A Hotter Planet Is Already Warping Asset Prices
A Q&A with economic researchers explores the extent to which costs from heat stress are reflected in the pricing of stocks, corporate debt and municipal bonds.
We’re having a heat wave.
Photographer: David McNew/Getty Images
Climate change will have severe consequences on the global economy, including through rising seas and increased hurricane activity, droughts and wildfires. But the biggest economic cost may be the growing frequency of heat waves, which drive up energy costs for air conditioning and slash the productivity of many types of laborers, principally those whose jobs require them to work outdoors.
New research led by New York University economist Viral Acharya attempts to measure the extent to which those costs are already reflected in the pricing of stocks, corporate debt and municipal bonds. The researchers found a significant impact from heat stress exposure on all three. I spoke with Acharya and one of his co-authors, Tuomas Tomunen, an assistant professor of finance at Boston College. A condensed and lightly edited transcript of the conversation follows. Their paper, which was co-written by Suresh Sundaresan of Columbia University and Timothy Johnson of the University of Illinois — can be found here.