Moody's said extreme heat and unstable water supplies are threatening asset valuations in more and more industries, and everything from labor productivity to energy costs is being affected. High temperatures and water resources are no longer independent risks that evolve along different timelines; for investors, both of these risks translate into operational risks, profit fluctuations, and stranded asset exposure. High temperatures and water risks are beginning to “drag down” the asset value of the European real estate industry. Such effects, if not priced, could quietly erode the cash flow and portfolio returns of companies in industries such as agriculture, apparel manufacturing, and semiconductors. Investors now need to adapt to the “new risk pattern” created by extreme weather conditions, and the effects of high temperatures and water scarcity are evolving into permanent risk characteristics. In the US, a sample of about 159,000 water-intensive facilities shows that nearly 49,000 facilities may face high or extreme water pressure in the next few decades.

Moody's said extreme heat and unstable water supplies are threatening asset valuations in more and more industries, and everything from labor productivity to energy costs is being affected. High temperatures and water resources are no longer independent risks that evolve along different timelines; for investors, both of these risks translate into operational risks, profit fluctuations, and stranded asset exposure. High temperatures and water risks are beginning to “drag down” the asset value of the European real estate industry. Such effects, if not priced, could quietly erode the cash flow and portfolio returns of companies in industries such as agriculture, apparel manufacturing, and semiconductors. Investors now need to adapt to the “new risk pattern” created by extreme weather conditions, and the effects of high temperatures and water scarcity are evolving into permanent risk characteristics. In the US, a sample of about 159,000 water-intensive facilities shows that nearly 49,000 facilities may face high or extreme water pressure in the next few decades.