Investing in the Age of Climate Change

Climate change is happening. Is your investment portfolio ready?

Although we can still mitigate the truly catastrophic damage forecasted by 2100, the absolute best case for 2050 is 1.5*C warming and 150 million refugees. That’s going to significantly reshape the economic landscape — and the stock market. Let’s explore how you can prepare.

Photo by Nicholas Doherty on Unsplash

The Shorts

First, let’s consider what companies are going to struggle the most over the next 30 years of climate change. You might short them — or, at the very least, remove them from your investment portfolio:

1. Fossil fuel extraction & consumption, including oil, coal and natural gas companies, power utilities with large coal portfolios, airlines and gas-based car companies. Responsible investors are already divesting from these by the trillions. The SPYX index, which mirrors the S&P 500 minus fossil fuels, has outperformed the S&P since its inception.
2. Insurance, especially companies with large coastal portfolios. Insurance depends on accurately predicting the future, but weather patterns, sea levels and more are changing drastically. Either companies majorly raise rates (and lose customers) to compensate, or they’ll go bankrupt paying out for natural disasters (see: claims in CA and Florida are soaring)