A1415
Title: Extreme temperatures and the profitability of large European firms
Authors: Gian Pietro Enzo Bellocca - Universidad Carlos III de Madrid (Spain) [presenting]
Pilar Poncela - Universidad Autonoma de Madrid (Spain)
Esther Ruiz - Universidad Carlos III de Madrid (Spain)
Abstract: The impact of temperature exposure is analyzed on the earnings per share of large European firms over the 21st century. Findings reveal that earnings are sensitive to extreme temperatures across a large proportion of sectors. Depending on the sector and quarter, exposure to extreme temperatures can have either a positive or negative impact on profitability. Analysis shows a greater percentage of sectors affected in Europe compared to the US, likely due to Europe's broader temperature variability from the northern Baltic to the southern Mediterranean regions. It is observed that most sectors experience effects during the milder seasons of spring and autumn, being positive in most cases. The lack of a clear negative effect of extreme temperatures on firms' profitability points out one of the reasons why it is so difficult to fight against climate change: while being harmful, it can be profitable. Additionally, a concerning trend is highlighted regarding a steady increase in European investments in sectors that are solely negatively impacted by extreme temperatures, which grew from around 16\% in 2015 to over 23\% in 2022.
