Heat waves and droughts magnified by global warming are exacting an economic tax on America’s middle class through higher prices and increased health care costs. Now this global warming tax is hitting the stock valuations of American companies.
Global warming's economic tax hits restaurant stocks
The most visible evidence of how global warming could impact a company's stock price occurred on July 20 with sharp declines in restaurant stock prices. Led by Chipotle’s stunning 20+% stock drop all the major restaurant stocks including McDonalds took a hit as stock analysts incorporated global warming’s heat and drought impacts upon restaurant food costs, profit margins and sales if higher menu prices trigger a consumer search for lower cost options.
Other stocks exposed to global warming's economic tax
It is only a question of time before global warming’s economic impacts fall on other companies. Farmers earning less on reduced crop yields will not be in a position to buy new farm equipment from companies like John Deere. A lower food supply means less food to process, impacting companies like Archer Daniels Midlands. Gasoline prices will rise since 10 percent of today’s gasoline is composed of ethanol principally derived from corn. We have already seen national gasoline prices go up by over 10 cents during the last three weeks due to Middle East supply risks combined with higher costs for ethanol. Gasoline price increases that curtail driving will hurt retail sales at large gasoline retailers like 76 Stations and others. Retail stores that depend on consumers driving to their location to shop will probably see reduced customer traffic.
Cities hit by global warming's economic tax
Cities that are already facing economic stress will be hit by global warming’s economic tax through higher electricity bills and the increased cost of caring for the elderly and weak who do not have the financial resources or human strength to handle an intense heat wave. The emerging economic choice confronting mayors across America from global warming’s economic tax is to further cut municipal services or try to implement higher taxes.
Are Disney and Carnival Cruise Line at risk?
Finally, our overall economy will take an economic blow to its already weakened economic growth. Higher prices that are not offset by growth in consumer income will generate a slowing effect or an economic tax on the economy. This holds the potential to hit companies like Disney or Carnival Cruise Lines that sell discretionary purchases like vacations.
Water's price and supply questions confronting Starbucks and The Coca Cola Company
With 56 percent of the country now facing drought, the companies located in these drought-impacted areas are at economic risk in terms of their cost of water, their supply of water and the potential for reduced revenues from having to raise their product prices during a slowing economy. Beverage companies like Starbucks and The Coca-Cola Company are adopting sustainable business practices to address this threat to their profit margins and stock valuations.
Unemployment impacts from global warming's economic tax
Higher unemployment is a likely consequence from the global warming economic tax. There are real limits on how much a business can reduce operating costs before it has to look at cutting jobs to preserve profit margins. Most companies confronting a global warming economic tax on their businesses will be hard pressed not to reduce their payrolls.
Stock and product winners
The economics of global warming will benefit the stock valuations of some companies like electric utilities that soon should be reporting record revenues as their customers turn up the A/C to stay cool enough to work and sleep. Natural gas prices just climbed above $3 per mmbtu as utilities use more natural gas to accommodate peak loads of electricity. That is very welcome news to the natural gas industry.
Companies selling higher SEER (Seasonal Energy Efficiency Ratio) air conditioners should see increased sales volumes. A few key names on the Energy Star list of air conditioning equipment manufacturers include Lennox, Carrier and Bryant. Higher electrical bills tied to increased air conditioning could be the economic push that moves geothermal heat pumps into a mainstream heating and cooling option. A couple of less well known companies on the Energy Star manufacturer list include ClimateMaster and Waterfurnance Renewable Energy that have launched higher efficiency technologies built around variable speed drives.
Home gardening can deliver lower priced and healthier foods using less water through the use of drip irrigation systems that are 90 percent efficient. Retailers and manufacturers tied to home food gardening should see increased sales.
Solar sales should also benefit those few utility service territories that offer a “perfect storm” of net metering plus high peak time electricity prices and high solar insulation levels. In these utility service territories, the economics of a 1.5 KW-sized rooftop solar systems should be very attractive to homeowners. Winners in this space should be SunRun and Clean Power Finance.
21st century's trillion dollar sustainable economy
And the list of business opportunities will only grow as consumers get the message at their cash register, meters and pumps that global warming is an economic tax draining their pocket books. Consumer demand is creating a 21st century sustainable economy where companies win higher revenues and competitive advantage by offering consumers smarter, healthier and greener product solutions. In 2011, the global annual revenues of more sustainable goods and services achieved a milestone of $1 trillion. As the economic tax of global warming weighs heavier on both stock valuations and consumers, I now project the global annual sales of more sustainable goods and services to reach $10 trillion as early as 2017.
Bill Roth is a cleantech business pioneer having led teams that developed the first hydrogen fueled Prius and a utility scale, non-thermal solar power plant. Using his CEO and senior officer experiences, Roth has coached hundreds of CEOs and business owners on how to develop and implement projects that win customers and cut costs while reducing environmental impacts. As a professional economist, Roth has written numerous books including his best selling The Secret Green Sauce (available on Amazon) that profiles proven sustainable best practices in pricing, marketing and operations. His most recent book, The Boomer Generation Diet (available on Amazon) profiles his humorous personal story on how he used sustainable best practices to lose 40 pounds and still enjoy Happy Hour!