How Climate Change Will Affect Your Investment Opportunities

Warm golden light hitting the coast of Carlsbad CA.
Marcel Fuentes / Getty Images/iStockphoto

Like most natural, social or political upheavals, climate change presents a unique opportunity for investors who know where to look. Sustainable technologies, like those behind electric cars and clean energy, have sent stocks like Tesla (TSLA) and NextEra Energy (NEE) soaring. But there are more opportunities on the horizon.

Consider Investing in These Industries as the Climate Changes

Industries that are directly dealing with the effects or prevention of climate change could be good selections for your investment portfolio. If you want to leverage the latest Nobel Prize-winning research into climate change’s effect on economics and business, you could consider investing in these industries:

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Sustainable Agriculture

When making investment decisions, note that the focus of climate change has shifted from preventing it to managing its consequences. In the case of agriculture, companies are researching new ways of producing food as the environment becomes more hostile to traditional methods. If you don’t know enough about sustainable agriculture to make a confident stock purchase, consider an ETF that lets you buy into many companies at the same time, like Defiance NextGen Food & Sustainability ETF (DIET).

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Coastal Region Businesses and Construction

Companies that provide goods and services related to seawall construction, desalination, and sustainable agriculture could benefit from the effects of and response to climate change. The largest engineering firms are also likely to benefit. The firms behind projects like bridges and dams are the only ones capable of planning and building the infrastructure that will be needed to manage rising seas in places like Miami.

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Insurance

Insurance companies might benefit from increased concern about weather events like hurricanes and tornadoes. Flood insurance is likely to see increased demand as traditional homeowners coverage doesn’t cover flooding. If you don’t want to put all your eggs into one basket by investing in a single company, consider a fund like Invesco KBW Property & Casualty Insurance ETF.

Real Estate

In the real estate market, oceanfront property might see its value decline, and inland real estate could gain in value. There are always old-fashioned REITs, of course, but crowdfunding real estate platforms like Fundrise let you choose real estate investments based on factors like location–and you don’t have to actually buy any real estate.

Building Wealth

Leverage Nobel Prize Economic Research on Growth Amid Climate Change

The Nobel Memorial Prize in Economic Sciences was awarded to William Nordhaus and Paul Romer in Oct. 2018 for their research on the ways in which climate change and technology have affected the economy. The two shared the Nobel prize amount of 9 million Swedish krona, or about $1.06 million.

Nordhaus created a model that assesses the impact of climate policy interventions, like carbon taxes, on the global economy. Romer theorized that new ideas and technology help drive economic activity.

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The debate about climate change continues, and some people downplay its significance. Most investors don’t want to be seen as taking advantage of a serious situation, but this kind of research can help inform investment decisions related to changes in business development, economic development and emerging technologies. Experts agree that climate change is here, so now is the time for investors to get in on the ground floor of technologies that could offset climate change consequences or prevent further negative impacts of climate change.

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Andrew Lisa contributed to the reporting for this article. 

Last updated: June 22, 2021

About the Author

Karen Doyle is a personal finance writer with over 20 years’ experience writing about investments, money management and financial planning. Her work has appeared on numerous news and finance websites including GOBankingRates, Yahoo! Finance, MSN, USA Today, CNBC, Equifax.com, and more.

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