Investment Risks from Climate Change

The COP21 climate change conference in Paris has focused attention on the issues of fossil fuel emissions, global warming and climate change. From an investment viewpoint what are the risks of climate change? How real is the issue and what could happen that could cause you to lose money? The European Commission provides the sort of background needed to get a grasp on the subject of climate change from the perspective of the European Union.

Climate change threatens to disrupt livelihoods, destabilize societies, and disrupt development in its tracks. The greatest single impact of climate change could be on human migration with millions of people displaced by shoreline erosion, coastal flooding and agricultural disruption – a crisis in the making.

Continued emission of greenhouse gases will cause further warming and long-lasting changes in all aspects of the climate system. Greenhouse gas concentrations in the atmosphere will continue to increase unless the billions of tons of our annual emissions decrease substantially.

Drought in the Middle East may have been a contributor to the civil wars in Syria and Iraq and the resulting mass migration into Europe of refugees. Forty percent of the world population lives within 60 miles of an oceanic coast and 39 percent of Americans live near the coast. To the extent that sea levels might raise this is a significant issue.

Risky Business

US News writes about the huge economic costs if climate change is ignored.

“The U.S. faces significant and diverse economic risks from climate change.” No, that’s not a scary pronouncement from the Obama administration to justify its climate policies. That’s the first sentence of the report “Risky Business”- from a staid committee co-chaired by former New York Mayor Michael Bloomberg, former George W. Bush administration Treasury Secretary Henry Paulson and retired hedge fund founder Tom Steyer – urging the business community “to rise to the challenge and lead the way in helping reduce climate risks.”

Most importantly, the report focuses on the geographical diversity of risks that U.S. businesses and households face and the capacities of different areas to address those risks, factoring in differences in climate conditions and the mix of economic activity. In contrast to ubiquitous scare stories about the harm to businesses and households from policies that combat climate change, this report highlights the dangers from not pursuing such policies.

The Risky Business report talks about

Damage to coastal property and infrastructure from rising sea levels and increased storm surge, climate-driven changes in agricultural production and energy demand, and the impact of higher temperatures on labor productivity and public health.

In the extreme out door work will become difficult and indoor work and living will require air conditioning, raising the need for electric generation, which if derived from fossil fuels will worsen the situation. The investment risks in the medium term will be in coastal areas, in farm production where drought becomes the norm instead of a periodic risk, and in the fossil fuel business when conditions dictate that coal, oil and natural gas will no longer be used except to make medicines and plastics.

Politics versus Sound Investment Decisions

You may believe that there is altogether too much hype about global warming and climate change. Or you may take the doomsday approach and believe that we are too late and that humanity is doomed. From a sound investment viewpoint neither extreme is likely to be the case. So, what are the investment risks from climate change? Perhaps you should avoid investment in agricultural property in the Southwest or beachfront property in the Caribbean. How about putting your next office high rise in Chicago instead of lower Manhattan? And if you are looking for profitable investment opportunities consider water purification and clean energy but only with companies that can turn a profit and don’t need subsidies.

Investment Risks from Climate Change PPT

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