The Pricing of Heat Stress Risk in the Financial Markets

Risk is now being priced in, but given that this data is available and the way that financial markets work, why would we not expect it to be priced in? One reason could be that even though we knew the gradient across geographies of exposure to temperature or heat stress risk, the risk has actually increased over time. Investors are seeing manifestations of heat stress in the form of forest fires, heat waves, droughts,. extra air conditioning needs, loss of worker productivity. All of this is entering data gradually year by year as more and more of these stresses manifest.