By Kristen Fourie, ESG and Impact Analyst at Sanlam Investments

As heatwaves intensify and eco-anxiety rises, climate change is becoming a workplace health issue, yet in many African markets, this conversation hasn’t even started.

Key points:

• Climate change is a health risk: Rising temperatures, poor air quality, and climate disasters are already impacting physical and mental health in the workplace.
• New psychological stressors are emerging: Terms like eco-anxiety and solastalgia describe a growing mental health burdenamong younger workers.
• South Africa’s economy is vulnerable: Labour-intensive sectors such as agriculture and construction face heat-related productivity losses and higher health-related absenteeism.
• Financial services have a role to play: From insurance for heat events to investor pressure on portfolio companies, the financial sector can drive resilience.
• The gap is urgent: While countries like Japan are regulating employer responsibility in extreme heat, many African markets are only beginning to explore these risks.

A global spotlight and an African gap

Japan recently introduced new regulations requiring companies to protect employees from extreme heat, acknowledging the health risks linked to climate change, lifestyle habits and heatstroke. It’s a bold example of forward-thinking workplace policy. With climate change escalating, so too will the responsibility on employers, insurers, and investors to protect people, not just profits. While extensive research exists on the broader consequences of climate change, there’s limited understanding of how these changes directly affect employees’ physical and mental health, especially in Africa.

Physical health impacts

Rising global temperatures have led to an increase in extreme heat events, which pose significant health risks. The January 2023 heat wave in South Africa was driven by complex climate systems that trapped warm air over various regions of the country. This was further exacerbated by the Botswana subtropical high, leading to prolonged high temperatures.

In South Africa, studies have already demonstrated that individuals working in sun-exposed conditions experience heat-related health effects - including heat stress, dehydration and the exacerbation of pre-existing health conditions - impacting their well-being and productivity. Additionally, prolonged exposure to ultraviolet radiation increases the risk of skin cancers among outdoor workers.

Construction, agriculture and manufacturing face the greatest risks, according to Stats SA. These sectors contribute approximately 16% of South Africa’s GDP (around R740.8-billion) therefore rising heat exposure in these labour-intensive sectors could suffer potential labour productivity declines of around 11% of GDP per capita.  

Climate change and air pollution together pose a growing risk to respiratory health, impacting employees from office workers to those in high-risk industries, like mining. Studies in South Africa show that air pollution is more harmful on hot days, and children, women, and those in industrial areas are particularly vulnerable. For businesses, this can result in higher absenteeism, reduced productivity and long-term health costs, ultimately affecting overall company performance and resilience.

Extreme weather events not only cause immediate injuries but also disrupt healthcare services. For instance, the 2022 Eastern Cape floods in South Africa resulted in damage of R187-million and highlighting the vulnerability of infrastructure, as well as employees, to climate-induced disasters.

The interconnected nature of these impacts extends beyond physical health – prolonged heat exposure, economic instability, and environmental stress can contribute to significant mental health challenges.

Mental health impacts

The increasing prevalence of climate-related disasters has shown to contribute to anxiety, depression and post-traumatic stress disorder among affected populations. Younger employees in particular express heightened concern about the future, grappling with uncertainties related to environmental changes, economic instability, and social inequalities.

An expert report written in 2021 by clinical psychologist Dr Garret Barnwell details the psychological and mental health consequences likely to be seen with climate change. The study highlights that climate change will worsen existing social inequalities and have severe mental health, well-being and societal consequences, especially for vulnerable populations in South Africa. Additionally, associated health conditions, financial and food insecurity, interpersonal violence, and identity disruptions or loss are identified as critical factors that exacerbate mental health issues.

Concerning psychological trends

New psychological terms like ‘psychoterratic syndromes’ are emerging, including eco-grief, solastalgia, and eco-anxiety, which refer to distress caused by environmental degradation and impacts to homes and individuals. While these terms are not officially recognised, they are gaining relevance as people mistake their symptoms as generalised anxiety or stress disorders.

The economic impact of mental health-related impacts is substantial, with the World Health Organisation estimating annual costs of common mental disorders at US$1-rillion.

Implications for organisational performance

An ILO report, Working on a Warmer Planet: The Impact of Heat Stress on Labour Productivity and Decent Work, found that by 2030, extreme heat is projected to reduce global working hours by over 2%, equivalent to 80-million full-time jobs and $2.4-trillion in economic losses.  

Increased absenteeism due to heat-related illnesses, respiratory problems, or mental health issues can lead to reduced productivity, while presenteeism – where employees work despite being ill and underperform – costs around R235-billion per year, equivalent to 4.3% of GDP.Employees struggling with health challenges may find it difficult to perform their duties efficiently. Moreover, companies that fail to address these health risks may face reputational damage.

In South Africa, where high unemployment and substance abuse are already significant challenges, climate-induced displacement, food insecurity and deteriorating health conditions will likely worsen societal issues and workforce stability.

Role of the insurance industry, asset managers and the broader financial industry

Innovative solutions for climate-related health impacts are emerging globally. In 2024 Hong Kong-based insurer, AXA, launched ‘Heatwave Parametric Insurance’ for outdoor workers, providing financial support during extreme heat events¹¹. The insurance triggers a payout if temperatures surpass 36°C for three consecutive days between August and October. Eligible workers receive a monetary payout or an ‘anti-heatwave kit’ of equal value. Similarly, the African Risk Capacity (ARC) provides parametric insurance to African Union member states, offering quick payouts to communities affected by climate-induced disasters. Notable payouts include $14.2-million to Malawi for drought recovery. Most funds have supported agriculture, particularly crop yield losses and food security challenges.

ARC’s Replica Programme allows humanitarian agencies to replicate country policies, enhancing resilience and increasing emergency funding, highlighting the potential for South African insurance products tailored to climate-related health risks.

Asset managers wield significant influence over the companies in which they invest and can advocate for proactive measures to mitigate climate-related health risks. This includes encouraging companies to implement heat action plans, enhance workplace ventilation to combat poor air quality, and offer flexible work arrangements during extreme weather events.

Furthermore, companies should be urged to invest in mental health support systems to assist employees in coping with climate-induced stress and anxiety, while  integrating climate risks into health and safety policies, developing responsive insurance products, and strengthening employee support systems with climate change in mind.

By proactively addressing these issues, organisations can enhance resilience, protect their workforce and maintain robust financial performance.

Disclaimer: Sanlam Investments consists of authorised financial services providers in terms of FAIS and disclaimers can be viewed on www.sanlaminvestments.com