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PG & E warned investors about disasters. It was mostly overlooked



(Bloomberg) – PG & E Corp. told investors many times that weather-related disasters are risky but many did not pay enough attention while the company was not on the brink of bankruptcy.

The company has included warnings in regulatory documents and offering prospectuses, indicating how disasters such as forest fires, droughts and floods can judge the results or disrupt its operations. But by mid-November, the company's bonds traded above par value, even after decades, which means that money managers believe these risks are manageable. PG & E's market value fell to 3.5 billion dollars from almost $ 24 billion in late September. Most of the bonds are traded at around 70 to 80 cents per dollar. The sudden downturns highlight how difficult it is for investors to analyze the risks of disasters and potentially even climate change than regular business difficulties.

"Many people think that the risk of climate change is so far in the future that it will not develop to affect the bonds, but then you have something like that," says Jens Pears, Chief Investment Officer of Natixis Investment Manager at Mirova, which controls about $ 10.7 billion in assets. [1] Mirova was giving up on PG & E in part because of the explosion of the San Bruno gas pipeline in 2010, where he was found guilty of a breach of safety.

The California Electric and Gas Company said it would file for bankruptcy this month after the fires in 2017 and 2018, leaving it with potential debts of $ 30 billion or more. Current market prices for bonds suggest that investors expect to take some sort of hit on the securities. Company spokeswoman declined to comment

PG & E fell to 13% before the start of regular trading in New York. Shares have fallen by more than 85 percent since the fire, the most deadly blaze in the history of the state, exploded on November 8. Geisha Williams, who left the CEO over the weekend, has consistently argued that California's fears of fires exceed PG & E, describing flames as "climatic extreme climatic conditions" over the past year. In a prospectus for bond trading in April Pacific Gas and Electric Co. warned that climate change and natural disasters could hurt it.

The company has planned more safety investments over the past few years and has made it a key element in the demand of the Board Director at the end of 2017. At the same time, the company has set up its Fire Protection Program in the Community and has since refined its expansion program of the network of meteorological stations and conducting high-threat electrical infrastructure inspections

Disasters disclosures are common among US utilities. But money managers and analysts who focus on environmental, social and governance issues are concerned about PG & E in particular for some time. Research and Analysis Company MSCI Inc. for the first time, marks forest fires as a significant risk to PG & E investors in 2016 after it was found that the company's equipment caused the Butte fire in 2015. More recently, environmental, social and governmental research firm Sustainalytics described forest fires and other environmental hazards for the company as "heavy".

Of the 1,200 green and sustainable equity funds traced by Bloomberg, only 34 owned PG & E shares the latest orders. But many conventional cash managers paid less attention to environmental risks.

"People feel comfortable with risks that were never a problem before, then suddenly," said Henry Piboy, who helped manage Eaton Vance's 460 billion dollars of fixed assets. "The risk slips in the places you least expect this."

(Cost-per-Action Updates in 6th paragraph)

– With the help of Elisa Ronalds-Hanon, Chase Weiner and Jim Eustatius Jr.

contact the reporters on this story: Molly Smith in New York at msmith604@bloomberg.net, Emily Chassan in New York at echasan1@bloomberg.net, Janine Wolf in New York at jwolf71@bloomberg.net

To contact the responsible editors for this story: Nikolai Gameltoft at ngammeltoft@bloomberg.net, Janet Paskin, Dan Wilchins

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