Corporate concern over El Nino hits multi-year high

A Dartmouth College study from 2023 said previous major El Ninos weighed on growth, with losses from the 1982-83 and 1997-98 events at $4.1 trillion and $5.7 trillion, respectively, over the following five years. For Peruvian miner Compañía de Minas Buenaventura BUENAVC1.LM, Juan Carlos Ortiz, Vice President of Operations, told a July 31 earnings call that the company had added $12 million to its capital expenditure plan to cover El Nino-related risks. Each mine's safety committee had mapped the risks of flooding and would spend its share of the extra cash on preparing, for example through increasing pumping capacity, he added. In India, agricultural firm UPL Limited's UPLL.NS Chief Financial Officer Bikash Prasad told an August 3 earnings call that planting delays in India and Europe would push some demand into later quarters. Shrikant Kanhere, chief executive of AWL Agri Business Limited, one of India's largest consumer goods companies, told Reuters the El Nino was "a serious concern" and rural sales were at risk if disruptions to agriculture cut people's income. The risk of an exceptionally strong El Nino and how to adapt has shot up the agenda in company discussions, according to an analysis of filings and earnings calls. Scientists have said a "very strong" El Nino is increasingly likely and could be the most disruptive such event since 1950. But they also say the impact is hard to predict as man-made global warming compounds the effect of El Nino, which is a natural phenomenon. For companies, the challenge is to mitigate the impact and in some cases to benefit from the inflation that can ensue from crop disruption and changing energy demand. Reuters Climate Monitor showed parts of India were already 8 to 9 degrees Celsius above their 1961-1990 average on August 10, with the average high across Asia 3.9 degrees above. For some, the developing El Nino presents an opportunity rather than a risk. U.S. energy company AES AES.N said higher spot electricity sales and prices in Colombia boosted second-quarter revenue by $67 million. The prospect of weaker harvests in parts of Asia could also bolster farmers in the United States, said Benjamin Bahr, portfolio manager at U.S.-based First Eagle Investments. "The U.S. harvest I believe is going to be largely completed as well. And so the folks that have these crops in storage should have less risk and potentially more skewed upside if the crop prices do react positively," he said. A review of major corporate filings and conference calls using market intelligence firm AlphaSense showed 478 companies mentioned the weather phenomenon in 1,443 documents from May 1 to August 4, with 316 mentions in the calls, the highest since 2019. Led by companies in sectors including food, chemicals and banking, most focus on the scope of their exposure and contingency planning, rather than a clear estimate of what it means for sales, earnings or cash flow. The event was mentioned in nearly 900 documents from Indian companies - heavily reliant on monsoon rainfall - nearly 10 times the mentions by U.S.-based firms, followed by those based in the Philippines, Malaysia and Brazil. "Warmer, drier, more erratic conditions are being fuelled by climate change, so that makes predictions even more difficult from a scientific perspective and, honestly, from a business perspective," said Velislava Ivanova, Global Chief Sustainability Strategist at consultants EY. "We're seeing a lot more clients being focused on that from a risk and preparedness perspective," she said, adding the firm was helping to stress test their supply chains, given the potential for the impacts to last for many years.

Corporate concern over El Nino hits multi-year high

Companies add costs and adjust plans

Corporate attention to El Nino rises

Some companies and investors see upside

Mentions in filings and calls hit the highest since 2019

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