Climate Change-Proof Investments? It’s A Thing

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Written by Ann Brown

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While the debate continues as to whether or not there really is climate change, some investors are betting on climate change worsening.

Climate change-proof investments? Yes, it’s a thing. A big business thing.

Hurricane Michael left a trail of devastation from the Florida Panhandle to the Carolinas, and investors are looking for ways to turn a profit — from cleanup services to short-term housing.

And of course, the insurance industry reaps some rewards despite having an increase in payouts. People are looking at more exotic forms of insurance, according to Barney Schauble, managing principal at Nephila Advisors LLC.

“Businesses can buy coverage for extreme weather, and Nephila finds investors willing to bear the other side of that risk in various forms. Schauble says his company recently helped a water utility that was worried about increasingly unpredictable precipitation patterns. So it created a product that would protect the utility against swings,” Bloomberg reported. “That business is exploding. Since last year, the amount of money coming in for extreme-weather protection has doubled.”

Investments include storm and flood protection along the coast, desalination plants in drought-prone regions, new approaches to agriculture, and even land far from the ocean for when rising seas shift the real estate market, Bloomberg reported.

Tamiya Waldon looks out at the damage to her neighborhood in the aftermath of Hurricane Michael in Panama City, Fla., Wednesday, Oct. 10, 2018. (AP Photo/Gerald Herbert)

 

Investors who believe climate change is here and happening need to rethink their investment options.

“There is no way at this point to stop climate change,” said James Everett, partner and co-founder at Ecosystem Integrity Fund, a venture capital investor in San Francisco. “Pretty much every system is going to have to change. We’re going to have to adapt to this.”

Some investors have focused climate change fixes, such as renewable power and electric vehicles. But investors need to think bigger picture, said Jay Koh, co-founder and managing director of the Lightsmith Group, a private equity firm focused on climate adaptation.

“There is a requirement for some kind of psychological journey that people have to go through,” Koh said in a Bloomberg interview. “I’d rather have a strategy designed for the set of circumstances where we might not 100 percent win.”

Climate change is affecting people in many ways and their needs are changing. So too are the investors looking at projects to fit these new and growing needs.

Marija Kramer is head of responsible investment business at Institutional Shareholder Services.

“What we’re seeing now is that investors are focused on how a changing climate brings two highly impactful risks: transition and physical,” Kramer told Forbes. “Transition risks are linked to the political commitment to curb greenhouse gas emissions. For example, a government may choose to introduce a tax on greenhouse gas emissions that could leave several companies with unburned fossil fuel assets but support the emergence of renewable energy technologies. These policy and technology-related changes could directly affect the value of an investor’s portfolio.”