Anticipating Hurricane Risk Before It Strikes
- Hurricanes can drag returns across a broad swath of equities. Firms with assets located in hurricane-prone regions have historically underperformed, with losses compounding over the observation window.
- The severity of stock underperformance has correlated strongly with the share of a firm’s assets exposed to hurricanes. The more a company relies on hurricane-prone assets, the worse the returns tend to be.
- Investors can anticipate and manage hurricane exposure before storms hit by mapping vulnerable assets, monitoring seasonal risks and incorporating adaptation measures into engagement, rebalancing or hedging strategies.
As hurricanes intensify, their financial toll on investors is becoming undeniable.1 These storms are reshaping the risk landscape, not only through asset damage and infrastructure loss, but via business disruption and heightened earnings volatility.
In a forthcoming paper, we analyze global hurricane events between 2022 and 2024 to understand how these localized hazards affected companies’ stock performance — and how investors can manage those risks. We highlight some of that research in this blog post.
Using MSCI GeoSpatial Asset Intelligence, we matched hurricane tracks to over two million mapped corporate assets and tracked the stock performance of impacted issuers after each hurricane. During the observed time period, more than half of the firms in the MSCI ACWI Index had at least one asset in a hurricane-impact zone during peak storm months. In terms of market weight, those firms represented over three-quarters of the index. Therefore, even if a portfolio appears geographically diversified, exposure to hurricanes is embedded across sectors and regions.
Firms with assets in the path of a hurricane experienced statistically significant underperformance. And this underperformance emerged even before hurricanes physically impacted the asset locations and continued to deepen through the 30 business days that followed, the entire study window.2 This suggests that investors gradually price in risk as damage assessments and business impacts become clearer.
We track cumulative abnormal excess equity returns for issuers exposed to hurricanes, covering a period from five business days before landfall to 30 business days after. The results show a consistent pattern: MSCI ACWI Index constituents impacted by hurricanes underperform, with losses that deepen and remain statistically significant over time. Specifically: ***statistically significant at 99% confidence level that the mean is below 0; **statistically significant at 95% confidence level that the mean is below 0; *statistically significant at 90% confidence level that the mean is below 0. Source: MSCI ESG Research
Not all firms were hit equally, however. The higher the share of a company’s assets exposed, the steeper the decline in stock performance. In terms of sectors, utilities saw the most pronounced effect, likely reflecting their concentrated fixed infrastructure.3 But investors don’t need to wait for the next storm to know which firms are vulnerable. Using hazard metrics, risks can be quantified ahead of time.
Issuers are grouped into quintiles based on the share of their assets exposed to hurricanes. Those in quintile 1 have the lowest exposure, while those in quintile 5 have the highest. The results reveal a clear gradient: firms in the top-exposure quintile experience the largest negative abnormal excess returns, underscoring their heightened downside risk compared to less-exposed peers. Source: MSCI ESG Research
As shown above, companies hit by hurricanes have historically delivered lower short-term returns. In the goal of proactively managing this risk, investors can employ forward-looking estimates of issuers’ hurricane exposure long before storms occur and use these estimates when building and monitoring their portfolios.
In our analysis, we linked MSCI Physical Risk Metrics - Issuer level, specifically Tropical Cyclones 100-year Wind Speed Percentile Score4 estimates to our hurricane dataset and found that companies in the highest-risk quintile had a more than 20 times greater share of assets impacted on an annual basis than those in the lowest quintile.5
Issuers are grouped into quintiles based on their MSCI Tropical Cyclone Hazard Percentile, which reflects relative hurricane exposure in 2025, measured by the intensity of wind speed exceedances across underlying assets. For each quintile, we present realized hurricane exposure over 2022–2024: Average annual hurricane hits per issuer, average share of issuer assets affected per hurricane and average annual asset share affected per issuer (calculated as the product of the first two metrics). The final metric may reflect multiple hits to the same asset within a given year. Source: MSCI ESG Research
The same pattern also held at the country level. When grouped by domicile, average hazard-intensity values aligned with realized hurricane hits. Our final chart shows that an issuer’s domicile is not in itself a sufficient reflection of risk. Issuers from countries not associated with hurricanes, such as Switzerland, France and Germany, have both high hazard-intensity values and realized exposure reflecting their global operations.
The chart compares average realized hurricane exposure (x-axis) with average estimated hazard percentile (y-axis) for issuers, grouped by their domicile country. Realized exposure is measured as the average annual share of issuer assets affected by hurricanes over 2022–2024 (calculated as the annual number of hurricanes per issuer multiplied by the average share of assets impacted). Estimated exposure is based on the MSCI Issuer-Level Tropical Cyclone Hazard Percentile in 2025, which reflects relative hurricane risk from wind-speed exceedances across issuers’ underlying assets. Source: MSCI ESG Research
Climate risk isn’t a distant threat — it’s already impacting today’s markets. The critical question is whether investors are anticipating it early enough. With precise asset-level data, investors can move from reacting to storms (and other physical hazards) to proactively anticipating and managing physical climate risk before it impacts portfolios.
Integrating these insights into risk oversight can involve:
- Map exposure. Use geospatial data to pinpoint vulnerable assets and operations across holdings.
- Monitor seasonal risk. Hurricane activity tends to peak between August and October, so investors can align risk reviews with this cycle.
- Incorporate adaptation. Evaluate resilience indicators such as redundancy, business-continuity plans and flood protections; firms with strong measures may recover faster.
- Adjust allocations. Rebalance portfolios or apply hedges.
- Engage at-risk issuers. Engage more strategically with exposed issuers.
When major storms strike, portfolios lose value. With asset-level insights, investors can anticipate risk before it makes landfall.
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1 “Hurricane” is the regional term used in the Atlantic and Northeast Pacific, while similar storms in Asia and the southern hemisphere are referred to as “typhoons” or “cyclones.” “Tropical cyclone” is the generic scientific term for these intense storm systems. In this blog post, we use “hurricane,” but the findings apply across all tropical cyclones.
2 The underperformance is measured by residual returns after controlling for country factors, industry factors and style factors. We use MSCI Global Equity Factor Model - Trading.
3 Sector definitions are based on the Global Industry Classification Standard (GICS®). GICS is the industry-classification standard jointly developed by MSCI and S&P Dow Jones Indices.
4 The Tropical Cyclones 100-year Wind Speed Percentile Score at the issuer level is the average hazard level of tropical cyclones (100-year return period wind speed) a company's assets are exposed to, expressed as a percentile in comparison to current hazard levels of companies that are MSCI ACWI Index constituents.
5 Since MSCI Hazard Percentiles are based on data from the CMIP6 global circulation model released in 2021, measuring their correlation with 2022-2024 realized hurricane exposure is a truly out-of-sample measure of their ability to estimate realized hurricane exposure on a forward-looking basis.
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