25 – 31st Oct'25; 1Y Return: 1st Nov'24 – 31st Oct'25
**BSE 500 TRI is the selected benchmark for the Ambit Micro Marvels Portfolio. The performance related information provided herein is not verified by SEBI.
*Nifty Smallcap 250 TRI is the secondary benchmark, being provided solely for additional reference and comparison. For details refer disclaimer clause.
Exhibit 16: Ambit Micro Marvels Portfolio calendar year performance
Source: Ambit Micro Marvels Portfolio inception date is Jul 29, 2024;
**BSE 500 TRI is the selected benchmark for the Ambit Micro Marvels Portfolio. The performance related information provided herein is not verified by SEBI.
*Nifty Smallcap 250 TRI is the secondary benchmark, being provided solely for additional reference and comparison. For details refer disclaimer clause.
Ambit Pricing Prowess Fund
Ambit Pricing Prowess Fund is an All-weather, Open-ended, Long-only, Category III, Flexi-cap AIF – a meticulously crafted opportunity for long-term investors seeking:
- Accelerated Portfolio Returns: The ability to raise selling prices faster than input costs (inflation) directly increases profit margins and accelerates Free Cash Flow (FCF) growth.
- Unrivaled Portfolio Resilience: Pricing Power acts as a structural defense mechanism, stabilizing margins even during periods of macro pressure, supply shocks, or weaker demand.
- Maximum Long-Term Value Creation: Pricing Power is a proxy for an irrefutable competitive advantage (deep moat).
In a market of highly varied valuations, Ambit Pricing Prowess Fund is not constrained by a single market segment. We are designed to seek the most attractive combination of Quality and Price across the entire investment universe.
We can shift capital fluidly between Large, Mid, Small, and even a select number of carefully vetted unlisted businesses. This broad mandate allows us to find and capitalize on unique opportunities that align with our core framework.
Our focus is more on business fundamentals, rather than stock price movements. We do not seek comfort of the crowd and seek exposure to companies that are "unrecognized" because the market either misprices the longevity of their growth or fails to fully appreciate the structural defense their pricing power provides.
The framework's final structure—blending Established (proven track record, mature moats) and Emerging (new, rapidly widening moats, higher growth potential) Pricing Power plays—provides a balanced approach to capture both resilience and accelerated return potential within the portfolio.
Investing in businesses with Pricing Prowess offers compelling advantages, as below:
- Proven Inflation Hedge
- Maximized Profit Margins
- Stable, Quality Compounding (non-Glamorous)
- Formidable Entry Barriers
- Long-term Value Creation
Exhibit 17: Ambit Pricing Prowess Fund
Note: Data as on 31st Oct 2025; First close for Ambit Pricing Prowess Fund was done on 24th Sept 2025; Returns are computed at Fund level and are pre fees and on pre-tax basis. Returns of BSE 500 and Nifty 50 is being provided solely for additional reference and comparison. The performance related information provided herein is not verified by SEBI.
