27th October 2026
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Dr Sophie Lewis, Chief Scientist - Engagement
Late last year, over morning coffee at a climate-focused investor forum, I got talking with an investor who was typical of many I meet: informed on the fundamentals, high conviction, curious for credible information. Then the investor said, "We can discount heat, that doesn't matter. So, let's talk about the other climate impacts."
As someone who has spent a decade researching heat extremes, I was taken aback. And yet I also understood where that came from, because Australian life has taught all of us to think that way.
Summer is the season we sell: the beach, the outback, the esky, the hat, the cricket, the cold beer. We have adapted and we are proud of it. We cope privately, with blinds down and an early start. If anything, it looks like competence and resilience. A collective badge of honour.
But while sunglasses protect us on our hottest days, are they also clouding the bigger picture?
Because as a climate scientist, and an Australian, here's what I cannot reconcile. Treasury's Intergenerational Report, released in September, gives us a glimpse of Australian life in 2066. Its forecast of 1.2 per cent annual productivity growth leans on AI but does not include the physical costs of climate change.
So how does the report treat each? By my count, the main report gives the terms AI and artificial intelligence nearly 500 mentions, to 33 for climate change. Heat gets only 7.
Nobody can say with certainty what AI will do to productivity over the next year, let alone the next forty years. Meanwhile, heat is the most known of the physical risks. There is a clear link between rising global temperatures and increasing local-scale extreme heat impacts. The physics is well understood, and decades of data back our insights into future projections over the next forty years.
Treasury deserves credit for modelling heat's effect on worker productivity, as one of four climate damages in a partial scenario. But that sits in a side analysis, while AI sits under the headline number. Why go all in on what we cannot know, and look away from what we can?
I think the answer is habituation. Every Australian has lived through hot summers, so heat has become scenery. A story that works for a day at the beach has become an input to a forecast.
Aswath Damodaran's Narrative and Numbers argues that a good valuation tests the story against the numbers and the numbers against the story. In our forecasts, the story about heat has not been tested.
Heat's costs also fall where no balance sheet looks. A child is sent home from a school with no cooling, and a parent must stay home from work with them. Someone sleeps badly and is on autopilot all Tuesday.
In one study of a silicon wafer plant, output fell 8.3 per cent when outdoor wet bulb temperatures increased by 10°C even though the factory floor was held at constant temperature. US research finds more workplace injuries on hot days, including falls and crane accidents that are never recorded as heat. These costs land on households and are booked as something else, so no company and Treasury is not adding them up.
Take one week. In June this year, the UK lost an estimated 24 million working hours and £1.15 billion of output to heat.
Companies know. In a World Economic Forum and BCG report, 82 per cent of 40 senior leaders at large global companies called extreme heat an urgent and major risk to their workforce. Yet fewer than one in three companies had workforce heat initiatives, and about three-quarters of those leaders struggled to put the risk into financial terms. Most agree heat matters. Few can say what it costs.
For anyone setting assumptions about productivity, margins or capex, that gap is worth closing before the Australian summer peaks in January. We need to move from coping to preparing.
Three questions I would start it:
Take the sunglasses off for a minute. Heat is one of our main stories. As the 2026 El Niño strengthens and the Southern Hemisphere summer outlook comes into view, my colleagues and I at ACCR are working on a dedicated heat report that lays out how and why heat matters.