In the United States, the summer is increasingly the time when the impact of carbon pollution hits home – literally. This year, with the smoke from Quebec wildfires, that was very true for Washington DC. Yet, important factions of the political and business elite in D.C. pretend that nothing unusual is happening.
For that reason and others, the “smart money” is moving. Below is some wise advice in a recent Commentary from Jan Schalkwijk, the founder of JPS Global Investments.
“According to NASA, June 2023 was the hottest June on record. July looks fairly certain to be confirmed as the hottest month ever recorded on planet Earth. In Florida, scientists have started taking coral out of the ocean to prevent it from bleaching, as water temperatures there have breached 100 °F. Coincidentally, what state is the number one destination for domestic migration in the US? Florida; the state with the highest share of its population at or near sea level and in the path of hurricanes! The 2nd and 3rd place go to Texas and Arizona, the hottest states in the Union. It is so easy to offer bleak evidence of climate change, but it is not motivating most people. You motivate people more by inspiring them than by lecturing or scaring them, in my opinion.
To be sure, although I find climate change alarming, I am not an alarmist. It is draining to the messenger as well as his or her audience and perhaps time is better spent solving problems than stewing in them. I get the need for scientists to speak the truth no matter how uncomfortable. However, the messenger has to match the message. I am not a scientist or a journalist, but an investor. So how to best approach climate change from that perspective?
Climate change is not investable if the investment thesis does not match reality. Investing in air conditioners – and I would choose heat pumps – makes sense in a hotter world. If you are investing in Michigan grocery chains on the basis of increased demand from climate change induced migration, you may be waiting for a long time. The problem is timing. Perhaps in 2050 the Upper Peninsula will become a renowned wine growing region, taking the crown from drought-stricken and fire-scorched Napa Valley. But that to me is not an investable theme. I have yet to meet a Michigander who finds the winters there pleasant or someone who would like to move there for climate reasons, despite the weather.
Rather, I would want to invest in something that has a high likelihood of paying off in the next 5 to 10 yrs.”
That timing is nicely aligned with the time horizon smart investors think about…