Climate change has been getting a lot of airtime lately, especially in the wake of President Obama’s sweeping speech on the subject last month. Many companies have been increasingly engaged on the topic, talking more about the risks and opportunities their businesses face from the effects of a warming planet.
I’ve been talking a lot about climate change, too, specifically advocating for the notion that investors need to take it into account in their overall stock analyses. Judging from readers’ comments questioning my intelligence and parentage, some people strongly disagree with this position!
So what if we change the discourse? What if, instead of talking about climate change, we talk about operational resilience? About business continuity? About efficiency? Because that’s exactly how I heard three utilities addressing the subject today, and it was compelling.
Weathering the storm
I attended the Center for Climate and Energy Solutions’ launch event for its new report, “Weathering the Storm: Building Business Resilience to Climate Change“. Representatives from American Water Works Company Inc (NYSE:AWK), Entergy Corporation (NYSE:ETR), and National Grid plc (ADR) (NYSE:NGG) were among the speakers. All of them talked about significant financial losses from recent extreme weather events, service disruption, weakening infrastructure, and the need for their industry to transform if it is to be effective in the decades to come.
Climate models predict the increasing frequency and severity of extreme weather events. That means more hurricanes that pack a bigger wallop, for instance. Perhaps you’re not convinced about the link between the two, so why don’t we just leave that aside. Each utility acknowledged the simple fact that they’ve been getting crushed by nasty weather in a way that they’ve not in the past.
Thomas B. King, executive director and president of National Grid plc (ADR) (NYSE:NGG) US, explained, “Ten years ago we didn’t have to worry about major storms in our service area. The magnitude has shot way up in the last 5 to 8 years.”
Jeff Sterba, president and CEO of American Water Works Company Inc (NYSE:AWK), discussed the recent flood-drought-flood cycle in the Midwest that has been altering soil and damaging underground pipe infrastructure.
Jeff Williams, Entergy Corporation (NYSE:ETR)’s director of climate consulting, said that his company lost 1.1 million customers after Hurricane Katrina.
It would be hard to posit some left-wing conspiracy on the part of these utilities. They’re just observing their operating conditions, and trying to figure out how to surmount the challenges they face.