No matter what you think of climate change, some facts are undeniable. That is to say, there are going to be investment opportunities, and if you want to benefit your investments by investing on the long side in those companies with the best chance to succeed and short those that won’t rise to the challenge, then I believe what I am about to share is important to understand.

You have likely experienced a microcosm of how the greenhouse effect works in your daily life. During the summer, you have the air conditioning running in the car even when the temperature outside is a moderate 75⁰ F. Inside the car, you are at comfortable 69⁰ or 70⁰. You drive to the mall and park, going in to shop for an hour or two. When you come back to the car, the temperature outside is still 75⁰, but the interior of the car is up over 90⁰. So what happened? The sun’s rays shining down through the windows hit the inside of the car, bunce up and are blocked by roof. The sunlight is converted into heat and your car becomes an oven.

Greenhouse gases work similarly. Instead of the roof of your car, the sun’s rays are blocked by carbon dioxide and methane gas in the atmosphere. That in turn heats the earth in the same way your car warmed up while sitting at the shopping mall.

2020 figures to be one of the top two hottest years ever recorded. 19 of the hottest years on record have occurred since 1998, and the 20th was 1998 itself. The earth is warming up and because of this, worldwide we are seeing more wildfires, floods, droughts, hurricanes, dams collapsing, damaged food crops, snowstorms, ice cap glaciers melting, and rising sea levels.

The Rhodium Group forecasts the United States is on the cusp of a great transformation if carbon emissions continue. Their models show that in the next 30 years 162 million Americans will experience a decline in their quality of life. Of those, more than half will experience a severe decline in the next 50 years.[1]

An article in the New York Times says that in Buffalo, NY the average summer temperature will be 100⁰, the same as Tempe, Arizona today. Humidity from New Orleans to Wisconsin will be so great that 100 million Americans will face heat stroke. Fresh water will be in short supply in Florida, Georgia, and Alabama. Cotton and other crops could be decimated in Mississippi, Louisiana, Tennessee, Arkansas, and Missouri.[2]

Do you remember the Superman movie where Lex Luther was going to hit the fault line off the coast and sink California into the sea, making Nevada the new shoreline? According to that article, Luther’s plan may yet come to pass. By the end of the century the sea will rise by eight to ten feet in the San Francisco Bay area, displacing 13 million Americans whose homes will be underwater.

All of this will put a huge demand on infrastructure, basic services, and has the potential to increase the income differentials between the haves and have nots. Those unable to make the move could be left in poverty, without their basic services.

The New York Times article says that one of every 12 Americans in the southern half of the country will move to California, the mountain West or the Northwest in the next 45 years due to climate change. They estimate the corridor from Seattle to Vancouver, BC will become a megapolis. The migration will be greater than the 6 million Black Americans that moved from the South from 1926 to 1970.

All of this sounds pretty negative, and if nothing changes, it will be.

The positive side is this. We learned from the models for the pandemic that people’s and government intervention can change the model results. The pandemic models showed that 2.2 million people would die in the United States if there was nothing done to arrest the spread of the virus. Current models forecast significantly smaller numbers, even though the number of deaths is still not a happy number.

I believe that climate change will be addressed. Either the United States will lead the way, or in our absence, the Chinese will step in to lead the needed worldwide changes. Total Carbon emissions have essentially been flat since 2013. Much of the developed world, including the United States, has been reducing carbon emissions since 2008. Renewable electrical generation has risen to almost 30%. Solar is cost effective in comparison to coal.

I believe that climate change is analogous to the pandemic. Having 400,000 or 500,000 Americans die from COVID-19 is tragic. But it is better than having 2.2 million or more deaths. We will probably experience some of the impact presented above with climate change. But I believe it will not be as drastic as the models forecast.

My investment focus is on changes in technology, demographics and lifestyles. There are now some and there will be more opportunities for both long and short positions in the market as climate changes take place.

[1] “A New Framework for US Leadership on Climate Migration,” Yayboke, Houser, Staguhn, Salma, Rhodium Group, October 2020.

[2] “How Climate Migration Will Reshape America: Millions Will Be Displaced. Where Will They Go?” Lustgrarten, Yew York Times, Sept 15, 2020.