Author Topic: Climate-proofing your portfolio  (Read 3784 times)

FireLane

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Climate-proofing your portfolio
« on: October 18, 2018, 10:35:51 AM »
I've been reading the discussion on the new IPCC report, which has me feeling more pessimistic than usual.

It looks like the worst effects of climate change are going to come sooner and at lower temperatures than we thought. The reductions pledged under the Paris accords aren't enough, and most countries aren't even meeting those.

By 2040, we'll likely experience mass migrations, ecosystem collapses, more frequent and extreme weather, and the slow destruction of billions of dollars of coastal real estate. All these things will erode economic growth for decades to come (one estimate is 1.2% of GDP for every 1.8 degrees of warming), if they don't stop it completely or even reverse it.

We talk a lot about how the 4% rule would have survived the great crises of the 20th century, but this could be a black swan unlike any other.

So, for those of us who plan to live off our investment portfolios for decades to come, what can we do to safeguard our retirements from climate change?

Higher bond allocations, like 50/50? Equity investments tilted toward renewable energy? Divest from fossil fuel companies? Go light on companies headquartered in equatorial countries that are going to get too hot to live in, heavier on companies in Canada and other northern countries that are going to get more hospitable? I'm open to suggestions.

BSL18

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Re: Climate-proofing your portfolio
« Reply #1 on: October 18, 2018, 11:32:18 AM »
The problem with climate proofing your portfolio is within the black swan definition (even if in this case, IMO it can hardly be called a black swan, it will happen, question is when). To be able to bullet proof your portfolio, you'd have to be able to predict when it will happen and what the consequences will be. For example, moving away from campanies near the equator would most likely be a good idea. However, loading on company in Canada or Scandinavia (even if as a Canadian I'd be open to the suggestion) is basically ignoring several other potential effects. One of the most important will be mass migration. However, if people start leaving their country, they'll end up in northern countries like the ones you'd invest in, causing major changes along the way. Also, resources like water will be targeted by governement moves. The meaning of that is some scientists (although this is mostly based on assumptions) do predict that major conflicts, at a worldwide level, will develop. And once again, if (or when) it happens, people won't be fighting for the hottest places, but the ones with the most water and farmland in appropriate climates. You guessed it, northern US, Canada, Scandinavia, Northern Russia. Meaning your investments in these countries won't be secure either.

I think the best course of action so far is: do nothing. We don't have nearly enough information to make any smart move. However, we'll have to pay attention to what companies develop to counter the effects of global warming, and capitalize on that in the next years and decades. And also think about using FIRE to learn basic survival skills, just in case!!

GuitarStv

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Re: Climate-proofing your portfolio
« Reply #2 on: October 18, 2018, 11:45:28 AM »
Invest in index funds that are from a mix of locations around the globe to climate proof your portfolio.  If climate-change related companies become super influential and rich, they'll float up to the top of your investments automatically.  If disaster hits one particular country, it shouldn't tank all your investments.

ChpBstrd

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Re: Climate-proofing your portfolio
« Reply #3 on: October 18, 2018, 01:07:36 PM »
The problem is your investment planning timeframe doesn't align with the timeframe of climate change. That is, in the next 10-20 years, the effects will consist of a few tenths of a degree, oceans a foot higher, and maybe an extra hurricane per year. This won't change much in the industrialized world other than possibly reducing real estate values in New Orleans, Miami, and Venice. This is part of the tragedy of course. Because the status quo will seem to continue to work for the extent of investment planning timeframes, populations will not be motivated to invest in a way that could mitigate the long-term damage.

We can predict with absolute certainty that someone on Wall Street will invent an underperforming financial product to try to address climate concerns. Avoid any such thing.

FireLane

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Re: Climate-proofing your portfolio
« Reply #4 on: October 18, 2018, 01:49:55 PM »
The problem is your investment planning timeframe doesn't align with the timeframe of climate change. That is, in the next 10-20 years, the effects will consist of a few tenths of a degree, oceans a foot higher, and maybe an extra hurricane per year. This won't change much in the industrialized world other than possibly reducing real estate values in New Orleans, Miami, and Venice.

That's true, climate change probably won't impact portfolios very much in the next 10-20 years. But I'm planning to be retired for 40-50 years, and it will definitely loom large on that time scale. I'm expecting it will start to exert a drag on global growth.

Maybe the solution is to squeeze enough investment gains out of the last gasps of the fossil-fuel economy, so that when climate-driven economic crises begin, I'll be too rich for it to matter to me? Now that's a gloomy thought.

expatartist

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Re: Climate-proofing your portfolio
« Reply #5 on: October 18, 2018, 06:10:32 PM »
The problem is your investment planning timeframe doesn't align with the timeframe of climate change. That is, in the next 10-20 years, the effects will consist of a few tenths of a degree, oceans a foot higher, and maybe an extra hurricane per year. This won't change much in the industrialized world other than possibly reducing real estate values in New Orleans, Miami, and Venice.

That's true, climate change probably won't impact portfolios very much in the next 10-20 years. But I'm planning to be retired for 40-50 years, and it will definitely loom large on that time scale. I'm expecting it will start to exert a drag on global growth.

Maybe the solution is to squeeze enough investment gains out of the last gasps of the fossil-fuel economy, so that when climate-driven economic crises begin, I'll be too rich for it to matter to me? Now that's a gloomy thought.


Yes fund managers will take all this into account. US funds are often internationally diversified due to the global nature of many of the companies in them.

Real estate makes up a good proportion of my investments - as a US citizen working outside the country, I'm unable to invest significantly in stocks or even CDs. I'm also trying to plan for my real estate to be financially and physically sustainable after I'm gone. Unfortunately the areas I'm looking at are all coastal regions: Hong Kong (1st world, all coast, its future in China looking iffy) and Athens (2nd world, inland but much is low-lying with mediocre infrastructure).

nihilism122

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Re: Climate-proofing your portfolio
« Reply #6 on: October 18, 2018, 07:45:04 PM »
This thread is very depressing.  What is wrong with us as a species that we are in this position?  Decades of deliberate failure has brought us to this point. 

maizeman

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Re: Climate-proofing your portfolio
« Reply #7 on: October 18, 2018, 08:21:31 PM »
So, for those of us who plan to live off our investment portfolios for decades to come, what can we do to safeguard our retirements from climate change?

Higher bond allocations, like 50/50? Equity investments tilted toward renewable energy? Divest from fossil fuel companies? Go light on companies headquartered in equatorial countries that are going to get too hot to live in, heavier on companies in Canada and other northern countries that are going to get more hospitable? I'm open to suggestions.

It does make sense to avoid investing in real estate in low-lying areas. It's subtle but you can already start to see the effects of rising sea levels show up in real estate pricing. And the minute the first bank announces they're going to stop writing 30 year mortgages on coastal real estate in Florida because they're not confident the building will still be there to act as collateral in coming decades those subtle effects will get significant real fast. If I knew a way to do it conveniently, I'd be tempted to invest in Canadian farmland.

I agree with ChpBstrd that for stocks it makes sense to just continue to invest in globally diversified index funds. As different countries and companies fall and rise you'll automatically be invested more in the winners and less in those losing out in the changing climate.

I would definitely avoid higher bond allocations. Dealing with even just the crisis level effects of climate change (things like more frequent natural disasters, relocating the tens of millions of folks who live near sea level, and replacing the infrastructure that will soon be below sea level) is going to require dramatic amounts of emergency government spending which, if not paired with increased taxes, is likely to produce increases in inflation and make for bad decades for bonds.

ChpBstrd

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Re: Climate-proofing your portfolio
« Reply #8 on: October 18, 2018, 08:38:04 PM »
On the flip side, some beachfront property may appreciate astronomically. Where the elevation is high enough, like on most of the California coast, Pensacola, FL, Jamaica, or Puerto Vallarta, Mexico, these may be some of the last beaches in the developed world for a while. When most Florida beaches, the Cancun area, and the Carolinas beaches are underwater, the coast will look like a giant, sinking swamp with dangerous chunks of rebar and concrete (former hotels and condos) jutting up and breaking the waves just offshore. Spoiler alert: Nobody is cleaning that stuff up. A natural ocean beach might be a rare thing for many decades, simply because it takes many years of wave erosion to turn a forest or a city into sloped sand. At the higher elevation beaches, sand may be deposited higher by wave action, erosion may accelerate and recreate the beach at a higher point, or people may choose to dredge it up to shore. These rare beaches may become the exclusive domain of the trillionaire class where they build disposable McMansions.

The era of investing half a million dollars in a condo built on a disappearing sandbar will seem like a very strange time to our descendants. It seems strange to me even now!

maizeman

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Re: Climate-proofing your portfolio
« Reply #9 on: October 18, 2018, 08:51:53 PM »
A natural ocean beach might be a rare thing for many decades, simply because it takes many years of wave erosion to turn a forest or a city into sloped sand. At the higher elevation beaches, sand may be deposited higher by wave action, erosion may accelerate and recreate the beach at a higher point, or people may choose to dredge it up to shore. These rare beaches may become the exclusive domain of the trillionaire class where they build disposable McMansions.

A little off topic, but your post reminds me of a semi-recent podcast episode on "sand poaching" which is apparently becoming more common both because resorts of trying to maintain big nice white beaches even as their sand is getting washed away, and because beach and river sand works much better for making concrete than desert sand, which tends to be smaller and more rounded down.

https://www.npr.org/sections/money/2018/07/13/628894815/episode-853-peak-sand

middo

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Re: Climate-proofing your portfolio
« Reply #10 on: October 18, 2018, 09:02:33 PM »
Remember, a car accident is good for the economy.  It generates work in cleaning up, work in repairs/replacement, work for ambulances and doctors.  It is a positive in GDP terms.

Why would climate change be any different?  As some homes get washed away, more will need to be built.  As crops fail in one area, there will be a scramble to plant new varieties or changes of crops.  As internal combustion cars become obsolete, electric ones will replace them.  As coal and oil are left in the ground, our energy sources will come from the sun, the wind and the tides.  Picking winners and losers will not be easy.  That's why we are recommended to not stock pick and let the market sort it out.  As companies become winners from climate change (and some will), then they will become more important on the index, and as others lose, they will become less important.  Compare it to technologies that become outdated.

catccc

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Re: Climate-proofing your portfolio
« Reply #11 on: October 19, 2018, 07:22:05 AM »
Remember, a car accident is good for the economy.  It generates work in cleaning up, work in repairs/replacement, work for ambulances and doctors.  It is a positive in GDP terms.

Why would climate change be any different?  As some homes get washed away, more will need to be built.  As crops fail in one area, there will be a scramble to plant new varieties or changes of crops.  As internal combustion cars become obsolete, electric ones will replace them.  As coal and oil are left in the ground, our energy sources will come from the sun, the wind and the tides.  Picking winners and losers will not be easy.  That's why we are recommended to not stock pick and let the market sort it out.  As companies become winners from climate change (and some will), then they will become more important on the index, and as others lose, they will become less important.  Compare it to technologies that become outdated.

Thank you for this.  I can only do my part and hope that it plays out so nicely, but in the face of impending doom, this is making me feel better.

steveo

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Re: Climate-proofing your portfolio
« Reply #12 on: October 19, 2018, 04:58:52 PM »
Thank you for this.  I can only do my part and hope that it plays out so nicely, but in the face of impending doom, this is making me feel better.

I'd put millions on it that the doom predictions won't come true. They haven't been true once in relation to IPCC forecasts so I would stop dramatising climate-change. I remember about 20 years + ago studying environmental economics and people were predicting oil would run out really quickly. I've followed the predictions of climate-change for years.

One thing I guarantee you is that environmentalists predictions of a dire future never come true.

Don't bet your portfolio one doom and gloom. Bet on the facts.

maizeman

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Re: Climate-proofing your portfolio
« Reply #13 on: October 19, 2018, 05:33:41 PM »
Thank you for this.  I can only do my part and hope that it plays out so nicely, but in the face of impending doom, this is making me feel better.

I'd put millions on it that the doom predictions won't come true. They haven't been true once in relation to IPCC forecasts so I would stop dramatising climate-change. I remember about 20 years + ago studying environmental economics and people were predicting oil would run out really quickly. I've followed the predictions of climate-change for years.

One thing I guarantee you is that environmentalists predictions of a dire future never come true.

So on the one hand I agree with you that many climate doomers tend to be too dismissive of the potential for humanity to either adapt to or overcome major challenges that we will confront in the future "if nothing changes."

Peak oil is a great example of that where I spent a good chunk of time in college and grad school interacting with folks who were convinced world oil production had peaked in 2007 and that the wheels were coming off of our global civilization month by month as a result. Gasoline that cost $4/gallon (in today's dollars) certainly didn't help at all, and I'm not too proud to admit I started to buy into this myself to some extent. But of course, we all know how this story ends:

Super high oil prices were an economic signal that lead to new oil reserves and new technologies to reach those reserves becoming economically viable. And this year, with very little fanfare, the united states passed our "peak" oil production level set in December of 1970, which all the doomers assured me was just never going to be possible, no matter how much money we spent or what technology we tried to develop. (Now there are plenty of reasons to complain about fracking, but to me it really does seem to have been an effective bridge to keep our civilization's wheels turning while we rapidly ramp up renewable electricity production, more efficient cars, hybrid cars, and electric cars).



So anyway, that's the part I agree with. But at the same time I feel compelled to point out that, by the very of the prediction nature, people can only be right in predicting the end of the world once. So saying "well they've never been right about everything ending before" is a little like saying "I've survived every day of my life so far." By definition you survive every day of your life but your last one.

YttriumNitrate

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Re: Climate-proofing your portfolio
« Reply #14 on: October 19, 2018, 06:03:24 PM »
I climate-proofed my portfolio by buying a house a few hundred feet from a beach on Lake Michigan. If the ocean beaches get wiped out, my house will be worth a fortune. Even if the oceans don't rise, it's still a great place to live.

FireLane

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Re: Climate-proofing your portfolio
« Reply #15 on: October 19, 2018, 07:40:29 PM »
I would definitely avoid higher bond allocations. Dealing with even just the crisis level effects of climate change (things like more frequent natural disasters, relocating the tens of millions of folks who live near sea level, and replacing the infrastructure that will soon be below sea level) is going to require dramatic amounts of emergency government spending which, if not paired with increased taxes, is likely to produce increases in inflation and make for bad decades for bonds.

Thanks, I'll have to think about that. My assumption was that the negative impacts of climate change could cause a permanent reduction in growth, which would be really bad for stocks, especially at the current high valuations. Bonds would be the safer option to carry you through the turmoil. But maybe that approach has its own set of risks.

Remember, a car accident is good for the economy.  It generates work in cleaning up, work in repairs/replacement, work for ambulances and doctors.  It is a positive in GDP terms.

Isn't this just the glazier's fallacy? Disaster is good for GDP if and only if it spurs investment activity that wouldn't have happened otherwise. We see the dollars being spent on rebuilding, but we don't see the other investment that could have happened with those same dollars but didn't.

I'd put millions on it that the doom predictions won't come true.

You've got an easy way to make that bet, if you're serious: buy a beachfront condo in Miami.

daverobev

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Re: Climate-proofing your portfolio
« Reply #16 on: October 19, 2018, 08:35:39 PM »
Thank you for this.  I can only do my part and hope that it plays out so nicely, but in the face of impending doom, this is making me feel better.

I'd put millions on it that the doom predictions won't come true. They haven't been true once in relation to IPCC forecasts so I would stop dramatising climate-change. I remember about 20 years + ago studying environmental economics and people were predicting oil would run out really quickly. I've followed the predictions of climate-change for years.

One thing I guarantee you is that environmentalists predictions of a dire future never come true.

Don't bet your portfolio one doom and gloom. Bet on the facts.

http://theconversation.com/earths-sixth-mass-extinction-has-begun-new-study-confirms-43432

Shit's dying out.

theolympians

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Re: Climate-proofing your portfolio
« Reply #17 on: October 20, 2018, 10:10:49 AM »
This thread is very depressing.  What is wrong with us as a species that we are in this position?  Decades of deliberate failure has brought us to this point.

Where does this come from? "Decades of failure????" We, in the U.S. (and the west) have the highest standards of living for a people in history. There are threats, but they are manageable if we have the will. Think of where we would be if we listened to to the doom and gloomers of the 80's who were telling us there was no way we were going to beat socialism in the eastern block. They collapsed, we didn't. I went across the border and saw how the communist utopias in Czech and East Germany were run----poorly.

"This position" is largely manufactured and driven by the media. I've lived through the great cooling scare, acid rain (by the predictions in the 70's and 80's there should be NO forests in europe now), California would be an island literally) etc....

Writing of predictions, none of the SPECIFIC predictions have come to pass. Sure in some scientific study deep some measurement might conform from what was said years ago. Actual results??? ZIP. The poles should be ice free several times over by their predictions.

"The sea levels are rising ". Throughout the age of the earth sea levels have fluctuated; and they will continue to do so. My own city is jumping on this bandwagon as well. They are worried about a foot or two rise. We are about 20' above sea level.

gaja

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Re: Climate-proofing your portfolio
« Reply #18 on: October 20, 2018, 10:51:15 AM »
The Norwegian pension fund has a large and very conservative portfolio. They mainly try to change the businesses they invest in through dialogue and active ownership based on these climate strategies: https://www.nbim.no/en/responsibility/risk-management/climate-change2/

But they do have a list of companies they won't invest in for ethical reasons, including coal companies: https://www.nbim.no/en/responsibility/exclusion-of-companies/

And they are considering divesting from oil, based solely on economic risk: https://www.bloomberg.com/new-economy-forum
« Last Edit: October 21, 2018, 03:45:53 AM by gaja »

BSL18

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Re: Climate-proofing your portfolio
« Reply #19 on: October 20, 2018, 06:07:10 PM »
I feel this thread had diverted from "how to cope with climate change while making money" to "is climate change real"...

On one hand, I personally disagree with people stating that this is only part of a normal cycle. We are due for a global warming indeed, and few studies (to my knowledge) deny that. However human activities have made it a lot quicker than it should be, and it is this pace that is hurting the environment in general. So we (as a specie) will adapt, but adaptation rarely comes without a cost.

On the other hand, if we consider only the economical side of things, yes, World Wars and such have fueled innovation and economy for decades after they happened. But some people paid the price for that, I think it will be the same for climate change. All major changes in the world have happened because people wanted a better, easier life, more comfort, so I don't think any society movement of a high enough scale will emerge with people willing to sacrifice their standards of living to change the course of the climate change.

Back to OP's questions, basically whenever events of that scale emerge, people with money always end up better than people without. So one way to climate proof your investments (and the rest with it) is to make sure to lower your expenses, save as much as possible, invest properly and make money before it happens. It is what will allow you to make it through better than others, in the same way that Mustachianism generally help people getting though unexpected events in life better than most people.

bacchi

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Re: Climate-proofing your portfolio
« Reply #20 on: October 21, 2018, 10:22:56 AM »
I think the most sensible thing has already been mentioned though it's only for your portfolio if you're buying rental property: Don't buy beach-front property. Don't buy property in hurricane/monsoon alley. Don't buy property in the US desert southwest.

Retire-Canada

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Re: Climate-proofing your portfolio
« Reply #21 on: October 21, 2018, 12:12:05 PM »
Rich people in well developed countries will be in the best position to mitigate the most serious climate change effects. We'll also be in a position to make money off the changes that are forced onto society. That major changes are ahead related to climate is of no doubt to me. How it will affect me particularly in my lovely corner of North America is hard to say.

We are also about to experience the robotic revolution where a large portion of the human population will become obsolete from the perspective of the wealthy elite. If you don't care about the comfort, happiness or even the survival of the low cost labour that has been the machinery of the economy to date...then you may not be overly bothered by climate change.

My personal take on the issue is that we'll under respond as a species until things are so bad they can't be ignored and then we'll go 150% to solving the problem. This will save the species, but will devastate the natural world and the poor. It's possible we underestimate our ability to course correct and we lose civilization as we know it. I don't think there is any way to know how that will turn out and I don't think there is anyway to change course given the entrenched power/political interests.

So I'm going to save/invest a reasonable amount of money, stay fit and flexible in case I have to rob, kill and eat my neighbours and hope for the best. I don't think more money in any reasonable quantities I can generate will help, but I do think being healthy and flexible and having more than the average financial resources is a great combo.

I also think it makes a lot of sense to retire early and enjoy life now just in case we do face a horrific future.

maizeman

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Re: Climate-proofing your portfolio
« Reply #22 on: October 21, 2018, 12:50:14 PM »
Rich people in well developed countries will be in the best position to mitigate the most serious climate change effects. We'll also be in a position to make money off the changes that are forced onto society. That major changes are ahead related to climate is of no doubt to me. How it will affect me particularly in my lovely corner of North America is hard to say.

We are also about to experience the robotic revolution where a large portion of the human population will become obsolete from the perspective of the wealthy elite. If you don't care about the comfort, happiness or even the survival of the low cost labour that has been the machinery of the economy to date...then you may not be overly bothered by climate change.

My personal take on the issue is that we'll under respond as a species until things are so bad they can't be ignored and then we'll go 150% to solving the problem. This will save the species, but will devastate the natural world and the poor. It's possible we underestimate our ability to course correct and we lose civilization as we know it. I don't think there is any way to know how that will turn out and I don't think there is anyway to change course given the entrenched power/political interests.

So I'm going to save/invest a reasonable amount of money, stay fit and flexible in case I have to rob, kill and eat my neighbours and hope for the best. I don't think more money in any reasonable quantities I can generate will help, but I do think being healthy and flexible and having more than the average financial resources is a great combo.

I also think it makes a lot of sense to retire early and enjoy life now just in case we do face a horrific future.

Since we're getting into some non-investment ways of preparing for the world that may come, I'd add that saving too much can actually be detrimental if you let the extra savings visibly effect your lifestyle.

When (hopefully actually "if") those folks who have lost their jobs to robots and their homes to rising sea levels and their ability to afford to feed their families to a climate changing faster than plant breeders can adapt our crops come looking for someone to blame for their problems, being one of the visibly affluent (I'm thinking the lifestyle Suzie Orman was pushing in her interview a few weeks ago) is going to be a significant hinderance to survival.

A family friend lived in a big rust belt city back in 1967 during the race riots, and describes seeing the rioters bypass his working class neighborhood to go burn houses in the richer neighborhood a bit farther out.

Stealth wealth all the way.

mjr

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Re: Climate-proofing your portfolio
« Reply #23 on: October 21, 2018, 06:38:51 PM »


I'd put millions on it that the doom predictions won't come true. They haven't been true once in relation to IPCC forecasts so I would stop dramatising climate-change. I remember about 20 years + ago studying environmental economics and people were predicting oil would run out really quickly. I've followed the predictions of climate-change for years.

One thing I guarantee you is that environmentalists predictions of a dire future never come true.

Don't bet your portfolio one doom and gloom. Bet on the facts.

Yep, this.  Humans, even clever humans, have  form in irrational behaviour.  Religions, wars, doom cults, of which human-induced climate change is just the latest.

The world is warming, whether we like or it or not, whether we're causing it or not.  It will not be the calamity that the climate change religion wants it be.  It attracts dramatists, virtue-signallers and rent-seekers.

The effects on the world due to climate change are and will be nothing compared to the world's population growth.  Everything else pales into comparison.

Retire-Canada

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Re: Climate-proofing your portfolio
« Reply #24 on: October 21, 2018, 06:44:31 PM »
The effects on the world due to climate change are and will be nothing compared to the world's population growth.  Everything else pales into comparison.

Those ^^ are not two separate problems.

GuitarStv

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Re: Climate-proofing your portfolio
« Reply #25 on: October 22, 2018, 07:53:41 AM »


I'd put millions on it that the doom predictions won't come true. They haven't been true once in relation to IPCC forecasts so I would stop dramatising climate-change. I remember about 20 years + ago studying environmental economics and people were predicting oil would run out really quickly. I've followed the predictions of climate-change for years.

One thing I guarantee you is that environmentalists predictions of a dire future never come true.

Don't bet your portfolio one doom and gloom. Bet on the facts.

Yep, this.  Humans, even clever humans, have  form in irrational behaviour.  Religions, wars, doom cults, of which human-induced climate change is just the latest.

The world is warming, whether we like or it or not, whether we're causing it or not.  It will not be the calamity that the climate change religion wants it be.  It attracts dramatists, virtue-signallers and rent-seekers.

The effects on the world due to climate change are and will be nothing compared to the world's population growth.  Everything else pales into comparison.

Small point of distinction here.  When a belief is based upon the best available evidence, it's called 'science' not 'religion'.  That's one of the key differences between the two.  'Religion' is based upon faith, science is based upon peer-reviewed evidence.  I'm assuming that you didn't know that, because the alternative is that you are purposely slandering the work of thousands of experts in the field of climate science without any proof.

The best available evidence tells us that the world is warming, because of the actions that people are taking.  Projecting the future is a difficult and imprecise task, and there's certainly a degree of error in any prediction made.  That said, the best available evidence seems to overwhelmingly indicate that the impact of ongoing climate change will not be a net good for the human race.

Retire-Canada

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Re: Climate-proofing your portfolio
« Reply #26 on: October 22, 2018, 08:10:20 AM »
Small point of distinction here.  When a belief is based upon the best available evidence, it's called 'science' not 'religion'.  That's one of the key differences between the two.  'Religion' is based upon faith, science is based upon peer-reviewed evidence.  I'm assuming that you didn't know that, because the alternative is that you are purposely slandering the work of thousands of experts in the field of climate science without any proof.

The best available evidence tells us that the world is warming, because of the actions that people are taking.  Projecting the future is a difficult and imprecise task, and there's certainly a degree of error in any prediction made.  That said, the best available evidence seems to overwhelmingly indicate that the impact of ongoing climate change will not be a net good for the human race.

And human civilisations have gone extinct for environmental reasons before. So it's not like it's impossible. It's just that we are now a globally connected species running the experiment at a scale that has never been tried before. Anyone who has experienced at truly severe weather event knows that our technology and industry does not hold a candle to the planet's fury. So expecting we can just engineer our way out of it may prove wrong if the impacts get too severe. The problem is by the time you find out it will be too late to do anything about it, but go for the ride.

We got really really really close to a nuclear war at a couple points in time in recent history. It didn't happen, but that doesn't make the folks who pointed out the risks of total planetary devastation wrong. It just made us lucky.

The climate/science deniers are like folks on the Titanic gambling that the ship isn't taking on water as fast as the technical folks like the Ship's Engineer was saying and that the ocean wasn't as cold as the Captain was warning. So why not play another round of bridge and enjoy some more cocktails from the bar?

Enough

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Re: Climate-proofing your portfolio
« Reply #27 on: October 22, 2018, 08:25:34 AM »
Remember, a car accident is good for the economy.  It generates work in cleaning up, work in repairs/replacement, work for ambulances and doctors.  It is a positive in GDP terms.

Why would climate change be any different?  As some homes get washed away, more will need to be built.  As crops fail in one area, there will be a scramble to plant new varieties or changes of crops.  As internal combustion cars become obsolete, electric ones will replace them.  As coal and oil are left in the ground, our energy sources will come from the sun, the wind and the tides.  Picking winners and losers will not be easy.  That's why we are recommended to not stock pick and let the market sort it out.  As companies become winners from climate change (and some will), then they will become more important on the index, and as others lose, they will become less important.  Compare it to technologies that become outdated.

A car accident is NOT good for the economy.  See  Broken Window Fallacy: https://en.wikipedia.org/wiki/Parable_of_the_broken_window  The synopsis is that yes, although you spend money to repair the broken window (or car), had the window not been broken or the car not been in an accident, that money would have either been spent elsewhere, or even better, invested elsewhere.  That investment drives the economy forward with improvements rather than maintaining the baseline with repairs.

Villanelle

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Re: Climate-proofing your portfolio
« Reply #28 on: October 22, 2018, 08:33:56 AM »
I think it's nearly impossible to predict exactly how (much less how *and* when) climate change will affect the markets, so I'm investing just as I would if I didn't believe climate change were real. 

One thing I have done, which hasn't been mentioned, is not have kids.  Certainly my husband and I didn't make that choice based solely on climate change concerns.  But it does mean that we didn't contribute to additional overpopulation (though I know my failure to add 1-4 more people to the planet is but a drop in the ocean) and it also means I have fewer people to care for and worry about in the medium and longer term.  Of course, that means fewer people to pool resources, but I'm guessing the net will come out in my favor.  And it also means it will probably be somewhat less painful for me to watch civilization burn, if it comes to that.

MustacheAndaHalf

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Re: Climate-proofing your portfolio
« Reply #29 on: October 22, 2018, 11:41:32 AM »
... By 2040, we'll likely experience mass migrations, ecosystem collapses, ...
There's a flaw in predicting mass migrations.  Mass migrations assume the immigrants are allowed into other countries.

To cite a recent news item, the U.S. President threatened to order the military to the U.S. border to prevent thousands of migrants trying to enter the U.S.  And that's without food scarcity.  Can you imagine the level of "us vs them" feeling when only one of you will have enough food?

maizeman

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Climate-proofing your portfolio
« Reply #30 on: October 22, 2018, 12:03:57 PM »
... By 2040, we'll likely experience mass migrations, ecosystem collapses, ...
There's a flaw in predicting mass migrations.  Mass migrations assume the immigrants are allowed into other countries.

To cite a recent news item, the U.S. President threatened to order the military to the U.S. border to prevent thousands of migrants trying to enter the U.S.  And that's without food scarcity.  Can you imagine the level of "us vs them" feeling when only one of you will have enough food?

Many mass migrations don't require crossing international borders. For example, 20M people live in Florida and a lot of them are going to have to go somewhere else but within the USA. 40M people live in the nile delta, and many of them will likely also have to move, but probably elsewhere in Egypt.

Then you get to cases like India and Bangladesh. Bangladesh has 160M people, many of them barely above sea level and shares a 2,600 mile long border with India. Can India effectively fortify and defend that whole border? I don't know. (For context the US Mexico border is only 2,000 miles, and the US has a lot more money to spend on border security.) Even if it can, are Indian soldiers prepared to shoot and kill starving refugees to keep then on the Bangladesh side? I don't know.

PDXTabs

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Re: Climate-proofing your portfolio
« Reply #31 on: October 22, 2018, 12:15:41 PM »
I'm firmly in the camp that global climate change will significantly harm the world economy and investment returns in the not so distant future. However, other than avoiding low lying land and old energy, I'm not sure that there is much you can do. To be specific: I'm saving in VTWSX, but I fully expect that the coming troubles will keep me from getting the normal 7% YoY growth. So my plan is basically to save more and not to buy a house that would be physically underwater for a very long time.

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Re: Climate-proofing your portfolio
« Reply #32 on: October 22, 2018, 12:27:08 PM »
... By 2040, we'll likely experience mass migrations, ecosystem collapses, ...
There's a flaw in predicting mass migrations.  Mass migrations assume the immigrants are allowed into other countries.

To cite a recent news item, the U.S. President threatened to order the military to the U.S. border to prevent thousands of migrants trying to enter the U.S.  And that's without food scarcity.  Can you imagine the level of "us vs them" feeling when only one of you will have enough food?

Many mass migrations don't require crossing international borders. For example, 20M people live in Florida and a lot of them are going to have to go somewhere else but within the USA. 40M people live in the nile delta, and many of them will likely also have to move, but probably elsewhere in Egypt.

Then you get to cases like India and Bangladesh. Bangladesh has 160M people, many of them barely above sea level and shares a 2,600 mile long border with India. Can India effectively fortify and defend that whole border? I don't know. (For context the US Mexico border is only 2,000 miles, and the US has a lot more money to spend on border security.) Even if it can, are Indian soldiers prepared to shoot and kill starving refugees to keep then on the Bangladesh side? I don't know.

It won't just be a few starving refugees though (at least not as things get worse).  The full military of the country will likely be involved as well.  This changes the equation somewhat regarding the ease of putting down the refugees.

maizeman

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Re: Climate-proofing your portfolio
« Reply #33 on: October 22, 2018, 12:52:47 PM »
In a lot of ways I think it would be easier to get the Indian army to shoot at the Bangladeshi army than at starving women and children. And if the army does shoot, India isn't particularly likely to fail at resisting an attempted invasion by Bangladesh.

Looking around the world, I don't see many cases where a country that is going to be disproportionately impacted by rising sea levels and/or climate change outguns the country its population would naturally migrate towards in the absence of international borders. So I'm guessing the "are you willing to kill starving and unarmed people" question will be more relevant than the "what happens if they try to invade" question.

ChpBstrd

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Re: Climate-proofing your portfolio
« Reply #34 on: October 22, 2018, 02:29:15 PM »
Historically, humans have always warred for teritory and the resources it offers. To lose the battle has always meant facing starvation in the desert, so to speak or literally. To cultivate resources has always meant being paranoid about being pushed out through violence. It has been this way for tens of thousands of years - hundreds of thousands if you are willing to count prehuman ancestors. Fighting for food and other resources has been wired into our genetics through the systemic elimination of anyone who fled or lost the fight.

So yes, the 21st century will be about the northern countries who are sitting on food resources massacring starving refugees from places that went from breadbaskets to basket cases within a generation. Hurricanes, heat, and bugs might make much of the tropics unfarmable.

The next such massacre may occur under the American flag as Trump militarizes the border in anticipation of a wave of desperate refugees. Based on thousands of years of human behavior, I assure you, the soldiers will kill the refugees. It's what humans do.

FireLane

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Re: Climate-proofing your portfolio
« Reply #35 on: October 22, 2018, 08:46:13 PM »
FYI, Tanja at Our Next Life is writing about this too. I'm glad to see more people thinking about it.

MustacheAndaHalf

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Re: Climate-proofing your portfolio
« Reply #36 on: October 23, 2018, 09:48:51 AM »
... By 2040, we'll likely experience mass migrations, ecosystem collapses, ...
There's a flaw in predicting mass migrations.  Mass migrations assume the immigrants are allowed into other countries.

To cite a recent news item, the U.S. President threatened to order the military to the U.S. border to prevent thousands of migrants trying to enter the U.S.  And that's without food scarcity.  Can you imagine the level of "us vs them" feeling when only one of you will have enough food?
Many mass migrations don't require crossing international borders. For example, 20M people live in Florida and a lot of them are going to have to go somewhere else but within the USA. 40M people live in the nile delta, and many of them will likely also have to move, but probably elsewhere in Egypt.

Then you get to cases like India and Bangladesh. Bangladesh has 160M people, many of them barely above sea level and shares a 2,600 mile long border with India. Can India effectively fortify and defend that whole border? I don't know. (For context the US Mexico border is only 2,000 miles, and the US has a lot more money to spend on border security.) Even if it can, are Indian soldiers prepared to shoot and kill starving refugees to keep then on the Bangladesh side? I don't know.
I was continuing a discussion about mass migrations North across country borders.

Moving within a country doesn't involve refugees or changes in the number of people consuming the food supply.  I don't think that has the impact of migrations across borders.

India is West of Bangladesh.  Wouldn't they both have the same food scarcity problems?

North of Bangladesh lies China, with the largest army in the world.

maizeman

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Re: Climate-proofing your portfolio
« Reply #37 on: October 23, 2018, 10:18:37 AM »
... By 2040, we'll likely experience mass migrations, ecosystem collapses, ...
There's a flaw in predicting mass migrations.  Mass migrations assume the immigrants are allowed into other countries.

To cite a recent news item, the U.S. President threatened to order the military to the U.S. border to prevent thousands of migrants trying to enter the U.S.  And that's without food scarcity.  Can you imagine the level of "us vs them" feeling when only one of you will have enough food?
Many mass migrations don't require crossing international borders. For example, 20M people live in Florida and a lot of them are going to have to go somewhere else but within the USA. 40M people live in the nile delta, and many of them will likely also have to move, but probably elsewhere in Egypt.

Then you get to cases like India and Bangladesh. Bangladesh has 160M people, many of them barely above sea level and shares a 2,600 mile long border with India. Can India effectively fortify and defend that whole border? I don't know. (For context the US Mexico border is only 2,000 miles, and the US has a lot more money to spend on border security.) Even if it can, are Indian soldiers prepared to shoot and kill starving refugees to keep then on the Bangladesh side? I don't know.
I was continuing a discussion about mass migrations North across country borders.

Moving within a country doesn't involve refugees or changes in the number of people consuming the food supply.  I don't think that has the impact of migrations across borders.

India is West of Bangladesh.  Wouldn't they both have the same food scarcity problems?

North of Bangladesh lies China, with the largest army in the world.

It is certainly possible to have migrations and refugees even within a single country. On a much smaller scale in the USA we saw this back with Hurricane Katrina hit New Orleans and people were displaced without money or jobs or essentially any worldly positions to other cities in the region for months or years. For larger scale examples there are millions of Syrians living in refugee camps within Syria and millions of after being forced to leave the homes and cities they used to live in. Similar internal refugee camps exist in countries like Sudan and Congo.

About northward migration and Bangladesh/India. I agree with you that generally what you'll see is people moving from south to north above the equator and north to south below it. Banglash and India are a special case though. Bangladesh is essentially one giant river delta/floodplain and as a result is going to lose much of its total land area to rising sea levels, including most of its most productive crop land which already floods several times per year. To go north you have to cross first a bit of India and then the Himalayas where most non-native populations (tibetans/nepalese/etc) have problems even breathing because the air is so thin,* so it seems likely that refugees would instead stream to the higher ground both east and west (both of which are part of India).

*Long term acclimation to high altitude can help somewhat if you have adequate nutrition during the acclimation process since building up extra red blood cells and hemoglobin takes a lot of iron and protein, but most of the people who have been living in the Himalayas and the Tibetan plateau for generations also carry several gene variants that allow them to tolerate the high altitude.

harvestbook

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Re: Climate-proofing your portfolio
« Reply #38 on: October 23, 2018, 02:46:50 PM »
Yeah, but just think about the money to be made in trading geoengineering futures!

maizeman

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Re: Climate-proofing your portfolio
« Reply #39 on: October 24, 2018, 12:11:17 PM »
Looking around the world, I don't see many cases where a country that is going to be disproportionately impacted by rising sea levels and/or climate change outguns the country its population would naturally migrate towards in the absence of international borders. So I'm guessing the "are you willing to kill starving and unarmed people" question will be more relevant than the "what happens if they try to invade" question.
I guess it depends on how you define many? There are quite a few countries in  Oceania that are predicted to be completely submerged if the model are correct. Most countries with studies along the coasts are also going to be spending a lot of money on remediation efforts as well. The biggest problem is that in a lot of cases the models don't call for the worst effects to hit until about 2100. A lot of research shows that people tend to not care about the future unless they will be an active participant in it.

I don't think your statement and mine are contradict each other. Yes there are lots of countries (including island nations) that are going to suffer horribly from both changing temperature/rainfall and rising sea levels. It's just that those countries don't generally have the military might to invade other nearby countries that are going to be less effected.

theolympians

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Re: Climate-proofing your portfolio
« Reply #40 on: October 24, 2018, 11:26:38 PM »
Oh my, it IS all doom and gloom here. We are almost to "invest in bunker tech". I just don't get the issue. I do not believe in anthropogenic climate change. It does not have to do with whether I accept science, it is the interpretation of data, and weight given to certain data, and the lack of ability to know what weight to give certain data, and the reliance on "computer modeling", and the political mileage some get out of it.

The climate is always changing. It is not static. We are fools to believe we know what Earth's optimal temp is, even less how to keep it where we want it. Temps may rise in the next century or two. Great. Does that mean floods, storms, starvations, mass migration, food shortages, an end to term limits for President Trump? No.

If more CO2 is added to atmosphere, plants will use it as "food". Vegetation and crops will grow more robustly. If temps rise and we lose a month or two of winter that will equate to a longer growing season (somewhere on the Earth). Both are benefits= more food. The problem would be cooling......

Back to topic, how to climate proof your portfolio for 50 years hence: invest in agriculture. If you are afraid of rising sea levels, don't invest in beachfront, invest in land a contour line back.

triangle

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Re: Climate-proofing your portfolio
« Reply #41 on: October 25, 2018, 12:15:16 AM »
I think trying climate proof ones portfolio should be around priority #31.  And 90% of that would be trying to get an some investing edge on insuring against weather related events (storms) or other natural events like volcanic eruptions or earthquakes; not climate change from human activity.

How would one go about making investments today assuming that temperatures rose or fell by 0.5 degrees in the next century? Or 1.5 degrees? Or pick the number you feel will happen. It would be like trying to invest today assuming that in 30 years there are no smartphones or that all (social) media is controlled by US.gov, or that the corporate tax rate will triple.

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Re: Climate-proofing your portfolio
« Reply #42 on: October 25, 2018, 02:56:56 AM »
If more CO2 is added to atmosphere, plants will use it as "food". Vegetation and crops will grow more robustly.

This is already happening

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Re: Climate-proofing your portfolio
« Reply #43 on: October 26, 2018, 06:56:39 AM »
I do not believe in anthropogenic climate change.

https://climate.nasa.gov/climate_resources/24/graphic-the-relentless-rise-of-carbon-dioxide/

I can't believe how people feel this way. There is no sane debate; the world is not flat, clouds are needed for rain, 1+1=2, humans are changing the climate through industrial emissions.

It's real. Yes, climate changes. But it doesn't naturally change like this (unless you consider anything humanity does "natural" because we are inherently natural ourselves...).

https://climate.nasa.gov/evidence/

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Re: Climate-proofing your portfolio
« Reply #44 on: October 26, 2018, 07:39:41 AM »
I do not believe in anthropogenic climate change.

https://climate.nasa.gov/climate_resources/24/graphic-the-relentless-rise-of-carbon-dioxide/

I can't believe how people feel this way. There is no sane debate; the world is not flat, clouds are needed for rain, 1+1=2, humans are changing the climate through industrial emissions.

It's real. Yes, climate changes. But it doesn't naturally change like this (unless you consider anything humanity does "natural" because we are inherently natural ourselves...).

https://climate.nasa.gov/evidence/

Believing in the truth means that you have to come to terms with the fact that things you find fun and convenient are actively destroying the world around you.  The only logical response to this is to limit and reduce those things.  It doesn't matter how much evidence or truth you present . . . there is a certain percentage of the population who will never accept it simply because of the personal hardship involved.

mjr

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Re: Climate-proofing your portfolio
« Reply #45 on: October 28, 2018, 03:53:17 PM »

'Religion' is based upon faith, science is based upon peer-reviewed evidence.  I'm assuming that you didn't know that, because the alternative is that you are purposely slandering the work of thousands of experts in the field of climate science without any proof.

The best available evidence tells us that the world is warming, because of the actions that people are taking.  Projecting the future is a difficult and imprecise task, and there's certainly a degree of error in any prediction made.  That said, the best available evidence seems to overwhelmingly indicate that the impact of ongoing climate change will not be a net good for the human race.

You're quite correct that I am slandering the work of thousands of experts.  You have weak-minded governments and bureaucrats funding climate change studies, they produce the results that they get paid to produce and so get more funding.

All they produce is models and they interpret those models.

I didn't say the world is not warming.  It is.   I even said "The world is warming, whether we like or it or not, whether we're causing it or not".  Perhaps you should try reading my words instead of just assuming I'm a knuckle-dragging, climate-denialist.

I despair at the all the money, thought and angst wasted on "climate change".  It will be what it will be.  My point was that, not "the world isn't warming".

maizeman

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Re: Climate-proofing your portfolio
« Reply #46 on: October 28, 2018, 04:07:17 PM »
You're quite correct that I am slandering the work of thousands of experts.  You have weak-minded governments and bureaucrats funding climate change studies, they produce the results that they get paid to produce and so get more funding.

This is one of the worldviews I really struggle to understand. Generally it is easier to publish papers (and publish them in higher impact journals) if you get unexpected results than expected results. It's easier to get grants if you publish more papers, and publish those papers in higher impact journals.

There are a lot of perverse incentives in the way science if funded, but the idea that just reporting confirmatory results over and over ahead is the way to get more funding isn't one of them.

And even if we put all that aside, the fact that there are dozens of national governments funding scientific research and large numbers of foundations and industry grants, so all these funders would have to be on the same page (which they aren't).

And even if you put that issue aside too, you're still left with (which you look at the entire world) a significant number of cantankerous tenured professors with endowed chairs who can do or say whatever they want, have a guaranteed job for life, and still have enough funding from their own endowments to do whatever research they want.

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Re: Climate-proofing your portfolio
« Reply #47 on: October 28, 2018, 04:11:43 PM »

'Religion' is based upon faith, science is based upon peer-reviewed evidence.  I'm assuming that you didn't know that, because the alternative is that you are purposely slandering the work of thousands of experts in the field of climate science without any proof.

The best available evidence tells us that the world is warming, because of the actions that people are taking.  Projecting the future is a difficult and imprecise task, and there's certainly a degree of error in any prediction made.  That said, the best available evidence seems to overwhelmingly indicate that the impact of ongoing climate change will not be a net good for the human race.

You're quite correct that I am slandering the work of thousands of experts.  You have weak-minded governments and bureaucrats funding climate change studies, they produce the results that they get paid to produce and so get more funding.

All they produce is models and they interpret those models.

I didn't say the world is not warming.  It is.   I even said "The world is warming, whether we like or it or not, whether we're causing it or not".  Perhaps you should try reading my words instead of just assuming I'm a knuckle-dragging, climate-denialist.

I despair at the all the money, thought and angst wasted on "climate change".  It will be what it will be.  My point was that, not "the world isn't warming".

So, you accept the science, but you don't accept the science?  Cherry picking the parts you can agree with and rejecting the parts you don't?

What amazes me about this is that Arrhenius first calculated that burning fossil fuels at the rates mankind were would cause global warming back in 1896.  It is not new, or controversial.  It does get masked by other factors, such as SO2 emissions which rose until the mid '70's and then fell sharply.   It also gets masked by natural climate variabilities.  But it is happening and it is being driven by man's release of sequestered carbon on a large, global scale.

Anyway, as I said before, the share market will follow the winners and drop the losers from climate change.  So a broad, market based fund will track these changes as they happen.  I won't be doing anything specific to climate proof my portfolio.

mjr

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Re: Climate-proofing your portfolio
« Reply #48 on: October 28, 2018, 05:33:33 PM »
So, you accept the science, but you don't accept the science?  Cherry picking the parts you can agree with and rejecting the parts you don't?

CO2 causing warming is incontrovertible.  Man-made emissions increasing the CO2 concentration is incontrovertible.  That this has a warming effect is incontrovertible.

Whether this effect is overall good or bad is not proven.  Whether or not we can do diddly-squat is not proven.  Whether or not we should spent money on prevention or adaptation is a valid debate.

What amazes me about this is that Arrhenius first calculated that burning fossil fuels at the rates mankind were would cause global warming back in 1896.

This is all true.  But the CO2 component by itself is not nearly enough to cause the "catastrophic" warming that drives the climate change religion (and I use that word deliberately).   They can make the models dramatic only by including water vapour and radiative forcing and upper-atmospheric hot spots which are not proven or even observed. 

And no, I'm not a member or fan of Big Coal or Big Oil or countless other labels used to shut people down.  And I'm an engineer which gives me some nominal technical credentials.  Being an engineer, I look for pragmatism and I don't see any pragmatism in countless people running around saying "the science is settled" and spending billions of dollars on useless and inefficient programmes and research when the world has much bigger problems about which we can do something.
« Last Edit: October 28, 2018, 11:57:24 PM by mjr »

theolympians

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Re: Climate-proofing your portfolio
« Reply #49 on: October 28, 2018, 09:20:03 PM »
Invest in agriculture and property a contour line back from the beach. There you have a Climate proofed portfolio.