Too hot to fail? A strategist on making money as temperatures soar across India

With temperatures crossing 38°C in parts of India’s west coast and an early heatwave setting in, one Accenture strategist is pointing to a financial tool few investors may have considered: a derivative on the weather itself. “Amazing right!” writes Priyal Parab in a LinkedIn post, adding, “These weather derivatives… are contracts pulled up on weather-related entities—temperature, snowfall, rainfall, etc.”

As heatwaves get longer and markets more unpredictable, Parab suggests there may be new ways to hedge the unhedgeable—nature.

In a LinkedIn post that’s caught the attention of weather watchers and market followers alike, Accenture strategist Priyal Parab breaks down an unusual financial concept: weather derivatives.

“There is a DERIVATIVE on the weather itself. Amazing right!” she wrote, explaining how these contracts function much like traditional derivatives, but with triggers based on weather-related factors such as temperature, snowfall, or rainfall.

To illustrate the idea, he lays out a simple example: running an ice cream business during India’s early summer. “Heat goes up, profit goes up. Heat down, profit down.” But what happens when a sudden dip in temperature or an early monsoon eats into sales? “You are completely at nature’s mercy. Now what if I told you there's a hedge against this.”

Much like stock indices derive value from their underlying stocks, Parab notes that weather indices—like the temperature predictions often seen on Google—form the base for these contracts. If the weather deviates beyond a certain threshold, the contract pays out.

“So as an ice cream vendor, you’d maybe want to purchase the weather derivative that pays out if temperature goes below 30°C. If it stays hot you make money. If it gets cold you are hedged.”

The post comes at a time when parts of west India, including Mumbai, Goa, and coastal Karnataka, are already dealing with unusually high temperatures. On February 26, Mumbai recorded 38.7°C—5.9 degrees above normal, according to data by Climate Trends.

“Whether you perceive it as a gamble or calculated risk,” Parab wrote, “there’s more to weather derivatives and their benefits.”