Investing in a Warmer Future

Frequent floods
Photograph by AFP/Getty Images

The climate change will be a great challenge for our society. Especially for the economy, the cost of adapting to this change may reach $130 billion a year by 2030. This creates opportunities for a host of investors.

As I read on the Freakonomics blog, there was an article in Bloomberg Businessweek that talked about how companies try to adapt to global warming.

Investing in climate change used to mean putting money into efforts to stop global warming. Morgan Stanley, Goldman Sachs, and other firms took stakes in wind farms and tidal-energy projects, and set up carbon-trading desks. The appeal of cleantech has dimmed as efforts to curb greenhouse gas emissions have faltered: Venture capital and private equity investments fell 34 percent last year, to $5.8 billion, according to Bloomberg New Energy Finance.

Now some investors are taking another approach. Working under the assumption that climate change is inevitable, they’re investing in businesses that will profit as the planet gets hotter. (The World Bank says the earth could warm by 4C by the end of the century.) Their strategies include buying water treatment companies, brokering deals for Australian farmland, and backing a startup that has engineered a mosquito to fight dengue, a disease that’s spreading as the mercury climbs.

It seems that the Morgenstadt initiative of the Fraunhofer Society is facing the right direction.

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