Climate Exposure Impact on Equity Valuation: Case Study of Vail Resorts, Inc.


  • Donna Bebb
Publish Date:
February 24, 2015
Steyer-Taylor Center for Energy Policy and Finance
Related Organization(s):


Climate exposure for investors refers to potential gains or losses in a portfolio due to climate change. To effectively manage this exposure, investors first need to accurately quantify and measure the potential impact. Unfortunately, the unpredictable nature of the risk and complexity of obtaining data have made the task difficult in practice. Most of the environmental data available for investors is historical or challenging to quantify financially so investors are not able to meaningfully incorporate it into forward-looking, fluid investment decisions. In addition, the challenge of effectively measuring climate exposure in a portfolio requires a unique approach for each sector and company. Our model introduces a methodology to analyze the financial impact of climate exposure on a public company’s equity valuation. This climate exposure analysis differs from ESG (environmental, social and governance) and low-carbon portfolio tools because it measures near-term (three-five year) impact on equity valuation from climate change and related innovation, mitigation or adaptation. ESG tools typically generate qualitative ratings for each company rather than a quantitative value to apply to equity valuations, and low-carbon analysis tends to focus on longer-term potential financial impact (like stranded assets). Utilizing Vail Resorts, Inc. (MTN) as an example, the model incorporates the financial impact from changes in snowfall, associated increased snowmaking costs, and energy efficiency improvements. Vail Resorts provides a glimpse into a company dealing with the direct, present-day impact of changes in climate without being too geographically or financially complex. The research integrates climate change into MTN’s investment valuation and demonstrates that climate exposure risk and opportunity can be quantified.