5 Industries Getting Boosts (or Bumps) from Climate Change

by James Brumley | April 14, 2014 11:24 am

5 Industries Getting Boosts (or Bumps) from Climate Change

Ten years ago, “climate change” was something only tree-huggers worried about, and everyone else largely ignored the calls.

What a difference ten years can make. While green-centric hippies are still the butt of the occasional joke, now it’s clear to even the most calloused of capitalists that climate change is something that needs to be addressed, even if only because it’s putting commerce at risk.

The bar was raised a little higher at the end of March, when the United Nation’s Intergovernmental Panel on Climate Change published a report confirming what most of us basically already know … that our dirtier, warmer atmosphere meant the globe is more flood prone and less capable of producing food than it has ever been before.

Still, the fact that 300 scientists took three years to prepare the 2600-page report certainly ups the ante on how serious the situation is.

The question investors are asking themselves is, of course, what does this mean for the stock market? There are five major industries that climate change — and our efforts to fix it — could affect considerably.

Food Scarcity Will Force Higher Crop Yields

Given the choice, nobody wants to eat chemical-laden, genetically-modified food.

We may not have a choice in the foreseeable future, however. Climate change, and warmer temperatures in particular, can lead to droughts in some areas, and downpours in others, neither of which make plants grow any better. The solution is seeds that produce more fruits and vegetables, and fertilizers that do the same.

The adverse ecological impact will simply have to be swallowed. This plays right into the hands of companies like Monsanto (MON[1]) and The Mosaic Company (MOS[2]).

Erosion-Prone Areas Must Be Managed

Just so there’s no confusion, there’s no way to prevent the coastal erosion caused by a hurricane, any more than there’s a way to prevent flash flooding in the mainland after a prolonged bought with heavy rain. The best that can be hoped for is an abatement of the risks that rising water can pose, and a repair of the damage done by flooding.

Believe it or not, yes, there are companies that can do water-related excavating and underwater sculpting. Great Lakes Dredge & Dock Corporation (GLDD[3]) is one of them. Investors should know, however, that none of these companies are going to be household names. That doesn’t mean they’re not worthy climate change investments, however.

Insurers Will Get Squeezed

Here’s an industry that’s actually going to suffer in the wake of worsening climate change.

The debate over whether global warming is actually causing more hurricanes or not is still being fought, as is the argument over whether natural gas fracking causes earthquakes. If hurricanes like Katrina are going to become commonplace with the advent of serious climate change, however, property and casualty insurance companies are going to get very tired of footing the bills for the damage.

American International Group (AIG[4]) and its peers are right in the line of fire.

More At-Home Energy Systems

There are actually two forces ramping up demand for systems that can provide electricity for homes independent of the grid.

One of them is the fact that, as more and more climate-change law puts a cap on carbon emissions, electricity prices are going to rise as a result. The other is the fact that increasingly violent weather poses risks to an already-strained utility system. Wind and solar power systems are the most likely choices for those ready to take the plunge, with solar being the more popular choice of the two.

The problem is that there aren’t a lot of pure “at-home solar system” plays. There are still companies that cater to single-house systems, however, such as the recently ballyhooed SolarCity (SCTY[5]).

Potable Water Will be in High Demand

While pollution has gotten much of the blame for waning drinking water supplies, that assessment oversimplifies the problem. With or without more pollutants, rising ambient temperatures can also reduce the freshwater supplies by evaporation, or by melting permafrost layers.

That being said, the same CO2 that causes global warming also causes our oceans to become more acidic. That water eventually makes it to dry land, in the form of acid rain, which taints our remaining fresh water supplies. Point being, no matter how you slice it, drinking water is going to be in short supply as climate change worsens. That’s where a name like Tetra Tech (TTEK[6]) comes into play. Tetra Tech builds systems that can desalinate seawater, as well as clean reclaimed wastewater.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

Endnotes:
  1. MON: http://studio-5.financialcontent.com/investplace/quote?Symbol=MON
  2. MOS: http://studio-5.financialcontent.com/investplace/quote?Symbol=MOS
  3. GLDD: http://studio-5.financialcontent.com/investplace/quote?Symbol=GLDD
  4. AIG: http://studio-5.financialcontent.com/investplace/quote?Symbol=AIG
  5. SCTY: http://studio-5.financialcontent.com/investplace/quote?Symbol=SCTY
  6. TTEK: http://studio-5.financialcontent.com/investplace/quote?Symbol=TTEK

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