“The measure of intelligence is the ability to change.”
-Albert Einstein
What are the consequences of global warming, and how will it impact your life? Amid rising uncertainty, how will climate change also impact your investments?
It is not clear. We are in uncharted territory.
However, I will try to give you an overview of the issue and links to resources that may help you understand it and how it can impact you.
SIGNS OF CLIMATE CHANGE
Earth just had the ten hottest days in recorded history. And the water temperature near Florida has hit a record and exceeded 100 degrees Fahrenheit, near hot tub levels.
The change to hotter weather shows no sign of slowing.
Scientists believe this situation has occurred because of the burning of fossil fuels, coupled with various man-made activities that have increased carbon dioxide and greenhouse gases in the atmosphere.
I will NOT go into the current efforts to slow down climate change, aimed to prevent the situation from worsening. These are well-known items like solar and clean energy development, switching to electric cars, energy conservation, etc. Instead, I will try to talk about other issues that may influence how you should act now and in the future.
While no one cannot precisely predict timing, impacts, or what climate change will do, I can discuss some things to think about. And I hope I can give you some hints about managing the coming changes.
I am not a climate scientist. However, I hope this information provides a basis for you to do your own research and draw your own conclusions.
WHAT THE PREDICTIONS ARE
First: let’s start with a summary of the impact: the planet will warm, and our lives will become far less predictable.
From extreme weather and water and food supply fluctuations, accurate forecasts will be harder to make.
We have never had a situation quite like this in recorded history.
What follows are some of the issues that will occur in the short and long term. Where it applies, I will talk about some of the financial consequences and changes that may be coming.
And do not get too discouraged by what you read. The challenges are considerable–but I suspect we will meet this challenge and adapt to it successfully.
ISSUE 1: HOT AND EXTREME WEATHER
Some places on Earth are becoming hard to live in because of the heat. Parts of India, Pakistan, and Iran routinely hit 120 degrees Fahrenheit. Phoenix just hit over 110 degrees Fahrenheit for 31 consecutive days.
That is alarming because the body can begin to break down when a human being’s core temperature is more than 108 degrees Fahrenheit. So, we must stay inside longer and in climate-controlled buildings to remain healthy as the world warms.
And if one group of scientists is correct, much of the Midwest will routinely hit 125 degrees Fahrenheit during summer by 2050.
There is an indirect impact too. Hot air can carry more moisture and energy. That, in turn, helps fuel another related phenomenon: extreme weather. Periods of flooding and drought are much more likely. Moreover, the warming of the oceans provides energy to storms like hurricanes and increases their destructive power.
As a consequence, areas already prone to catastrophic storms will face an even higher risk.
Short term:
Make sure YOU stay safe in the hot weather. For some tips, see here.
Expect a more destructive hurricane season. If you live in an area that may be affected, prepare in advance. Make sure your insurance is up to date.
There appears to be little short-term risk here of food shortages in the US. However, having a supply on hand in case of emergencies is a good idea.
Longer term:
Hotter temperatures are likely to mean human migration to more temperate climates. Migration may be to cooler higher elevations and may mean that some geographic regions may become more desirable. Unfortunately, there is little unanimity about where those temperate areas will be—a reasonable guess might be locations above the 45th parallel and away from the coast.
Moreover, there will be a heightened risk of food supply disruption.
Potential Appropriate Investments
- Building and climate control companies for retrofitting and building improvements
- Building safety companies to strengthen existing structures against extreme weather
- Construction aimed at water storage—increasing dam capacity, recharging aquifers, etc.
- Building companies that upgrade to adapt to the shift from outside to inside activities.
- Power storage—the ability to withstand electrical fluctuations by power storage technology.
- Robotics aimed at performing tasks outside during extreme heat or at night.
ISSUE 2: SEA LEVEL RISE
If every bit of ice melted on Earth, the sea level would rise about 210 feet (65 meters). That won’t happen—but you now know how serious a worst case could be.
According to the National Oceanic and Atmospheric Administration (NOAA) analysis in 2022, from 2020 to 2050, sea level will rise on average 0.25 to 0.30 meters (10 to 12 inches).
However, the impacts will be uneven. For instance, the northern West Coast will be affected the least, rising (0.1 to 0.2 meters, or 4 to 8 inches), and the Hawaiian Islands will not be affected much (0.15 to 0.2 meters, or 6 to 8 inches).
Other areas may not be as lucky. The study projects that the Caribbean and northern Alaska will rise (0.2 to 0.25 meters, or 8 to 10 inches). But the most significant rise is expected for the East Coast (0.25 to 0.35 meters, or 10 to 14 inches) and Gulf Coast (0.35 to 0.45 meters, or 14 to 18 inches).
A sea level rise of just a few inches can make a significant difference, especially with flat shoreline topography.
For instance, flooding from extreme storms at high tide in coastal regions can cause significant destruction in areas unaffected so far. In addition to what we have discussed, waves from storms are increasing in height as the weather changes.
Short term
We will likely see a gradual increase in flooding in local coastal areas.
(Full disclosure—this has already caused a discussion in my household. We are considering alternatives for two of our properties).
Longer term
Rising temperatures and seas will cause human migration to higher elevations and even different regions. Many scientists are most concerned about Southeast Asia because of its unique risk factors.
I am particularly concerned about coastal areas in the US in Florida and the Gulf states.
Potential Appropriate Investments
- Construction and construction equipment companies that mitigate local coastal flooding may include those that make revetment walls and other types of construction used to protect coastlines.
- Real estate investments in areas unaffected by rising seas.
ISSUE 3: ECONOMIC UNCERTAINTY
Fluctuations in economic activity caused by climate change and the sheer cost of rebuilding after natural disasters will create uncertainty and higher costs over time. The cost will be factored into insurance rates, construction, and potential taxation for mitigation projects.
Short term:
Economic uncertainty will likely increase, but the increase will be gradual, barring an event as outlined in Issue Five.
Longer term
Poorer countries, affected by the heat and unable to pay for the ability to mitigate climate effects, will create large numbers of climate refugees.
The wealthiest countries are most likely to get through climate change but with considerable difficulties and costs too. However, they are the ones who can protect against rising seas and extreme weather by building barriers, water storage facilities, and technology to mitigate some of the effects of the shift in climate.
Potential Appropriate Investments:
- Stable and wealthy economies and their stocks and financial instruments.
- Liquidity/Liquid assets provide a layer of protection against uncertainty.
- Companies that are especially nimble in adapting to the changing needs.
- Areas least impacted by climate change.
ISSUE 4: INNOVATIONS AND ADAPTATIONS TO CLIMATE CHANGE
You might become discouraged about the climate and its impact on your life. However, humanity has adapted before and will do so again. The unknown is how fast the situation will deteriorate and how rapid our ability to adapt will be.
Short term:
Much of what we do will be reactive. It will be aimed at short-term solutions to mitigate heat, extreme weather, or flooding.
Longer term
Strengthening the power grid and alternate energy sources will become a significant focus. Grid and energy concerns will not be just due to the development of electric cars and the need to bolster electric generation but because of aging infrastructure.
Technology and innovation will help adapt our food supply to be more secure against climate fluctuation.
Appropriate Investments
I think this is the beginning of the development of stunning new technologies that will mitigate the effects of climate change. Here are some possibilities:
- Heat reversal—so far, we have considered technologies to reduce carbon dioxide from being emitted into the air. However, some technologies that capture and store carbon dioxide may reverse some of these effects. You can read about that here.
- Energy production—while it is completely naïve to think that the world’s dependence on fossil fuels will end, other ways of producing energy will arise. Technologies like nuclear power, hydrogen use, solar, and other new energy sources will be developed further.
- Food supply—expect the development of heat-resistant plants that use less water, acceleration of artificial meat production, and adaptive technologies to stabilize the food supply.
- Health technology—treatment and prevention of heat-related disorders will increase—new protective technology will also make working outside easier and safer.
- Carbon capture—oil companies are particularly active in this arena right now.
ISSUE 5: THE CHANCE OF A BLACK SWAN CLIMATE EVENTS
This category is a catch-all for things we cannot entirely predict. Some of these possible black swan issues can be read about here.
It is impossible to say whether any of these issues will occur. However, I try to encourage worst-case thinking since you usually find that the worst-case seldom happens.
WHAT SHOULD YOU DO
TAKE CARE OF YOURSELF FIRST. Nothing much matters if your health deteriorates due to climate or other factors, so take elementary precautions.
Get ready for change.
Here are some things you can do:
- Keep adequate financial reserves.
- Evaluate risks to your situation. What circumstances can you least afford, and what can you do about that? In the case of emergencies, take the time to consider disruptions to your food, power, etc., and take measures to make yourself less vulnerable.
- Evaluate your current financial holdings for their risks and opportunities. Make changes if you need to.
Monitor change
Stay informed. Much of what I have mentioned is hard to gauge, likely to manifest itself in different ways, and will affect other parts of the planet differently.
As the situation unfolds, be alert to how it may affect you.
SOME CONCLUSIONS
First, sorry about the length of this post. It is about twice the usual word count. That is because when I researched this subject, it seemed that most analyses were either focused on risks or looked only at extremely narrow aspects of the phenomena. And I wanted better for my readers.
For instance, many articles about blame are useless as we decide how to act best moving forward. Hopefully, this post will provide a broader context and some ideas you can consider, which can be a starting point to keep you better informed.
Second is the theme that change is inevitable, and you must be prepared for it.
I remember when I visited the biblical town of Ephesus. Once a busy seaport, it is about two miles from the ocean today. Its situation differs from biblical times because of the changing geological conditions and earthquakes over 2,000 years. It is a historical place with acres of marble ruins now and entirely vacant. That is a lesson for today.
Third, remember that these changes will not all happen at once. You have time.
Finally, the search for new technology to meet change is already underway. This trend explains the popularity of investments in electric car manufacturing, new energy sources, and reinvestment in the power grid. Hopefully, this post will show you how investment patterns anticipate the coming change.
Disclaimer: consult with a financial fiduciary before taking any steps outlined here. Not all advice may be suitable for your circumstances or investment style.
Image: Patrick Hendry
License: Unsplash