Climate Change And Your Finances

There can probably be no more denying, at this point, that climate change is a real phenomenon. Extreme weather events globally have increased, fuelled by it. In 2021 alone, there were floods in west Germany; wildfires in Greece; winter storms in Texas; record-breaking heatwaves in Moscow; a dust storm, the worst in more than a decade, blanketed China with dust clouds towering 100 metres; tornadoes in Kentucky; typhoons in the Philippines; among so many others. All these events saw death and displacement in ways that had never been seen before. Last year, regions previously not considered to be on the front line for erratic weather change saw many homes destroyed and lives lost. And with each year that passes the incidence of these severe weather events only seems to increase. A few years ago, when the term climate change started being tossed about, many people were sceptical.

That was then.

Who cares?

While we in Jamaica mostly acknowledge that there is a profound change in weather patterns around the world, we largely tend to think it is somebody else's problem. We are not the perpetrators of greenhouse emissions; it's the big, industrialised countries. What, after all, does record-breaking snowfall in Madrid have to do with us?

The simple answer is, everything.

There are lessons to be learned in extreme climate events like these. That record-breaking snowstorm in Madrid last year cost Spain's capital city an approximate €1.4b alone in damage. Severe weather events can and will impact people's financial well-being. Climate change affects their bills, from insurance to food and utilities, credit, and ultimately the ability to save. We on The Rock may feel fortunate, compared to other places, but how long will we skate by on our so-called #blessed status? What if we experienced an extreme weather event here? Already we've seen that we're slowly becoming more prone to flooding. As they say: Today for you, tomorrow for me. We might not all be in the same boat, but we are certainly in the same climate change storm.

The Soufriere volcano eruption in St Vincent & the Grenadines last year tells us that we in the region can't take anything for granted. In an instant everything changed there, with poverty expected to worsen significantly exacerbated by the impact of COVID on livelihoods. There may have been no casualties, but the event brought about impacts on agriculture, fisheries, and tourism, which the island is largely dependent on. The truth is, developing island states like ours can ill afford this kind of displacement to our way of life, our growth, already disadvantaged by, among other things, a history of slavery and hundreds of years of fiscal mismanagement.

Climate change as an opportunity for portfolio diversification

Fortunately, it isn't all doom and gloom. Yes, there are droughts, disastrous storms and floods, rising sea levels brought on by climate change that is man-made and induced largely by carbon dioxide emissions and greenhouse gases from industry and agriculture.

Fact is, though, research has indicated that, while global temperatures will almost certainly continue to rise, increasing by at least two degrees Celsius by the year 2100, a reduction in climate footprints is possible if corrective steps are taken now to avert an irreversible and serious global disaster. For this to happen, there will be a need for technology to do so, which will require big investments of resources that can net investors potentially big profits while doing good for the environment.

Today, savvy investors who are concerned about climate change can create investment portfolios around the theme of climate change primarily by way of renewable energy investments and companies with green initiatives. There is a growing number of green exchange-traded funds (ETFs) that can allow investors to incorporate environmentally friendly solutions into their investment decisions.

ETFs are investment funds that, as the name suggests, trade on a stock exchange and track a specific index; green ETFs are those investment funds that focus only on companies that support or are directly involved with technologies that are environmentally responsible for either developing alternative energy or manufacturing green technology equipment.

Renewable energy and green technology

One of the best bets for investing in this sector is alternative energy. Solar technology, in particular, is a field Jamaicans are probably more acquainted with in the relatively new market for green tech. And so, purchasing stocks in, for example, in solar panel manufacturers might be a good way to get in on investing in renewable energy. But, it's important to remember that green tech encompasses so much more, like scientific research, agriculture, hydrology and atmospheric and material science, which are beginning to attract enormous amounts of investment capital. Do your research to figure out the global listed companies that focus on providing products or services that protect and repair damage to the environment, while conserving the Earth's natural resources.

Bottom line

Extreme weather events have increased due to climate change, which can impact financial well-being. For your financial resilience, consider diversifying your investment portfolio with shares in companies that are actively involved in the use of technology and science to reduce human impacts on the natural environment.

LamarHarris,vice-president,wealthmanagement,NCB CapitalMarkets

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