California’s largest utility was overwhelmed by rapid climatic changes as a prolonged drought dried out much of the state and decimated forests, dramatically increasing the risk of fire. On Monday, PG&E said it planned to file for Chapter 11 protection by month’s end, citing an estimated $30 billion in liabilities and 750 lawsuits from wildfires potentially caused by its power lines.
The PG&E bankruptcy could be a wake-up call for corporations, forcing them to expand how they think about climate-related risks, management consultants and other experts said.
Previously, companies mainly worried over risks from new governmental regulations related to climate change, said Christophe Brognaux, a managing director at Boston Consulting Group. The PG&E case makes clear that companies also have to worry about sudden, and potentially unexpected, impacts to their core assets and liabilities, he added.
“Physical risks have only recently manifested themselves. This is a fairly new development,” said Bruce Usher, a professor at Columbia University’s business school who teaches a course on climate and finance. “If you are not already considering extreme weather and other climatic events as one of many risk factors affecting business today, you are not doing your job.”