The 2023 wildfire season is shaping up to be one of the worst on record, highlighting how companies that help businesses threatened by the blazes could be long-term winners.
Over the past few weeks, flames have ravaged millions of hectares of land in Canada, which is battling the worst wildfire season on record. Smoke billowed across much of the eastern U.S., causing hazy skies and placing tens of millions of people under alerts for hazardous air quality. And the risk of fire is unusually high in several states in the northernmost...
A fire in northeastern British Columbia, Canada, on June 10.
BC Wildfire Service/Xinhua/Shutterstock
The 2023 wildfire season is shaping up to be one of the worst on record, highlighting how companies that help businesses threatened by the blazes could be long-term winners.
Over the past few weeks, flames have ravaged millions of hectares of land in Canada, which is battling the worst wildfire season on record. Smoke billowed across much of the eastern U.S., causing hazy skies and placing tens of millions of people under alerts for hazardous air quality. And the risk of fire is unusually high in several states in the northernmost part of the lower 48 states.
“Climate change is projected to worsen wildfire risks, with hotter temperatures, stronger winds, and drier conditions making environments more susceptible to fires,” said RBC Capital Markets in a research report. “Beyond physical destruction, wildfires are also increasingly contributing to air pollution.”
Companies are taking note. RBC said wildfire discussions are cropping up on earnings calls of many businesses, including those of insurance companies wrestling with how to properly model the risks. Two of the biggest insurers—Allstate and State Farm—are no longer writing new homeowners’ policies in California, partly because of the increased danger to homes.
Other businesses stand to gain. RBC highlighted three companies in the Russell 3000 index that offer investing opportunities related to wildfire resilience and risk mitigation and are also on RBC’s list of ESG Contenders—Outperform-rated stocks that aren’t yet highly owned in actively managed sustainable funds.
The three companies are Aecom (ticker ACM ), Atkore (ATKR), and Bentley Systems (BSY).
Aecom, an infrastructure-consulting firm, touts its focus on resilience. “Infrastructure designed with resilience in mind is better able to cope with shock events, such as extreme weather,” according to its website. The stock is flat for the year, with a gain of 0.9% as of early Thursday afternoon.
Atkore, whose shares are up 28%, makes electrical conduits and fittings, among other products. It stands to gain because as RBC noted, its conduits “support the undergrounding of power lines, enabling [the] grid to better withstand the effects of extreme weather events.”
Meanwhile, infrastructure engineering software company Bentley Systems is “creating products and services that empower users to advance how infrastructure is designed, future-proof our physical environment from climate change, including fires,” the report said. The shares are up more than 40% so far this year
RBC also included an ESG Contender related to indoor air quality: Carrier Global (CARR), maker of heating, ventilation, and air conditioning products. Barron’s wrote positively about the stock in early May.
Morgan Stanley analyst Joshua Pokrzywinski recently downgraded Carrier to Hold from Buy, cutting his target for the price to $47 from $49 a share. In April, Carrier announced it would acquire Viessmann Climate Solutions.
Pokrzywinski said that is good news because it beefs up the company’s European business and heat-pump operation, but that harvesting benefits from a large deal takes time. That is one reason he no longer urges buying the shares.
Carrier stock was at $47.72 around midday Thursday. So far this year, the shares are up more than 15%.
Wildfire risk is likely to get worse. The United Nations warned last year that the number of blazes is expected to increase by almost 15% by 2030 and by 30% by 2050. More communities around the world “must learn to live with the residual risk of wildfire,” according to a report from the U.N. Environment Programme.
Write to Lauren Foster at lauren.foster@barrons.com