(Whether or Not You Believe In It)
November 8, 2021
Maybe you think climate change is a hoax, but want to hedge your bets just in case… Or you don’t care what happens to Mother Earth after you’re gone… Perhaps you think that ethics and investing should be strangers, and you invest accordingly… Or maybe you’re just a climate Scrooge McDuck.
(These aren’t mutually exclusive, of course.)
It’s not Earth (or people) friendly, but huge profits await investors positioned for climate change – though probably not in the way that you’d imagine, as I’ll explain today…
With world leaders at the COP26 global warming conference last week – featuring wall-to-wall coverage that a world war, an economic collapse, and the 10 biggest Instagram influencers combined could only dream of – the implications of climate change, and how to fight it, are at the top of the global agenda.
(A quick explanation, on the list of “things the media suddenly assumed you knew but didn’t”: “COP” is the self-important acronym for “Conference of the Parties.” It’s the 26th time that countries have met under the banner of the United Nations Framework Convention on Climate Change, a treaty that’s been signed by 197 countries, with the aim of countering “dangerous human interference with the climate system.” What, you don’t remember hearing anything about the previous 25 meetings of the COP? Me neither.)
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Is It Real? It Doesn’t Matter
First, though… is climate change for real? Well, it’s legitimate fact that global temperatures are rising, the ocean is warming, ice sheets and glaciers are shrinking, sea levels are rising, and “once a century” weather events are happening a whole lot more often, as NASA explains.
But remember: Your climate-change persuasion doesn’t actually matter from an investment perspective. Markets move based on anticipation – not current reality. If you decide it’s time to buy HotStockABC on the fact, rather than the buzz (“buy the rumor, sell the news”), you’re too late. The time to buy land in Alaska or Siberia – see below – is soon… not three decades from now, when there are three Club Med all-inclusive resorts already there.
And now, there’s a surplus of climate-change porn: Projections about how we’re crippling the Earth… and what it will mean for humanity. Some highlights…
- The heat: By 2070, Sahara-like hot zones will cover around 20% of the Earth (versus just 1% now), possibly displacing one of every three people – in Africa, China, India, and elsewhere – because humans can’t live in temperatures above the mid-90s indefinitely. (Spend the summer in Phoenix… And then imagine doing it all year, and in parts of the world where air conditioning is no more than a rusty old fan blowing around hot, smelly, stale air.)
- The water: As sea levels rise, you’d better grow fins and learn how to swim. Around 40% of the world’s population (that’s 3 billion people… 9 times more than the entire population of the U.S.), live within 60 miles of a coast, according to the United Nations. Ten percent of the world — nearly 800 million people — live within about 30 feet of sea level, which will rise an estimated six feet by 2100… forcing at least 13 million people in the U.S. to move, according to a 2020 study. (But there will be less fresh water, of course, as glaciers melt… so less water to drink. But that’s a whole other problem.)
- The war: With heat, flooding, and forced migration comes displaced people searching for a place to live. As the think tank Brookings Institution explained, “[T]he patterns of war tell us that the effects of this will not be limited to the individual countries affected, but will spread both within Africa [conflict could rise by 50% in sub-Saharan Africa due to climate change] and beyond by the vectors of transnational terrorism and by mass migration.” Hungry people are too weak to invade other countries… Hot people, though, are a different matter altogether. “Hot and bothered” is a well-known phrase for a reason.
- The storms: The Environmental Defense Fund explains that we’ll see “drier droughts, bigger storm surges, and greater snowfall.” Does it seem like there are more big hurricanes than there used to be? It’s not your imagination. Same thing with wildfires. And floods. And hurricanes. They’re only getting worse.
Whether or not you think the past several decades of climate change are a statistical blip… or that climate change is media hype… or that it’s all going to go away soon… doesn’t matter to markets or to your money. Enough people think that it’s real, and they are investing accordingly.
The Losers of Climate Change
The hotter it is, the less productive people are, a range of studies have shown… Which is bad news for those countries on Mother Earth that are already turn-up-the-air-conditioning kinds of places.
A groundbreaking article in 2015 in the journal Nature looked at the impact of changes in temperature and precipitation in the half-century that ended in 2010 – and projected the future effect of climate change, in terms of per capita economic output. It found that…
If future adaptation mimics past adaptation, unmitigated warming is expected to reshape the global economy by reducing average global incomes roughly 23% by 2100 and widening global income inequality, relative to scenarios without climate change.
If anything, that nearly one-quarter decline in gross domestic product (“GDP”) per person has become an even bigger cut since then.
Within that global drop, there’s a huge range – and, like everything in life, winners and losers. A handy – and terrifying – map produced from data in the Nature paper suggests that the U.S. will experience a 36% decline in per capita output by 2100 due to climate change.
That sounds bad – no, it sounds catastrophic, in light of what that means for the quality of life for our children, for the future of American strength and stability, and for the role of the U.S. on the global stage.
But it’s actually pretty good compared with projections for other parts of the world: GDP per capita in most countries in Africa – down 80%… India, down 92%… Brazil, down 83%… and Indonesia, down 85%. The biggest drop in Europe is forecasted to be Greece, down 51%.
That’s beyond bad. But (see below), all else is not equal… So don’t buy a timeshare in Antarctica. Yet.
The Winners of Climate Change
In a word… go north.
Canada, the study suggests, will see a 247% rise in GDP per capita… Sweden, up 210%… Germany, up 63%… Kazakhstan, up 208%… and Russia, up 419%.
Why? After all, the Earth’s flyover zones are endless expanses of frozen nothingness, ice-solid seaways open only a few months a year, and weather that only an Eskimo would appreciate (or crazy Norwegians with aquavit running through their veins). They’re so desolate that America’s Pennsylvania-to-Nevada expanse seems as busy as the St. Patrick’s Day parade in Boston by comparison. No people, no towns, no farms, no nothing.
But with climate change, all that chilly desolation is going to grow warm – while the rest of the world bakes. And also: All that land’s going to become useable for growing crops.
As the New York Times explained last year in an article titled “How Russia wins the climate crisis”…
Climate change and its enormous human migrations will transform agriculture and remake the world order — and no country stands to gain more than Russia…
… For a few nations, climate change will present an unparalleled opportunity, as the planet’s coldest regions become more temperate. There is plenty of reason to think that those places will also receive an extraordinary influx of people displaced from the hottest parts of the world as the climate warms.
And no country may be better positioned to capitalize on climate change than Russia. Russia has the largest land mass by far of any northern nation… Russia is rich in resources and land, with room to grow. Its crop production is expected to be boosted by warming temperatures over the coming decades…
But the biggest projected climate-change winner, at least in percentage terms, is Mongolia – uncomfortably lodged between Northern China and Eastern Russia – with a projected 1,413% increase in GDP. With 3.3 million people – that’s a bit smaller than the population of Los Angeles – in a country more than twice as big as Texas, Mongolia has space to spare. When I visited Mongolia eight years ago, it was snowing in early May, so the weather can only get less chilly from here.
Tomorrow, we’ll share the conclusion to Kim’s story, including specifics on how you can invest in the coming climate apocalypse – from ETFs to Ben & Jerry’s (seriously).
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Executive Editor, American Consequences
With Editorial Staff
November 8, 2021