Climate change will have long-term structural effects on the economy and stock investors with long-term horizons will want to take note, according to a recent study by analysts at Morgan Stanley.
Likely beneficiaries are the home-improvement retail sector, including stocks like Home Depot and Lowe’s, and companies whose products are aimed at helping customers cope with flooding, like Gorman-Rupp and Roper Technologies. Infrastructure upgrades that stimulate construction and create higher demand from contractors for pickup trucks will benefit automakers like Ford, General Motors, Toyota, and Nissan, according to a recent story in Barron’s.
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The effects of climate change on coastal areas will be stark. Morgan Stanley analysts Mark Savino, Jessica Alsford and Victoria Irving indicate that according to the National Oceanic and Atmospheric Administration (NOAA), “disruptive coastal flooding in the US Gulf and Atlantic coasts currently occurs 3-6 days per year, but could happen as often as 80-180 days per year by 2040.”
Coastal real estate will suffer with increasing insurance premiums weighing on property values in those areas. Major textile exporters in countries like Bangladesh, Indonesia, and the Philippines will also feel the effects of rising sea levels. A recent study by market intelligence firm Four Twenty Seven indicated that some of America’s largest companies are vulnerable to climate change.
“We’re steadily moving toward a new normal where billion-dollar disasters are a regular occurrence,” says Emilie Mazzacurati, founder and CEO of the firm. The increase of extreme weather events and consequent pressures from asset owners and regulators is forcing businesses to understand the risks and find ways of mitigating them.
As these at-risk companies increasingly work to protect themselves from the effects of climate change, others will provide the needed solutions. Home Depot and Lowe’s will benefit from constructors looking to build more durable homes. Gorman-Rupp and Roper Technologies, which supply commercial-grade water pumps, will be in more demand with increased flooding. The automakers will benefit from sales of high-margin pickup sales.
Climate change is already causing ocean temperatures to rise faster than expected, which is causing sea levels to rise even faster. That means that these companies’ products and services could be in much greater demand a lot sooner, benefiting their investors in the near term as well.