Pension funds in Europe that are heavily invested in utilities have been losing money, because many utilities have lagged-behind and have failed to adapt to renewable energy technologies fast enough. Some fossil fuel-burning power utilities in the U.S. have come under litigation from local municipalities, due to their toxic emissions. The Canada Pension Plan Investment Board (CPPIB) needs to assess these risks, and take them into account when considering investments in utilities.

According to Bloomberg Finance and referenced in the report: “The Effects of Weather Events on Corporate Earnings Are Gathering Force” by S&P Global Ratings and Resilience Economics,

Electric and Gas utilities are significantly affected by the following weather factors:

  • Warm winters (and mild summers) reduce demand for residential energy consumption required for space heating (or cooling).
  • Drought reduces available water for hydroelectric power generation.
  • Summer heat waves cause energy demand and spot price spikes, which impair load serving entities.
  • Extremely hot ambient temperature increases risk of electricity transmission outage.
  • Winter cold snap causes natural gas and electricity demand spike, resulting in shortage and creating need for expensive alternatives