Fwd: Wall Street’s extreme heat winners

[Loretta Lohman]

It’s a “trillion-dollar question”  ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

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Extreme weather events that disrupt one business can be an opportunity for another. Wall Street is increasingly focused on deciphering which companies or industries are poised to benefit, and which lose out. Meanwhile, in Europe, researchers put a price tag on the June heat wave, the worst ever recorded in the region. And Singapore’s ex-central bank chief tells us climate-related disruption poses the “mother of all” risks to supply chains. Subscribe to Bloomberg.com for unlimited access to all our coverage on the economic impacts of heat and extreme weather. A trillion-dollar question By Coco Liu Extreme heat has gone from a seasonal anomaly to a permanent corporate variable. In North America, severe heat waves now occur twice as frequently as they did in the mid-20th century — a rate accelerating even faster across Europe and Latin America. As record-breaking summer temperatures regularly cause regional infrastructure to buckle, the macroeconomic toll is mounting. Yet that climate burden isn’t felt evenly. While intense heat disrupts operations for a variety of industries, it also creates business opportunities for others. Wall Street is now having to devote more resources to pinpointing those winners and losers, though it remains a complex task. A pedestrian uses a hand fan during hot weather in Palma de Mallorca, Spain. Photographer: Andrey Rudakov/Bloomberg “This is the trillion-dollar question,” says Gernot Wagner, a climate economist at Columbia Business School. Part of that challenge is that “science in many ways is following reality,” he notes. It still takes considerable time for investors to translate evolving climate models into hard equity analysis. But every heat wave provides more insight into how higher temperatures affect corporate bottom lines. Here are some of the industries that have already seen heat-induced opportunities and risks. More heat waves, more grid equipment sales When extreme heat spikes AC demand, it triggers an immediate physical toll on regional electrical grids, causing equipment to degrade or even malfunction. That vulnerability is particularly acute across North America and Europe, where much of the power network was built decades ago for a significantly cooler climate. This is accelerating capital expenditures on grid infrastructure. In New York City — where days exceeding 95F are projected to quadruple by 2030 — the local utility Con Edison allocated $3.9 billion ahead of the summer to replace legacy infrastructure. For manufacturers of substation transformers, cables and grid-scale battery storage systems, as well as engineering and maintenance firms such as MasTec Inc., these investments represent a massive growth opportunity, says Andrew John Stevenson, an analyst at Bloomberg Intelligence. Electrical transmission towers in California. Photographer: David Paul Morris/Bloomberg Advanced cooling is a hot business The global buildout of data centers to support artificial intelligence has made hardware cooling a paramount operational challenge. Rising ambient temperatures are pushing standard HVAC systems to their thermal limits. In 2022, unprecedented heat waves in London completely overwhelmed the cooling infrastructure at both Google and Oracle facilities, forcing operators to execute emergency shutdowns of several servers to prevent catastrophic hardware damage. But for companies offering advanced liquid cooling and specialized HVAC systems, this presents an opportunity. “The AI-specific demand is migrating away from traditional air cooling,” says Garvin Jabusch, chief investment officer at Green Alpha Advisors. Alongside that hardware shift is a greater appetite for software that manages and optimizes data center cooling, he adds. Trucking feels the heat Data centers aren’t the only ones revamping their cooling systems. Trucking companies, which have historically done without in-cab air conditioning, are now adding it. Take UPS, for example. Following a high-profile strike threat in 2023, the logistics titan codified a labor agreement to purchase only AC-equipped delivery vehicles, while retrofitting thousands of existing trucks operating in the hottest American corridors. Meanwhile, regulators are stepping up heat protections. In India, the Ministry of Road Transport and Highways recently mandated air-conditioned cabins for all new medium- and heavy-duty trucks, reshaping an industry where less than 5% of fleets have air conditioning. Read the story Heat losses $1.5 billion In lost working hours during a single week in the UK, according to a survey released Thursday Capital at risk “If you can’t work 20% or 30% of a day, there’s not just the labor that’s waiting around; there’s all the capital that’s waiting around.” Andrew John Stevenson Bloomberg Intelligence analyst A price tag to heat waves By Laura Millan The heat wave that scorched western and central Europe in June cost the UK economy £1.15 billion ($1.5 billion) in lost hours of work, according to new research. Heat impacted working hours, workplaces, commuting and ability to sleep, according to a survey of 1,950 adults across the UK conducted by the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and the Euro-Mediterranean Center on Climate Change. A cyclist in the City of London during June’s heat wave. Photographer: Betty Laura Zapata/Bloomberg Heat meant people worked about 30 minutes less on average during the week beginning Monday, June 22, the survey found. National temperature records for June were broken on three consecutive days that week. Employees in jobs that are more physically demanding or involve more exposure to heat, including construction and agriculture workers, reduced their hours more dramatically, with 3.6% of the people surveyed not working at all that week because of the high temperatures. Get more Mother of all risks By Ishika Mookerjee The scale of climate-related disruption to supply chains is being underestimated as global warming pushes the planet to the brink of environmental tipping points, according to Ravi Menon, Singapore’s former central bank chief. Ravi Menon Photographer: Lionel Ng/Bloomberg “The mother of all supply chain disruptions will be the climate, because that is the deepest form of entanglement that the global economy has,” Menon, the city-state’s ambassador for climate action, said Wednesday at the Bloomberg Sustainable Business Summit. The impact of climate on livelihoods, labor and economic activities “will all have knock-on effects down supply chains.” Keep reading 🎥 Attention all filmmakers! Working on a short documentary about climate change? Don’t miss your chance to submit it to the Bloomberg Green Docs film competition. Grand prize: $25,000. Submissions accepted through August 14, 2026. See official rules at bloomberg.com/greendocs. Today’s Zero listen Zero Ditching Net Zero to Win the Climate Argument Andy Burnham has become the UK’s sixth prime minister in just 10 years. When it comes to energy and climate, the Labour Party’s Burnham will inherit many of the same challenges of his predecessors: high energy prices, security of supply and an increasingly polarized debate over the UK’s ambitions to reach net zero. This week on Zero, Akshat Rathi sits down with Dale Vince, founder of Ecotricity and a major donor to Labour, to ask whether a new UK government can make energy cheap. Listen now, and subscribe on Apple, Spotify or YouTube to get new episodes of Zero every Thursday. More from Green Burnham raids climate aid budget New UK Prime Minister Andy Burnham will use money allocated to helping poor countries deal with the worst impacts of climate change to fund a new cap on bus fares across England. Read more China wants to boost renewable consumption Asian giant wants renewable energy consumption to jump 53% through 2030. France set to pay record aid to renewables Subsidies for renewable energy are set to reach €9.75 billion ($11.1 billion) in 2027. Europe car sales jump most since October 2023 Fully electric cars are underpinning the gains, offering some respite for the region’s automakers. Brookfield agrees to $7 billion battery deal Brookfield has agreed to acquire battery storage developer Aypa Power. Final take The world feared the Iran war’s disruption of the Strait of Hormuz would trigger historically high oil prices. Yet the worst hasn’t happened, and the reasons may hint at a rewiring of energy flows and at China’s focus on electrification, which has resulted in oil demand destruction. Electric vehicle and solar equipment sales have soared in the months since the start of the conflict. 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