How To Invest With Global Warming And Climate Change

The Earth is warming and the climate is changing. This will have large impacts on the economy, so how does a young person invest for the long term given what's occurring and will occur?

*Disclaimer* I am not an economist, financial planner, or anything related to that...I've just always stressed about the future and liked investing so this is a collection of my thoughts on it. I do invest in some of these stocks.

So my plan for a while now has been to 'retire' early based on investments and global warming has me really anxious about the viability of that. I put retire in quotes because it's not actual retirement...more having enough money that I can work whatever job interests me without worrying about how stable it is, how much it pays, etc. I've thought a lot about what investments have the best chance of doing well, read a lot of other opinions about this topic, and decided to collect my thoughts here and hopefully get thoughts from others in the comments.

Sectors That I Think Might Do Well

  • Energy/Energy Research/Utilities
  • Water
  • Food/GMOs
  • Timber/Forestry
  • Societal Collapse (Defense companies, Guns, etc.)
My general thoughts are that larger, stable companies are more appealing for the long-term here than new ones with very high ceilings. My thoughts on how to invest in each sector are:

Energy/Energy Research/Utilities

The world will have to steadily move away from fossil fuels, particularly coal, as energy sources. Getting into more details, I'm pretty confident that no matter what political leadership we have:
  • coal - will continue trending down
  • oil - will trend down more slowly than coal and still have uses
  • natural gas - will continue trending up and flatten out as it replaces coal
  • nuclear - will remain a large scale power source
  • wind - will continue trending up
  • solar - will continue trending up and will likely be the largest gainer relative to its current usage
An example of the type of company that I would target in this sector is Nextera Energy (NEE).

Water

Many areas that are not used to droughts will likely begin experiencing them (e.g., US Southeast) and many areas that already have periodic droughts will likely see worse ones (e.g., US Southwest). My gut is that water companies in general and especially ones that specialize in getting access to more freshwater (efficiency, desalinization, etc.) will do well.

An example of the type of company that I would target in this sector is Xylem (XYL).

Food

With drought and temperature change, existing farmland in some areas will be less productive. Combined with probable population increases, this means new areas will likely need to grow crops. Thus, I think that companies that specialize in growing crops efficiently, designing crops for new areas, etc., will do well. There are a lot of ways to invest in this sector and a few examples are:

- open a farm
- buy farmland and lease it out to other farmers
- invest in companies that specialize here

Exactly what you choose would depend a lot on what your timeframe, interests, and resources are. An example of the type of company that I would target that specializes here is Monsanto (MON). An example of a way to go broad here is an agribusiness ETF (MOO).

Timber

We are likely to try to preserve trees going forward, and similarly to the food discussion above, the areas that sustain healthy forests are likely to change due to drought and temperature changes. This leads me to assume that timber will be a reasonably good investment going forward. Similarly to food there are a lot of ways to invest here. You can buy land for tree farming...I personally lean against it as it requires a good bit of money up front, it isn't extremely liquid, is subject to risks of specific geographic areas, and it takes a really long time to start getting large returns. Another route you can take is investing in companies that buy land for this.

An example of the latter here is Rayonier (RYN).

Societal Collapse

If you lean much more pessimistically than I do, you might view societal collapse as likely. In that case, most companies aren't worth investing in and traditional investments are out so you're left with things like gold, ammunition, rice...I haven't gotten to this point yet so all I can think of here if this interests you is prepping.

Summary

I haven't come across any ETFs that fully cover these categories. Some have popped up that try to target some aspects (e.g., low carbon) such as LOWC and CRBN. Another potentially interesting option is Motif. You can assemble large collections of stocks and/or ETFs to trade together to minimize fees. A big drawback that's kept me from using them over Scottrade as my primary platform is that they don't offer free dividend reinvestment, and that is just so nice that I can't fully recommend something that does not offer it. It is worth noting that Motif has a subscription plan that does this so it is still pretty compelling.

So there's my completely non-professional take on how to invest long-term in this. Feel free to tell me why it's wrong in the comments.


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