7 financial predictions in a changing climate
This story is part of, CNET’s coverage of the impact of climate change on a range of financial issues.
Climate change is changing life as we know it. As we look to the future, the experts have strong opinions on how this will continue to impact our finances. Some are more optimistic than others.
1. More green job opportunities
From turbine technicians to solar panel installers, job growth in environmentally-friendly industries will intensify as countries commit to reducing carbon emissions – and citizens hold businesses and businesses. institutions more responsible for climate change. As John Kerry, the President’s Special Envoy for Climate, recently said at the United Nations Climate Conference in Glasgow, Scotland, “The energy market is the largest the world has. never known … I look at the tech industry that led to the rise of Massachusetts in the 1990s. [That was] small compared to this energy market. The energy market today has between 4.5 and 5 billion users, and it will grow to 9 billion users during this century. “
2. Wider wealth gaps
In a 2014 interview, famed astrophysicist Neil deGrasse Tyson offered a forecast on climate and money, saying the world (specifically, climate deniers) would start to care once it started to lose his wealth.
But not all savings will fare the same. Since the 1960s, according to researchers at Stanford University, the chasm of wealth disparities has only widened in a world where climate change has hardly been brought under control. One reason is that poor countries that tend to be in hot climates have suffered increasing damage from global warming, largely due to the energy consumption of richer countries. And it could only get worse in the years to come if more countries do not commit to reducing their emissions.
3. Impact investing will normalize
What started as a thoughtful way to invest with your heart now proves that it has the added benefit of being very profitable.
Since 2009, analysts at investment research firm Morningstar have tracked the performance of environmental, social, and governance (ESG) companies in the United States and Canada and concluded that there is evidence of a “premium for move towards ESG companies ”. In the first year of the pandemic, the performance of many large ESG investment funds overtook the broader market. “The world is moving towards a low carbon transition. There are investments to be made,” says Amy O’Brien, responsible investment manager at Nuveen, a TIAA company where investors have access to various equity funds from ESG type via their employer. sponsored pension plans.
This is attracting the attention of more investors and the demand for what is called impact investing is expected to soar. Bloomberg Intelligence predicts that the asset class will skyrocket to $ 53 trillion by 2025. “We are at a pivotal point in our industry,” said O’Brien. “The climate comes up as the number one problem for investors over and over again.”
A related prediction: Third-party designations will become more prevalent so that investors can better verify whether an investment is indeed meeting its ESG requirements. Right now, asset managers are self-certifying, but it may be independent parties giving the green light, in the same way the US Department of Agriculture places its organic seal of certification. on food products.
“There will be a demand for more transparency and accountability,” says Georgia Lee Hussey, certified financial planner and co-founder of Modernist Financial. “The standards right now are everywhere. “
4. Wider access to “direct indexing”
, an investment strategy that allows you to buy individual stocks in an index fund and omit companies that you find problematic or risky, was once a brokerage service primarily for the wealthy with large portfolios. “You could take the S&P 500 and take out the fossil fuel companies, the gun makers, the people who make fast food. You can match it to your values,” says Tanja Hester, author of Wallet Activism.
But the trend has intensified as more and more investors want customizable portfolios to match their values. Vanguard began offering customer service over the summer – and the noise on the streets is that Fidelity is next.
5. Emergence of a sustainable bank
While the socially responsible investment market has been growing for years, the banking sector has been slower to provide savers with. This year marked the launch of some new financial technologies supporting this demand for sustainable banking. Ando, a , launched in January with a commitment to invest its users’ money in projects that support the reduction of carbon emissions. In September, the female-led neobank Rallius arrived and pledged to invest exclusively in ESG, including initiatives such as decarbonization, affordable housing and accelerating the wealth of women and minorities.
As word spreads about the number of the world’s largest financial institutions that continue to contribute billions of dollars to fossil fuel projects, the trend is expected to accelerate. Rallius expects a deposit base of $ 500 million in its first year of operation.
6. Shock sticker on the essentials
As heavy rains and flooding become more frequent and severe, they will destroy more farms and crops in their path. This leads to production disruptions and food shortages on everything from wheat to the coffee beans to be produced. The lower supply will then translate into higher prices at the retail level and food insecurity for many more people. The increases are already being felt in the market and experts believe they will continue for some time. “Over the next 16 to 18 months, we’re going to see prices go up. There’s no question about it, ”says Phil Lempert, founder of Supermarket Guru.
Beyond food, we could also see climate change price shocks on other essentials such as medical supplies and microchips. Plant closures and work disruptions due to weather damage can cause slower manufacturing and deliveries. “This will reduce choice and raise prices,” said Sanjay Patnaik, director of the Center for Regulation and Markets at the Brookings Institute and a fellow at Johns Hopkins University whose research focuses on climate policy.
7. Switch to home insurance
While the average homeowner’s insurance rate has increased at about the rate of inflation, it’s another story for homeowners in storm-hit states like California, Colorado, and Louisiana. “For some policyholders, the increase was 9% in one year. For others, up to 20%, ”explains Loretta Worters, spokesperson for the Insurance Information Institute.
A recent New York Times article also highlights how some insurers have dropped their existing customers or increased their premiums multiple times in a single year. “Affordability and availability [of home insurance] could be negatively affected in the years to come, ”says Worters.