CNBC: Here’s how you can size up climate change to tap into smart investment opportunities

By Deborah Nason, December 7, 2020

As the Federal Reserve recently called out climate change as a stability risk, the investing world is recognizing the potential rewards of addressing the challenge.

“There’s an overlap between climate change and long-term growth opportunities,” said Eric Mancini, director of investment research and wealth advisor at Traphagen Financial Group in Oradell, New Jersey. “It’s a 20- to 30-year growth opportunity as renewable energy gradually takes market share from traditional fossil fuels.”

How does an investor tackle the huge topic of climate change to tap its opportunities? Natasha Lamb, managing partner, director of equity research and shareholder engagement for Arjuna Capital in Manchester-by-the-Sea, Massachusetts, offers a three-pronged approach:

  1. Determine what carbon assets you may be invested in, such as coal, oil and gas reserves. “There is a risk to your portfolio, as these companies will become unprofitable over time,” she said. “For example, the cost to extract from oil sands is expensive.”
  2. Think about how climate change can affect your entire portfolio  “While negative stock screening can eliminate fossil fuel assets and mitigate some climate change risk, the rest of the stock in your portfolio could be impacted by economy-wide risk from storms, sea-level rise, population migration, supply chain disruption, challenges with insurance coverage, etc.,” Lamb said.
  3. Look into investing in solutions that mitigate climate and portfolio risk, such as renewable energy solutions.

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