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

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)
  3. Coastal businesses, including fishing, oil refineries and tourism, will see their facilities costs rise with sea levels and storm surges.

It’s not all doom and gloom — there are plenty of businesses positioned to grow and thrive in climate crisis capitalism:

  1. Survival products that allow rich people to become self-sufficient (solar power, batteries, EV’s, water filtration, hydroponics, satellite internet)
  2. Companies reducing carbon footprints of existing products (including electrifying transportation, reducing car usage, decarbonizing industry and cleaning up the electricity grid)
  3. Urban and coastal construction & construction supply companies. There’s going to be a lot of building to do: New York alone is planning on spending $10 billion to build a sea barrier. The mass migration to cities is only expected to increase as climate change renders more rural land uninhabitable and unfarmable, and cities already have a housing shortage.

Preventing further damage

Savvy investors will realize that climate change has a tremendous negative economic impact, and that we (and our investment portfolios) are far better off if we can minimize the damage.

To that end, I’ve spent a lot of time researching and thinking about the best ways to minimize climate destruction.

If you’re looking for a quick way to have a measurable impact, there’s a YouTube effort going on right now called “Team Trees” to plant 20 million trees. Trees are a proven, cheap and effect way to sequester carbon.

If you’re looking for larger, more systematic change, there’s a bill in Congress that can quickly and significantly reduce emissions without raising taxes. It’s called the Energy Innovation and Carbon Dividend Act, and received bi-partisan support. The group behind it, the Citizen’s Climate Lobby, is currently hosting a tax deductable donation drive to raise the funds necessary for the final push.

Whether it’s through planting trees or passing legislation, I hope you’ll joining me in making an investment to the future of our planet, and our portfolios.

Thank you to David Orr for the inspiration for this analysis!

Technology, Entrepreneurship and Design to make the planet a better place. Pittsburgh, PA.

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