The United Nations released a sobering report on climate change this month, stating that the Earth is warming faster than even scientists thought and that without far-reaching action, the planet is likely to warm to a dangerous level by 2040. Scientist have been sounding the alarm about global warming for decades, but the report hit a chord: Time is running out before serious and possibly irreversible effects are felt.
Debate on the causes and effects will continue, but money managers say this stake in the ground gives investors a concrete guide to understand how climate change will affect their investments. “When you lay out what the challenge is, you’re in a better position to attack it,” said Stephen M. Liberatore, a fixed-income portfolio manager at Nuveen who manages $9 billion with an environmental, social and governance mandate.
A report like that lays out the solutions,” he said. “If we need $2 trillion to invest to save the planet, here’s what we need to do. I think it allows people to see what they need to do to accomplish their goals.”
It has been getting easier for individuals to invest with climate change as a focus. Since 1995, assets in sustainable and responsible investments have grown 18-fold, to more than $11 trillion, according to US SIF, a membership organization of sustainable investors.
There are two main approaches to creating a climate change investment strategy. One is investing in alternative energy. This can be done in a variety of areas, including solar, wind or geothermal production and distribution, or companies that make the infrastructure, like battery cells that power electric cars.
The other way is what some call climate-proofing a portfolio. The premise is that a warmer Earth will create economic disruption and that companies need to prepare for this.
Walmart, for example, has worked to make its more than 5,000 stores more environmentally responsible, from demanding that suppliers use less packaging to turning off lights at night. These are small steps that, given the retailer’s size, have saved it billions of dollars and reduced waste. This week, Walmart signed a deal to increase the use of solar panels on its stores.