Bombay and the rising sea

Business Standard, 21 July 2025

There has been a deceleration in the global policy work on decarbonisation, starting at the first Trump presidency (2016) and then Russia's invasion of Ukraine (2022). The outlook on emissions is now more challenging than it used to be, particularly in the 2025-2030 period. We have to all shift from planning on something near the median scenario to something closer to the high emissions scenarios.

About 12 inches higher

What does this mean for Bombay? In high emission scenarios computed by IPCC, the sea level at Bombay is likely to rise by about 25 cm by 2050. This reflects the thermal expansion of sea water and the global melting of ice, in a warmer world.

Alongside this, there is a local geological phenomenon that affects Bombay, which is subsidence. Bombay is subsiding by around 2 mm per year. This reflects factors including sediment compaction, groundwater extraction, and the load of the urban built environment upon the reclaimed land. This phenomenon is likely to add about 5 cm to the rising waters by 2050. Putting these together, the sea level at Bombay is likely to rise by about 30 cm or about 12 inches.

The forecasts for the sea level to 2050 are not greatly affected by emissions 2025-2030. The real impact for the sea level, of global faltering on decarbonisation over 2025-2030 will be felt after 2050.

What are the consequences of this for Bombay?

In a swimming pool, we can readily visualise a water level that's about 12 inches higher. We tend to visualise ourselves standing at Aksa beach, and water at the knees reaching up to the waist. But the sea is not a swimming pool, it is full of motion. When the average sea level rises by a small amount, this has big implications for the urban environment.

  1. It directly elevates the probability and severity of coastal flooding events, particularly during astronomical high tides and meteorological storm surges. Areas currently experiencing occasional "nuisance flooding" will encounter such events with greater regularity and increased inundation depth.
  2. The drainage system will worsen. The existing urban drainage infrastructure largely relies on gravity for discharge, and will work less well. This will impede the efficient discharge of rain and river water. This will give more prolonged waterlogging after precipitation events. Ideally, good city governance should involve investments in building and operating adequate pumping stations.
  3. The higher sea level will impact on transportation networks (roads, railways, metro lines), utility conduits (sewage systems, water supply pipes, electrical cables), and building foundations in low-lying zones. The combination of more frequent inundation and more saltwater exposure will induce accelerated degradation, higher maintenance costs, and reduced asset lifespan. Private and public actors would ideally muster the resourcing and management to combat this higher depreciation rate and stave off catastrophic failures.

Under perfect conditions, these problems induce coping costs. Under realistic Indian conditions, there will be flaws in public and private actions. The pumping stations will be inadequate, the O&M of assets will be patchy, so many things will go wrong.

The problem of global warming is often seen as something speculative, something that will happen in the deep future. The reasoning above locates us in a specific Indian setting (i.e. Bombay) and a date that fits within normal human planning horizons (i.e. 25 years out). For anyone below age 75, these are scenarios that matter.

Real estate investors need to think about three kinds of concerns:

  1. Anticipated future flood risk and increased operational costs will reduce investor and end-user demand, exerting downward pressure on property prices in vulnerable locations.
  2. Property ownership costs will increase due to higher insurance premiums (or the potential withdrawal of flood insurance coverage), augmented maintenance expenditures for floodproofing, and potential structural repairs necessitated by water damage.
  3. The market for properties with significant climate risk exposure may become less liquid as the pool of informed buyers who are willing to accept these risks shrinks.

Finance is the brain of the economy

Wall Street tells Main Street what to do: to get the real sector to do the right things, the financial sector has to lead the way. An integration of these physical climate risks into financial decision-making is necessary for accurate market pricing. For individuals and entities considering real estate investment in Mumbai, e.g. for long-term use or for bequest, the 30 cm effective sea level rise by 2050 constitutes material non-financial information for thinking about future utility and future asset valuation.

The scenario for 2050 is becoming material for the planning horizon for firms with real estate exposure. The real estate in Bombay alone is perhaps worth between half and one trillion dollars, and adverse events for this will ricochet through the system of asset prices. Lenders face credit risk associated with potential collateral devaluation, and increased default probabilities from borrowers incurring climate-related losses.

Weaving climate change into financial regulation

As is clearly articulated by FSLRC, the main script of financial regulation is the four questions of consumer protection, prudential regulation, resolution and systemic risk regulation. Of these, the problem of climate change impinges upon prudential regulation and systemic risk regulation.

In India, RBI has been making progress on these questions. They are close to releasing rules for banks and financial institutions regarding the disclosure and management of climate change risks. This will give regular disclosures about climate-related risks within loan portfolios, along with mitigation strategies, targets and stress tests. It will take substantial work, by financial firms, to develop these capabilities, and a three year lead time is envisaged prior to mandatory disclosures. This is important progress in financial regulation in India. In similar fashion, climate change needs to be woven deeply into financial regulation all across the financial system including at IRDA, SEBI, PFRDA, EPFO, etc.

Given the strategic apathy of most Indian financial firms, new kinds of disclosures will first reflect mere compliance of RBI rules, with mere contracting out to consultants and software vendors. A great deal of new knowledge building will be required to utilise this data more deeply for reshaping investment strategies and the behaviour of a variety of firms. Understanding and responding to climate change will become a differentiating factor shaping an edge in the performance of better firms.

The landscape of shifting incentives

It is important to trace the full path from climate change concerns embedded into financial regulation all the way to a more resilient real sector. This path runs in the following layers of modified incentives:

  1. Investors in financial firms will prioritise in favour of the better prepared financial firms.
  2. Financial firms will face market-based incentives in favour of more climate-resilient assets.
  3. Properties demonstrating resilience to projected hydrological changes will likely command a premium, while those with identified vulnerabilities will experience adjustments in market value.
  4. This will reshape the incentives of makers and buyers of real estate.

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