Climate Change and Your Investments

Climate Change and Your Portfolio

August 22, 2021

This week’s reader question:

How should I factor climate change into my investment strategy? How does Adviser Investments manage this portfolio risk?

Liz Laprade Research Analyst Liz Laprade had this to say:

Climate change is a consideration for many investment managers, including us. But after evaluating the findings in the United Nations report released last week, it’s safe to say that this weighty issue is about to become even more of a factor when assessing and selecting long-term stocks. The report, released by the Intergovernmental Panel on Climate Change, marshals research conducted by thousands of scientists from all over the world. It reveals not only that irreparable damage has already been inflicted on our planet by humans, but also what we can do to try to stem the tide for future generations.

On the heels of that bittersweet message, the Biden administration is trying to pass legislation that would put more dollars and support behind the push for renewable energy and cutting carbon emissions in half by 2030.

If the legislation succeeds, the obvious beneficiaries are renewable energy companies. On the flip side are a small number of companies responsible for most of the fossil fuel emissions around the world, including big oil, energy and coal companies. They would come under increased pressure and could see their costs increase to meet lower emission mandates.

Liz Laprade is pictured with the quote: "Companies that fail to comply with environmental mandates or don’t try to aid the world in minimizing fossil fuels... are less likely to make the cut with our fund managers."

Investors need to be aware that climate risks are likely to compound in the years ahead. As always, we invest in active managers who we believe are among the best stock pickers in their respective areas of expertise. And a big part of the process for them is evaluating corporate leadership practices and gauging how companies are preparing for rising risks. As such, our managers are accustomed to considering the winners and the losers within the environmental impact pillar of ESG investing.

Simply put, companies that fail to comply with environmental mandates or don’t try to aid the world in minimizing fossil fuels will suffer and are less likely to make the cut with our fund managers.

Ask Us a Question!

We’re always interested in the topics or concerns you might like us to comment on. Ask us a question about investing, the markets or financial planning and one of Adviser Investments’ experts will answer it in a future edition of The Week in Review. CLICK HERE NOW TO POSE YOUR QUERY.

 


Tax, legal and insurance information contained herein is general in nature, is provided for informational purposes only and was obtained from what we believe to bs reliable sources. However, accuracy, completeness or reliability cannot be guaranteed and should not be construed as legal or tax advice or advice to purchase or surrender insurance products. Personalized tax advice and tax return preparation is available through a separate, written engagement agreement with Adviser Investments Tax Solutions. We do not provide legal advice, nor sell insurance products. Always consult a licensed attorney, tax professional, or licensed insurance professional regarding your specific legal or tax situation, or insurance needs.

Adviser Investments' logo is a registered trademark of Adviser Investments, LLC.