Wildfires Have Changed the Game for This Type of Investment

By: Anneken Tappe · April 19, 2024 · Reading Time: 2 minutes

Utility Upheaval

Utilities are often thought of as stable and dependable businesses that will chug along no matter the state of the economy. That’s because people always need electricity and heat in their homes, and because they’re regulated by the government. But climate change may have the last word on the topic.

As extreme weather events become increasingly common, utilities have suffered, taking some of the shine off their stellar reputation.

Fire Fallout

Wildfires have become more common, with disastrous consequences for their respective regions, as well as utility companies, which have been blamed for their role on multiple occasions.

Last winter, a lawsuit alleged dilapidated equipment owned by Xcel Energy (XEL) was responsible for a large fire in the Texas Panhandle. Before that, the fatal Maui wildfire was linked to Hawaiian Electric (HE). A few years earlier, Pacific Gas & Electric (PCG) powerlines caused wildfires across California.

This recurring pattern warrants serious concern among utility investors. Hawaiian Electric saw a steep decline in value following the wildfires, with its stock plummeting more than 70% in the months since. In the wake of the California wildfires, PG&E declared bankruptcy.

For a sector long considered low-risk, these disasters have added a great deal of uncertainty, and serve as a reminder that climate change is also an issue for Wall Street.

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