Given that the climate crisis is upon us, where is our family’s money going to be safe? Most of us are not trained as investment bankers or economists, and yet we have to plan for our retirement futures, and for many, our presents.
What’s safe; what’s not? Who really knows? Should we really try and think this new reality through ourselves? Or should we rely on professionals who are forecasting economic impacts that have yet to be seen in their full expression?
I remember when “socially responsible investment” began being thrown about as a term in the early 1990s. Some of my banker colleagues and investment friends were eager to ride the green wave, and to advise on other issues like who did armament manufacturing, and where did oppressive political regimes launder their money to avoid notice and taxation?
I remember wondering at the time, “Who is advising these bankers and investment gurus on the stuff that professional environmentalists and political scientists study? How the hell are they taking decisions about fields they really no nothing about?”
For many the answer was, “Consultants.” But how did they choose these people? I certainly knew no one in my socio-economic and environmental affairs practice who advised bankers. And, to be honest, when I pressed my investment pals for more detail on how they formed their personal “social responsibility” opinions, they were a bit embarrassed.
So flash forward 30 years to now. As I scan the warming future, I wonder rather obviously about automobile companies who don’t go completely electric, like Volkswagen and Audi are promising. I wonder about any corporation that presumes a future for oil and gas production and sales beyond, say 2040. I wonder about jet transportation companies using their current fuel stock and airplane fleets in the same time horizon. I wonder about how fast Boeing can electrify their fleet.
Are you really enthusiastic about the personal CO2 load of all your vacation and business jet travel even now? Imagine how you will feel in 20 years time? What about low-lying real estate on the coastal plains of California or Florida? Are you convinced that ocean-front condo still makes good sense as a family investment? How about country acreages in boreal forests prone to wildfires? And what about buying shares in insurance and re-insurance companies that insure against floods and wildfire destruction of homes and offices? Will they have the financial resources to make good on policy claims in the billions of dollars?
We are all now starting to realize that there will be worse dilemmas to manage, where financial containment of risk may be impossible. How do we handle millions (and potentially billions over time) of climate refugees whose bodies cannot tolerate sustained bouts of 45C, or the complete failure of national crops, or the total lack of potable water? Do we build walls and order boats out of our seaports, like so many Komagata Marus? Do we unleash our armies on mothers and children, when the climate refugees keep arriving at the borders of the now so-called “lifeboat countries,” of Canada and Russia? Irony of ironies, what do we say to Americans who appear on our doorsteps when heat, smoke and climate intolerance make life in their deep south deeply unappealing?
How do we know where to invest our savings and pensions in such a world? Some will argue that fixed income investments in bonds of all types are the answer. If so, prepare for investment returns over decadal timelines that at best are a few percentage points, and at worst are guaranteed negative, like some current German issues. Or perhaps it is time to conduct a healthy review of green technology, and go all-in on solar, wind, geothermal, and (god forbid) nuclear? In terms of green tech equities, how do we gauge the best investments in the most promising opportunities? Presumably, some sectors are already on borrowed time, and personal divestiture decisions will have to be made soon. In fact, most sophisticated investors I know have already made at least one recent ethical sweep of their personal portfolios. For many, all oil and gas stocks are gone.
For most of us, this kind of investment review is new territory with new challenges. I am personally uneasy about relying on banks and investment managers to make the calls necessary. It feels like we all have to consider the future with our individual biases at play.