But there are broader lessons to draw for both investors and companies. For investors, the utility sector’s climate woes should serve as a reminder that climate change will challenge long held assumptions about risk and return. Agriculture, energy, and, for example, all face steep climate-related risks. That’s not to say that these sectors will become uninvestable. To the contrary, companies in these industries will require capital to adjust to climate change.
Businesses across all sectors can take lessons from utilities’ recent experience. For years, as wildfire risk grew, utility companies moved slowly to implement adaptation plans that would cut their risk. Taking a short term view, it’s easy to understand why. Such measures—like burying power lines underground or installing stronger poles—are costly and can disrupt operations.