Prepare Your Portfolio to take Advantage of Climate Change

A new Mercer research report, “Investing in a Time of Climate Change,” is fascinating for what it is (and isn’t): a pure investment thesis, not a screed on science or politics.

The report is especially timely, given a new National Oceanic and Atmospheric Administration report showing the so-called global-warming hiatus was the result of an error in measuring ocean temperatures. There has been no slowdown in warming, according to the latest data.

I don’t want to debate the science, but rather to focus on the investment risks the report discusses. As we have noted before, this is a question of industry market sharecorporate profits and investment performance — not science.

In the real world, climate-change deniers are and will be giant money losers.

I expect those who suffer from cognitive dissonance over whether global warming is real will soon be greeted by a brutal Darwinian result in the markets. I don’t make many forecasts but here is one: It is only a matter of time before the deniers exist only in think tanks funded by the fossil energy industry and oddball conspiracy groups.

The report identified four climate scenarios and four climate risk factors, each of which has differing “impacts on returns for portfolios, asset classes, and industry sectors between 2015 and 2050.”

The three broad conclusions of the report are . . .

 

Continues here: Even Skeptics Can Profit From Climate Change

 

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  1. Bob K. commented on Jun 9

    It is exhausting to teach global warming enthusiasts. Even if true, global warming, per history has been a boon to the human existence. You already can see that the Sahel is getting more rain, as will CA. Europe’s growing season is more stable, as well.

    I suggest a review of the period in the middle ages, and the dark ages ( those are two different periods BTW), to see the devastation caused by global cooling. You better pray for global warming.

    The models have consistently not predicted anything correctly, so I would not make any investing decision on what the “settled Science” says.

    • RW commented on Jun 9

      As long as you’re reviewing the Middle Ages pay some attention to the Medieval Warming of 950-1250AD: Mean temperatures were approx 0.3C higher than last year and more than half of the north American continent was sand desert (middle west) or rock desert (west).

    • Low Budget Dave commented on Jun 9

      If you are talking about the warming that has happened since the ice age, that is clearly true, since much of North America (and Europe) was covered by ice as recently as 22,000 years ago. If you are talking about the next ten degrees, then there is a good chance that you are incorrect.

      Our food supply systems developed during a relatively narrow range of temperatures. Although a higher range might cause a huge boom in certain life forms (like mold and insects) it might also cause a dramatic crash similar to the Permian extinction event, where about 96% of all marine life and 70% of land animals became extinct. In fact, more than 80% of all genera became extinct, including even insects. Because so much biodiversity was lost, the recovery of life on Earth took millions of year longer than any other extinction event.

      So, yeah, a little bit more rain in Africa might be a good thing, but it might be heavily outweighed by acidification of the entire ocean, as well as desertification of most of the world’s available farmland.

      The key word, of course, is “might”. While we “might” be able to grow carrots in Alaska, we might not. Is that a chance we are willing to take with trillions of dollars and billions of lives? Really?

    • rd commented on Jun 9

      Sea level rise is driven by both ice sheet melting and expansion due to heating. I think investing decisions based on a fairly steady rate of sea level rise would be prudent. I expect the insurance industry is going to lead the way on driving change. A lot of very expensive real estate around the world is going to become much less expensive over the next century. I would view Miami as a real estate trading opportunity instead of investing because much of its near-water real estate may cease to have value within 50 to 100 years. The grandkids may need to live on houseboats instead of in houses.

      Other than limited parts of the globe where tectonic movements or post-glacial re-bound are causing land to rise, coastlines will see increasing inundation over the coming decades. Sea level rise over the past 150 years after the end of the Little Ice Age is already causing problems with many urban areas. Natural estuaries and coastlines have seen significant sea level changes over the past million years and can adapt. However, people put infrastructure with fixed elevation place – that is very unadaptable.

      I expect to see “punctuated equilibrium” becoming more common along coastlines similar to Galveston, New Orleans, parts of the post-Sandy NJ shore etc. A lack of significant major flooding episodes will give false confidence resulting in more building. When the disaster hits, a number of areas will suddenly become untenable for reconstruction resulting in a major shift in land use (or loss of land) with forced relocations. The cost of alternative engineered solutions will be high as they will have to be very robust because flood protection is generally an all or nothing success.

    • dirge commented on Jun 9

      South Florida’s water table is already threatened by rising sea levels. Salt water intrusion is threatening the Biscayne aquifer, contaminating wells and degrading the infrastructure. Just converting those ranch houses into house boats won’t solve the water supply issue.
      If there are solutions they might be in desalination, conservation, salt-tolerant landscaping and agriculture.

    • rd commented on Jun 9

      Desalination is just money and energy. However, the karst limestone conditions in Florida make a Dutch diked system impractical as water pumping volumes to keep the sea out would be enormous. Maybe Miami will put their buildings on stilts with gondolas going down the streets.

    • VennData commented on Jun 9

      Bob K,

      What a great guy you are to be so exhausted but continue to educate. You certainly wouldn’t be in a ” think tanks funded by the fossil energy industry and oddball conspiracy groups.”

      What a great life, sitting in a Koch Bros funded basement in DC, getting you daily Google Alerts on “Climate Change” and cutting and pasting what you’re told in the very important “Comments” sections.

      I’m sure the Koch brothers will take care of you in your dotage in the beautiful Mediterranean newly stable farming climate.

      Thanks for all the links to support you Cutting and Pasting.

  2. ronin commented on Jun 9

    Do you think world leaders give a damn about climate change? It’s just another wedge issue to keep people divided and blinded to the geopolitics being played out in Eurasia.

    Eurasia is the chess board, and everything else is just fodder for now.

    If climate change is truly significant it won’t matter, because the world will be at war over the natural resources in Eurasia and it will already feel like the end of times if The West, China, and Russia are lofting bombs at each other.

  3. orsogrigio commented on Jun 9

    Interesting article, indeed. But let’s make a little gedankenexperiment (who is not familiar with this word, please check some easy-to-find sources). Let’s place ourselves in 1965, 50 years ago, and let’s see how at that times the matters about energy etc were though. As you will soon discover (I used to be an avid collector of Scientific American since last years of my high school, 1965 indeed), the technological/scientific world portrayed at that time was, let use an understatement, a little different from now, and forecasts plainly wrong. All that was due ‘tomorrow early morning’ simply didn’t happen and what happened was really not even thought (you can either take my word or check by yourself, but the latter game is really amusing and mind opening). So, please, give me a reason for accepting that our ‘forecasts’ for, say, 2065 are just fine. Extrapolating is not science, is simply whishful thinking, where you can ‘demonstrate’ any of your own ideas. I can simply admit that industries able to adapt will be profitable, others will simply shut down (easy-listening darwinism, I suspect). Anyhow I can’t figure out which will be, for the simple reason that the ‘adaptation’ will be towards an environment I can’t forecast (environment here is the WHOLE of mankind universe at any time). A last remark : always on that gedankenexperiment you’ll discover how much human society (and thus co.s) can change in 50 years, and please bear in mind that the speed of change is quite increasing …

  4. 4whatitsworth commented on Jun 9

    Money in climate change? Maybe insurance, or start a climate change school and get kids to bet their future with student loans. Not my bet BTW.

  5. 4whatitsworth commented on Jun 9

    Money in climate change? Maybe insurance, or start a climate change school and get kids to bet their future with student loans. Not my bet BTW.

  6. Lord commented on Jun 9

    I am struck by the deep immorality of much, though not all, of the fossil fuel industry. It will catch up with them and delaying will only make it worse for them in the end.

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