Toughening up
So, as investors, what do we want them to do? Should they go about business as usual, in the face of mounting threats to their operations? Or should they develop a strategy to keep business roaring no matter what the next shock is to their systems? Personally, I like the latter option.
American Water Works Company Inc (NYSE:AWK) is increasing redundancy in its fuel supply and communications equipment. The company conducts detailed planning studies that analyze facility-level water risks, which guide decisions to enhance operational and energy resilience and efficiency. After Hurricane Floyd in 1999, American Water Works Company Inc (NYSE:AWK) installed a flood wall at a major plant in New Jersey. Twelve years later, that proved to be a good call when flooding from Hurricane Irene came within an inch of cresting the flood wall, which protected a critical water supply facility serving a large population. American Water Works Company Inc (NYSE:AWK) is adopting a more integrated management approach to water resources that will expand available water supply options by various mechanisms, including more efficient water use and reuse technologies.
National Grid plc (ADR) (NYSE:NGG) has undertaken targeted risk assessments in the U.S., including, for example, a yearlong assessment of potential flood risks to all of its Rhode Island electricity substations following damage in 2010 from major river floods. Based on the findings, National Grid plc (ADR) (NYSE:NGG) plans to invest nearly $23 million over the next five years to rebuild or elevate parts of substations in flood-susceptible areas. The company’s gas utility service is conducting similar assessments, and to relocate critical assets out of vulnerable floodplains and storm-harden facilities that cannot easily be moved to higher ground.
Entergy Corporation (NYSE:ETR) teamed up with insurer Swiss Re AG – ADR (OTCMKTS:SSREY) to do scenario modeling. Swiss Re AG – ADR (OTCMKTS:SSREY) looked at three hazards — wind, flooding, and storm surges — and modeled the average annual losses that Entergy could expect to sustain. The company is using this information to guide its resilience strategy going forward.
Bottom line
Perhaps we do ourselves a disservice by getting too mired in the climate change debate. Let’s instead focus on the fact that these companies have taken note of serious risks to their bottom lines, and they’re stepping up to do something robust about it. That has got to appeal to investors at a fundamental level.
The article Is It Easier if We Don’t Call It Climate Change? originally appeared on Fool.com is written by Sara Murphy.
Sara Murphy has no position in any stocks mentioned. Follow her on Twitter @SMurphSmiles. The Motley Fool recommends National Grid plc (NYSE:NGG) (ADR).
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