Even when the most devastating economic news hits, and millions are reeling and wincing from the impact, somewhere, it seems, there’s someone profiting. Global warming is no different. As devastating an effect as climate change will have on our planet and on billions of lives (and on the earth’s ability to produce what we need), there will be some industries that will benefit – adding value to the economy, if not of equal worth, at least of substantial weight. (For more, see: Seven Ways Climate Change Affects Companies.)
Companies Engaged in Profiteering
First, perhaps, we should mention the companies that will simply be profiteering – money making at its most Darwinian. Believe it or not, there are companies that have been inventing what has been described as “Wall Street-type tools” in order to make profitable bets on what commodities could soon be scarce. KKR, a private equity firm, announced in January 2013 that it bought 25% of the shares of a Bermuda hedge fund known as Nephila Capital that trades weather derivatives. (For more, see: An Overview Of Weather Derivatives.)
There are also companies that are advising their wealthy clients on making purchases of land, specifically farmland, which will be more valuable as climate change impacts weather patterns. In fact, investors, via financial service firms, are purchasing water rights, as well as farmland, because of the large profits that will be made due to drought and food shortages. Oil exploration and drilling might also be facilitated in areas where ice is melting in the Arctic, exposing untapped reserves. Several major projects are already being carried out, and there is a rush by various countries to lay claim to certain areas. The major players that have been mentioned include Royal Dutch Shell (RDS-A) and Exxon Mobil Corp. (XOM), as well as Russian oil companies like Rosneft and Gazprom Neft. Another beneficiary of climate change will be the insurance companies, since every natural disaster that occurs encourages more individuals to purchase a protection plan. Also, they will be able to raise rates as a result of the increased frequency of such disasters.
(For more, see: How An Insurance Company Determines Your Premiums.)
Strategizing to Benefit Themselves
Then there are those companies in a grey area—capitalizing perhaps on the trend, but also introducing or implementing strategies that could be seen as a way to cope. These include companies like those in the agricultural biotech sector – companies like Monsanto Company (MON) that make genetically modified seeds, which they say will be able to withstand a harsher climate with prolonged droughts or frosts.
Arctic shipping companies, due to melting ice, have also been seeing a positive impact on their bottom line, made possible due to reduced costs of certain shipping routes, courtesy of global warming. Melting ice at the North Pole has reportedly made it possible for ships to take summertime journeys along the Northern Sea Route along the Arctic Circle. By heading north, instead of traveling over 11,000 miles across the Indian Ocean and Egypt’s Suez Canal, corporations that ship goods over the ocean between East Asia and Western Europe (like Nordic Bulk Carriers) have reportedly, with the support of icebreakers, been able to save up to $500,000 per trip.
Also, not surprisingly, there will be increased sales of standard air-conditioning. It is projected, according to leading forecast models, that the earth's temperatures will rise between three and eight degrees Fahrenheit by the end of the century. In fact, John Staples, president and CEO of US Air Conditioning, has been quoted as saying that “the hotter it gets, the more your business increases.” That assessment has been echoed in research documents that project that energy demand for air conditioning (which is positively correlated with the purchase of air conditioning units) will increase at a rapid rate over the entire 2000-2100 period.
Industries Generating Solutions
Most significantly, though, there will be industries emerging due to global warming that represent what industry is really all about—creating something of value in response to a need. These are enterprises oriented toward solutions and innovation, and that introduce something to the marketplace that indeed enhances the lives of those who purchase that something.
These include construction companies that are coming up with innovative ways to stem coastal flooding. The innovators that stand out in this industry include Flood Control America, a firm in Massachusetts which specializes in “invisible flood wall installation” – a steel wall that, whenever there is a warning of a flood, can be quickly set up, and can be dismantled and stored when there is no need for it. The firm’s vice president of communications, was quoted as saying, “It is difficult to see how removable flood-wall systems will not continue to increase in number across the country and the globe. …There is simply too much money invested in commercial, municipal and residential – to abandon properties to rising sea levels.”
The industries engaged in production that could also benefit include:
- The renewable energy industry: It's been recommended that renewable energy constitute 80% of the power sector by 2050. Developing nations are adopting renewables, and in 2013, for the first time in China, new renewable capacity surpassed both new fossil fuels and the country’s nuclear capacity. (For more, see: How To Become A Renewable Energy Entrepreneur.)
- Automakers producing hybrid cars. Higher gas prices might also increase demand for such vehicles.
- Companies devising innovative solutions such as Rayonier, a timber company that is trying to find a way to produce timber that would not result in the emissions of carbon dioxide into the atmosphere, and Daikin Industries Ltd., which is the maker of energy-efficient air conditioners. Also, there are companies like BASF SE, which makes fungicide and seed coatings to enable plants to be more resilient.
- Industries that are sources of reclaimed material and re-purposed furniture: Preferences for home décor and construction materials might increasingly lean toward reclaimed and re-purposed items, thus causing increased demand in these sectors.
- Finally, manufacturers of the basic products consumers will need to purchase to cope with increased exposure to the sun, such as new types of clothing, eyewear, umbrellas, and of course, sunscreen. A report produced by IBIS World, a market research company, stated that sales of sunscreen products grew yearly by 4.2% between 2007 and 2014, and total annual sales were $382 million. The Environmental Working Group also noted in an article on its website that there are an increasing number of skin cancer cases, and it has further stated, “Americans are aware that excessive exposure in sunlight can cause cancer.”
The Bottom Line
Global warming is a reality that will have a devastating impact on the livelihoods, health, and quality of life of billions. And yet, there are industries that will report increased earnings because of climate change. Some of these will simply be profiteering – cashing in on profits that will be there for the taking, while there are industries that will be actively generating solutions to problems and challenges generated by climate change, and will be bringing innovative offerings to the market. (For more, see: Five Investment Risks Created By Global Warming.)