Myth of Money: Investing in Climate Change
Climate change is real. And it comes with real investment opportunities. Is your portfolio prepared?
|Tatiana Koffman||Sep 13, 2020||4|
Welcome to this week’s edition of the Myth of Money, a weekly newsletter on all things money, economics and technology read by 10,000+ subscribers.
First things first…
The following is not intended as investment advice. Do you own research.
Now let’s dig in…
America is on fire. There are at least 97 large fires in California, Oregon, Washington, Colorado, Idaho and Utah, which have burned more than 6,200 square miles. At least 28 people have died and hundreds of homes have been destroyed. Unprecedented levels of pollution were recorded Saturday in Oregon and Washington state as tens-of-thousands of firefighters continue to battle deadly wildfires.
For decades environmentalists have warned that the world is going to burn. Footage of fires sweeping through the Siberia, Amazon forest, Australia and now, once again, California, make it easy to believe the planet is, literally, on fire. On September 7th, PG&E shut off electricity to 172,000 households in Northern California to avoid additional fire risk. There are at least 3,700 structures destroyed in California, with three months left in the fire season.
At this point, we have to acknowledge that annual fires cannot be stopped. Extreme temperatures and dry landscapes are likely to perpetuate the cycle. But there is more to this picture than just fires. Rapid climate change also means more frequent hurricanes, tycoons, tsunamis, coasting flooding, blizzards and more.
What is the financial consequence of climate change?
In a 2019 Report, the IMF urged central banks and financial regulators to acknowledge the financial implications of climate change, from system risk to asset prices to the catastrophic weather-related losses that climate change may cause.
“Central banks should revise the frameworks for their refinancing operations to incorporate climate risk analytics, possibly applying larger haircuts to assets materially exposed to physical or transition risks. Central banks can also lead by example by integrating sustainability considerations into the investment decisions for the portfolios under their management (i.e., their own funds, pension funds and, to the extent possible, international reserves).”
“ Climate change will affect monetary policy, too, by slowing productivity growth (for example, through damage to health and infrastructure) and heightening uncertainty and inflation volatility.”
What investment opportunities will emerge as a result of climate change?
Climate change investments are expected to take a up a larger share of the stock market.
For the novice investor, ETFs are always a great place to start their investor journey, as they capture the return of the entire industry rather than a single company.
A few examples of clean energy ETFs include:
$ICLN - iShares Global Clean Energy ETF - 37% 3-month return
$QCLN - First Trust NASDAQ Clean Edge Green Energy Index - 43% 3-month return
$PBW - PowerShares WilderHill Clean Energy Portfolio - 48% 3-month return
If you would like to invest in specific sectors, the following are few areas worth looking into:
Suburban real estate in northern and north-eastern U.S. is likely to become more popular, as both pandemic and climate change contribute to shifts across the U.S. Consider homebuilders ETFs $NAIL and $XHB.
As climate changes continues, some communities may experience a shortage of fresh water. Consider ETFs CGQ, FIW and PIO to invest in the water sector.
As more millennials opt out for electric cars, continue to watch companies such as Tesla ($TSLA), Nikola ($NKLA) and Fisker ($SPAQ).
Ready to start your investor journey?
One of the easiest platforms to use for ETF purchases is Robinhood. USE THIS LINK to claim your free stock today, when you open a new account.
This Week By the Numbers
Stock market continues to correct across the board this week. NASDAQ had its worst week since March. Investors are seeking refuge in alternative assets and cash, while awaiting further stimulus news from congress.
The New ‘Blank Check’ Barons Are Coming for Wall Street
It’s the hot ticket on Wall Street, a symbol that you’ve arrived or can at least persuade investors that you’re on your way: the blank-check company. Few corners of American finance capture the giddiness of today’s stock market quite like the mad rush into these vehicles, formally known as special purpose acquisition companies, or SPACs. Big-name dealmakers, small-name money managers, tech entrepreneurs, even Paul Ryan, the former speaker of the House and former Trump economic adviser Gary Cohn: all want to raise millions or even billions of dollars via SPACs, which offer nothing more than a promise that they’ll find actual, money-making businesses to buy later. This year, no fewer than 91 SPACs have raised more than $35 billion, approaching half the total raised by SPACs on U.S. exchanges in all previous years. Read Full Story.
America’s $20 Trillion Debt Pile Is Getting Cheaper as It Grows
The U.S. government is paying less as it borrows more, one reason investors appear more comfortable than Congress about funding another leg of stimulus. Interest payments in the federal budget declined about 10% in the first 11 months of this fiscal year, when America was running up its biggest deficit since World War II. Over the next few years, servicing the national debt will be cheaper than any time in the past half-century when measured against the size of the economy, according to the Congressional Budget Office. That’s because yields in the $20 trillion U.S. Treasury market plunged to record lows early in the pandemic -- and they’ve risen only slightly since then, even though the supply of debt has surged to a record. Read Full Story.
China Starts Testing Covid-19 Nasal Spray Vaccine
The newest Covid-19 vaccine candidate to start human testing is the first where volunteers won’t get a painful injection. Instead, they’ll receive a spray through the nose. China on Wednesday approved phase I human testing for the nasal spray vaccine, which is co-developed by researchers at Xiamen University and Hong Kong University, as well as by vaccine maker Beijing Wantai Biological Pharmacy Enterprise Co. Intranasal spray has previously been developed as a vaccine for the flu and is recommended for use among children and adults who want to avoid the more common needle injection. Read Full Story.
Bahrain Joins UAE in Establishing Relations With Israel
Bahrain has become the second Gulf nation to establish full diplomatic relations with Israel, joining the United Arab Emirates in normalizing ties with the Jewish state and reshaping politics in the Middle East. Bahraini officials said the agreement will help promote peace in the region, a position that is not shared by its neighbor Iran. The government in Tehran, which supports the island nation’s majority Shiite population, warned the deal will further destabilize the region. Read Full Story.
Bitcoin’s Breach of $10,000 Mark May Portend Deeper Losses
Bitcoin is falling in tandem with U.S. stocks, and technical indicators suggest the digital token could decline further if it fails to reverse recent downside momentum. The largest cryptocurrency is dithering around $10,000 Tuesday. However, a sustained breach of that level could trigger a bigger drop to $9,000 or -- should the rout in equities persist -- to $8,000, technical analysis suggests. Bitcoin traded above $12,000 as recently as last week, but has dropped about 16% since last Tuesday. Read Full Story.
Thank you for reading this week’s edition of the Myth of Money.🚀
Until next week,
By Tatiana Koffman
Hi there and thanks for reading. If you stumble upon my newsletter, you will notice that I write about money, economics and technology. I hold a JD/MBA and spent my career in Capital Markets working across Mergers & Acquisitions, Derivatives, Venture Capital and Cryptocurrencies. I believe in empowerment through closing the financial education gap and creating equality of opportunity for the next generation. Check out my articles in Forbes here.
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