This year’s northern hemisphere summer, marked by extreme weather events and a strong El Niño phenomenon, is having notable impacts on global business earnings and supply chains. These climatic disruptions highlight the interconnected nature of environmental changes and economic outcomes, affecting sectors from mining to utilities and retail.

Multinational companies are particularly exposed to these challenges. The mining firm Rio Tinto reported an anticipated revenue shortfall exceeding $800 million due to production and shipping difficulties caused by tropical cyclones Narelle in March and Mitchell in February. Beyond these acute events, rising temperatures and creeping heatwaves are also lowering productivity, compounding financial pressures on companies worldwide.

Analyses by MSCI reveal that approximately 11,000 major companies have collectively faced over $1 trillion in annual lost revenue opportunities tied to diverse extreme weather conditions. Water availability further complicates the picture; drought conditions linked to El Niño have reduced shipping capacity through critical transit points such as the Panama Canal. Similarly, low water levels in European rivers like the Rhine and Danube disrupt shipping routes, creating ripple effects across supply chains.

Energy companies have also been affected. French utility EDF attributes part of its projected 10 percent decline in EBITDA this year to reduced hydropower production due to heatwaves. Additionally, EDF was compelled to temporarily shut down three nuclear reactors during peak heat periods because of heat-related restrictions on cooling water usage. In response to these vulnerabilities, EDF plans to invest €8.7 billion by 2040 to bolster the resilience of its nuclear, hydropower, and island operations against climate-related disruptions.

The evolving climate landscape is also driving increased investment in data and risk management. MSCI has observed growing demand for detailed risk data at street and factory levels, prompting the acquisition of data provider First Street to enhance its offerings.

While many companies face challenges from climate extremes, some sectors are reporting benefits. The UK retailer Halfords raised its profit forecast for the fiscal year after stronger sales of bicycles and camping gear during sunnier conditions. Meanwhile, Perimeter Solutions, a U.S.-based producer of firefighting products, anticipates higher demand for its fire-retardant materials amid the prevalence of heat-driven wildfires.

These developments are occurring against the backdrop of roughly 1.4 degrees Celsius of global warming above pre-industrial levels. According to current government policies and pledges, this figure could rise to approximately 2.6 degrees Celsius by the century’s end. Experts warn that even fractional increases in temperature can lead to new types of extreme events, increasing the risk of defaults among households and businesses. Central banks have highlighted the potential for such climate-related risks to trigger broader financial instability, suggesting that observed fluctuations in corporate earnings may be early indicators of more profound economic impacts to come.