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Investing in Climate Change: Areas of Opportunity Spurred by a New Economy

3p Contributor | Friday November 19th, 2010 | 0 Comments

By Chat Reynders – Reynders, McVeigh Capital Management

The discussion around climate change and the severity of its impact may ebb and flow, but the effects are clearly manifesting in a variety of disruptions to physical, industrial and financial landscapes.  These tangible changes are bringing unique opportunities for innovative companies and savvy investors; as socially progressive investments continue to gain momentum, investors who identify these budding opportunities are well positioned for leadership in the changed financial landscape.
Forward thinking players in three key industries in particular are reinventing approaches to meet the demands set by global warming:

  • Innovations in clean energy
  • Smart Grid technology is on the verge of experiencing major growth as companies update their creation and delivery of electricity by providing advanced metering technologies and enhanced transmission efficiencies. While global spending in this market is expected to increase dramatically in the next few years, big business is already making its presence known; a recent partnership between Cisco Systems and Itron may well signify that a transition to smart grids in the U.S. is gaining momentum. As companies prepare for cap-and-trade or a carbon tax, renewable energy sources are met with increased interest. Not only  are they crucial to abating the energy crisis, they are also a central focus of states adopting Renewable Electricity Standards (RES.) RES require utilities to gradually increase their use of sustainable energy sources in the creation of electricity, promoting extensive growth in solar, wind and geothermal sectors.

  • Breakthroughs in water conservation, recycling
  • Policy makers, consumers, and businesses are arriving at the understanding that a new approach is needed in local, regional, and worldwide water policies.  With cost increases in water outpacing oil in certain parts of the United States and global prices rising well above the rate of inflation, significant opportunities exist for investors to participate in innovations that can reduce demand or increase supply of potable water.
    The decline of this universally essential resource is a major threat posed by climate change, and companies that fashion new technologies to address water issues enter another avenue of tremendous growth.  Growth will take shape where the needs are greatest, with companies such as Deere, Toray, and Itron leading in conservation and desalination technology, irrigation, and advanced metering.

  • Pioneering methods of sustainable agriculture
  • Unsustainable uses of water and pressures of climate change are expected to worsen the water shortage in the U.S., directly impacting the agricultural industry. A drastic change in irrigation practices is necessary; therefore, companies that develop smart irrigation and drop irrigation technologies – like industry leaders Jain Irrigation and AquaSpy – are forging real opportunities.

    Deere is also a primary constituent in the progress towards wider use of “precision farming.”  The practice employs advanced tractor controls and GPS to better regulate placement and distribution of fertilizer to exact standards, which significantly reduces wasteful fertilizer use and runoff.

    The latest movement in sustainable agriculture is the rise of urban farming – where all-season greenhouses or vertical farming high-rises link farm products directly to city populations. This both cuts down on the use of diesel fuel and offers relief to overused farm soils.

    As climate change continues to disrupt the status quo, investors should look to those companies which adapt to the changed landscape by pioneering advancements in “climate-friendly” technologies. Innovations in clean energy, water management and sustainable agriculture provide three cutting-edge avenues for growth and dramatic development.

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