By John Wasik
CHICAGO Nov 2 Whether you believe in man-made
global warming or not, it's undeniable that trillions of dollars
will be spent on technologies to address the collateral damage
of climate change.
Superstorm Sandy has just provided a tragic and devastating
exclamation mark to the ongoing discussion of climate change and
its link to extreme weather.
There are a number of ways to invest in industries that are
seeking solutions to climate-caused problems. Several global
companies, insurers and institutional investors accepted the
idea some time ago and are investing for the future. Even
investors who haven't signed on to the idea of man-made global
warning may find some sectors or companies to like.
While estimates vary widely, the impact of climate change on
the world economy may be at least $4 trillion by 2030, according
to Mercer LLC, a global financial consultant. Countries -
particularly those in the euro zone - are responding to global
warming by reducing the amount of carbon dioxide and other
greenhouse gases through greener energy policies and taxes.
Extreme weather has cost the United States some $67 billion
resulting from 21 devastating events since the beginning of last
year alone, according to the National Oceanic and Atmospheric
Administration. And that does not include the total tally of
losses from this summer's drought or Sandy.
Higher global temperatures translate into a greater
intensity of hurricanes, floods, ocean storm surges and
thunderstorms in certain regions while other areas will be hurt
by droughts, according to the Intergovernmental Panel on Climate
Change, an international research group. That means more
disaster-related losses, water- and agriculture-related problems
and more variability in weather patterns.
Some areas will be deluged while others parched. Witness
this summer's Midwestern drought and Sandy's recent wrath. What
climate experts previously thought would happen only once in a
century is happening much more often.
A strategic position in key companies and exchange-traded
funds will help reduce the "climate change risk" your portfolio
faces by acknowledging the perils of the problem and its impact
on global infrastructure, water supplies and energy production.
How do you sensibly and ethically invest in companies that
are connected to catastrophes? Since I'm solution-oriented, I
prefer companies in clean no-carbon energy, water reclamation,
energy management and conservation, green transportation and
agricultural technology. Entire industries are adapting to the
impact global warming is having on energy and food production,
infrastructure and transportation.
It is easy to become over-focused on any one of these
promising technologies and buy individual stocks to build your
own portfolio. This is the riskiest approach. That's why I
gravitate towards more broad-based approaches in exchange-traded
Want to concentrate on a specialized strategy such as water
delivery and reclamation? The PowerShares Global Water ETF
holds water-oriented giants like Veolia Environnement
and Waters Corp.
For a broader approach that combines a global warming
orientation with clean energy, consider the Market Vectors
Alternative Energy ETF, which holds a variety of energy,
water and utility companies. The PowerShares Cleantech Portfolio
includes some of the major players across six sectors
including information technology, health care and consumer
Are you concerned about feeding the world's growing
population? It's estimated that agriculture-related output may
be responsible for up to 29 percent of greenhouse gas emissions,
according to the research group CGIAR. That means a greater need
for new agri-technologies, fertilizers and sustainable farming.
The Market Vectors Agribusiness ETF offers a sampling of
agri-tech, fertilizer and processing companies like
For those who would rather invest directly in companies,
here are some sector leaders: Clean technology includes solar
panel makers like First Solar, while energy management
includes giant engineering firms like Siemens AG and
Many of the solutions-oriented companies are working on
perennial problems that existed long before anyone was focused
on global warming and often need fixing after major storm
The aging electrical grid, for example, is an infrastructure
that is more than 100 years old in many places and needs to be
updated. Companies like Roper Industries and ESCO
Technologies are working on a new generation of
electrical delivery systems that will make distributed power
Don't expect any quick profits from any of these stocks or
funds. As with any concentrated positions, they also tend to be
more volatile than total-market index funds and fall in and out
of favor with institutions on a regular basis. The Cleantech
portfolio, for example, is down 2 percent over the past three
years through Sept. 29.
Like climate change, they will evolve over long periods of
time, although for millions, their promised solutions can't come