Macroeconomic Trends

Unprecedented Indian Heat Wave is Raising Alarm

By Roger Mortimer, Portfolio Manager

Multiple regions in India are suffering from a record-breaking heatwave that is alarming climate change experts with its duration. Over a billion people – 10% of the world’s population – are being subjected to extreme heat.1

After a March that was the hottest in the country since record keeping began 122 years ago, temperatures on April 29th exceeded 46o C (115o F) in multiple northern and western regions.2 While the absolute level of heat is concerning, it is the duration of the heat wave that is worrying experts. According to Dr. Robert Rohde, the Lead Scientist at Berkeley Earth, in the last six weeks temperatures in New Delhi have averaged more than 4o C (7.5o F) above normal.3 He notes that “the significance of the current Indian/Pakistani heat wave is less about smashing records (though various records have fallen) and more about very long duration. The last ~ 6 weeks have been repeatedly challenging the top of the historical range and baking this part of the world.”4

India frequently experiences heat waves in May and June before the monsoon rainy season, but this year, the heat has arrived early, and with greater intensity. In April, temperatures in New Delhi, home to more than 30 million people, averaged consistently 5 to 10o F above normal, and on April 28th, all ten of the world’s hottest places were in India and Pakistan.4 High pressure “heat domes” that cause sustained high temperatures are becoming both more common and more intense. This phenomenon was also responsible for the record-breaking heatwave in the US Pacific northwest last year.

In addition to the obvious health hazards of extremely high temperatures, the heat is melting roads, damaging agricultural yields, and impacting the power grid, which is affecting essential services. India’s power consumption in the month of April this year was considerably higher than in the past four years and the country has been caught short on coal supply for its generating stations. India generates 70% of its power supply from coal. A government minister described the power situation as “very grave” and noted that “there is a huge shortage of power in the country… Together we soon need to find a solution. Quick, concrete steps are required to tackle this problem.”6

That India is highly dependent on coal for its power generation is in itself a problem, both economically and philosophically. Despite being the world’s second-largest coal producer it is also a major importer. Growing power demand puts strains on domestic infrastructure and requires foreign capital for import purchases. While the climate impact of coal consumption is becoming increasingly clear, the economic and logistical factors are highlighting the unsustainability of the current strategy.

India is the world’s third-largest carbon emitter7 and is rapidly industrializing. With a population more than four times that of the US but GDP per capita less than one-thirtieth of American levels, it implies that if India were to achieve the US per capita wealth standards in its current coal-fired model, its carbon emissions would increase more than 100 fold.8 With its systems already strained and the climate impact becoming more apparent, India has committed to a new energy model. At COP26 in Glasgow, Prime Minister Narendra Modi pledged to achieve net-zero by 2070 and set a goal of 1 billion tonnes of CO2 reduction by 2030.9

Indian companies like Reliance Industries (LSE: RIGD), which represents 3.94% of the KraneShares Global Carbon Transformation ETF (Ticker: KGHG),10 see tremendous opportunity in addressing India’s transformational power sector needs. The country’s electricity demand is forecasted to grow at 5% annually this decade (versus 2% for Europe and 1% for the US) and renewables will play a major role, with installed capacity forecast to double by 2026 and increase fivefold by 2032.11 The Indian government is implementing subsidies, capex incentives and tariffs to stimulate demand and to protect domestic companies. Once scaled at home, they believe they will have significant export opportunity. Mukesh Ambani, Reliance Industries’ Chairman, believes that India could become a clean energy superpower, with clean energy exports of $500 billion over the next 20 years.12

Reliance’s energy unit is spending a larger share of its total capital expenditure on ‘new energy’ than any other oil major13 and identifies solar as a key driver this decade, followed by batteries and hydrogen next decade. The company is investing heavily across the entire value chain and sees significant eventual cost efficiencies from vertical integration. It plans to manufacture polysilicon, wafers, cells, modules, EV and grid storage batteries, electrolyzers, and fuel cells. We believe, with its favorable incentive structure in India, it also can generate higher returns and access lower-cost capital than in its legacy energy businesses, giving margin expansion potential on top of strong revenue growth.

Reliance is characteristic of the type of investment we seek in the KraneShares Global Carbon Transformation ETF (Ticker: KGHG). As India’s largest private sector company, its investment program is highly aligned to support the decarbonization objectives of Prime Minister Modi. We believe it has the capabilities, skills, and market adjacencies to expand in emerging high-growth areas. Additionally, it is devoting a substantial share of its investment capital to decarbonization business opportunities, and senior management has made these initiatives a core element of the company’s strategy, both domestically and internationally. As a key change agent in India’s carbon transformation plans, we believe Reliance is poised for accelerating growth while addressing a critical societal need.

The KraneShares Global Carbon Transformation ETF (Ticker: KGHG) is an actively managed ETF that invests in companies that we believe will emerge as decarbonization leaders. KGHG focuses on companies in traditionally high emitting industries that are actively transitioning to new, decarbonized business models. A global approach enables the fund to invest in those markets and industries where policy and circumstance are most supportive of decarbonization.


  1. Scott Duncan, Twitter @ScottDuncanWX, April 26, 2022
  2. “Unbearable blistering heat threatens lives in India”, Namita Singh, The Independent, April 29, 2022
  3. Dr. Robert Rohde, Berkeley Earth, Twitter @RARohde, April 29, 2022
  4. Ibid.
  5. “Nearly the hottest place on Earth right now, India swelters under intense heat wave”, Zachary Rosenthal, Yahoo News, April 28, 2022
  6. “‘Situation grave’ says Delhi chief minister on power crisis”. The independent. Namita Singh, April 29, 2022
  7. 2020 data. Climate Change News, May 17, 2021.
  8. World-o-meter and United Nations Population Division, “Countries in the world by population (2022)”; World Bank, “GDP (Current US$)”
  9. “COP26: India PM Narendra Modi pledges net-zero by 2070”,, November 2, 2021
  10. Data from Bloomberg as of 4/29/2022. Holdings are subject to change.
  11. Goldman Sachs Equity Research, December 7, 2021
  12. “India could export $500 bln in green energy over 20 years, Reliance’s Ambani says”, Reuters, February 23, 2022
  13. Goldman Sachs, Ibid.