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CLimate change and pension investment

Including Financial Independence and Retiring Early (FIRE)
MGMG
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CLimate change and pension investment

#410860

Postby MGMG » May 10th, 2021, 8:04 pm

Hi All,

What approaches do people take to the managing the risks of climate change when investing long term for pensions? I am thinking here of how to manage the risk of disruption to all manner of things which is very likely within a decade and almost certain within several. Some stuff we know (hydrocarbons will become less central, some areas will become borderline uninhabitable etc). Other things we don't yet have certainty on. Do people factor these things in to their decisions? If so, how?

tjh290633
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Re: CLimate change and pension investment

#410909

Postby tjh290633 » May 10th, 2021, 11:09 pm

One of these days the activity of the sun will decrease and we shall move into global cooling. For that reason I ignore any suggestions that I should invest to mitigate the effects of Climate Change. Carbon Dioxide is vital for life, for agriculture and you cannot stop breathing it out.

Stick to financial decisions.

TJH

xxd09
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Re: CLimate change and pension investment

#410919

Postby xxd09 » May 10th, 2021, 11:51 pm

Just in the middle of reading William Bernstein,s “Madness of Crowds”
Has some good sections on the Armageddon delusions of human beings -it’s one of our recurrent behaviour patterns as a species
Frankly re investing I would keep calm and carry on as if the end is truly nigh then nothing you can do
More likely that it too will pass and your portfolio will continue to grow
xxd09

JohnW
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Re: CLimate change and pension investment

#410928

Postby JohnW » May 11th, 2021, 1:55 am

On balance, I'd say I don't think one would factor these things in to their decisions. Partly because I don't know how you would, with better returns in mind if that's the measure we're using for the success of our choices.
To factor climate changes 'things' into decisions means needing to factor in everything else that is pertinent, and then give each element the correct weighting. Otherwise, what's the point of factoring in only some of the factors? Good luck with all that.

MGMG
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Re: CLimate change and pension investment

#410938

Postby MGMG » May 11th, 2021, 7:23 am

tjh290633 wrote:One of these days the activity of the sun will decrease and we shall move into global cooling. For that reason I ignore any suggestions that I should invest to mitigate the effects of Climate Change. Carbon Dioxide is vital for life, for agriculture and you cannot stop breathing it out.

Stick to financial decisions.

TJH


You're missing ny point. I wasn't talking about investing to mitigate climate change but to avoid its (negative) effects on returns, much like you might avoid companies you see doing badly for other reasons.

Dod101
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Re: CLimate change and pension investment

#410941

Postby Dod101 » May 11th, 2021, 7:35 am

MGMG wrote:
tjh290633 wrote:One of these days the activity of the sun will decrease and we shall move into global cooling. For that reason I ignore any suggestions that I should invest to mitigate the effects of Climate Change. Carbon Dioxide is vital for life, for agriculture and you cannot stop breathing it out.

Stick to financial decisions.

TJH


You're missing ny point. I wasn't talking about investing to mitigate climate change but to avoid its (negative) effects on returns, much like you might avoid companies you see doing badly for other reasons.


I would hope that sub consciously we recognise the impact without having to sit down and draw up a blue print for what might happen. Few of us will be investing in buggy whips for instance nor I hope in too many coal mines. OTOH many of us will one way or another be investing in the likes of Tesla. As to what will happen to the likes of Shell? I do not know. It is still a big important company and I cover my back by continuing to invest but only within a diversified portfolio.

In other words, whilst I am aware of changes taking place, I do not feel that I am in a position to see the future and tend to make changes at the stock specific level as and when it seems to me to be required.

I think it is a fair question though, especially if you have a multi decade investment horizon.

Dod

Itsallaguess
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Re: CLimate change and pension investment

#410942

Postby Itsallaguess » May 11th, 2021, 7:45 am

If this is something that people want to consider really seriously, then perhaps it might help to minimise the number of children that they might have (and hence,that those children are likely to then have, etc...), which should do more for future climate change than any personal-investment decisions might ever hope to influence, at the same time as potentially releasing lots of unused future cash-flows that won't need spending on them, or their children, and which can then be re-invested into their own pension requirements...

Win-win, perhaps, and in terms of future environmental impact, probably a lot easier than trying to change the world using personal-investment processes alone...

Cheers,

Itsallaguess

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Re: CLimate change and pension investment

#410944

Postby Gilgongo » May 11th, 2021, 8:07 am

I think the economic and socio-political issues around climate change, such as population migration and crop failures, are really too hard for me to predict over the next 30-40 years in a way that I could translate into investment decisions. There is perhaps some logic in considering that a comparatively rapid divestment in fossil fuels will leave some of the companies involved with "stranded assets" which may in turn lead to negative knock-on effects on the wider economy, but that's as yet only quite a vague concern: https://www.lse.ac.uk/granthaminstitute ... ed-assets/ But I hope my portfolio diversification would be able to stand, say, the likes of BP or BHP halving in value before I sold them. And of course if things really, really go bad, none of us will be much of a position to do anything anyway and investing for the future will seem a little exotic perhaps.

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Re: CLimate change and pension investment

#410947

Postby Urbandreamer » May 11th, 2021, 8:26 am

MGMG wrote:You're missing ny point. I wasn't talking about investing to mitigate climate change but to avoid its (negative) effects on returns, much like you might avoid companies you see doing badly for other reasons.


Personally where I take climate change into account I tend to invest to mitigate it. The reason is that, while I do think that it is happening and will have large effects, I don't think that it's wise to project many investments more than 10-15 years. Sure many companies thrive far longer than that, but can you trust projections that far out? Indeed many of the best companies change with the times, hence what they do now may not be what they do in 30-40 years time. Shell is getting serious stick for not acting quickly enough, but it is investing in the electric car infrastructure. There was a time when their priciple product was.... shells.

I did invest in renew holdings as a direct result of the 2013 storm. To me bad weather clearly would lead to an increased demand for maintenance and infrastructure replacement. However that is not an investment to avoid negative effects, but to profit from them.

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Re: CLimate change and pension investment

#410962

Postby MyNameIsUrl » May 11th, 2021, 9:10 am

I've thought about this but not taken any action yet - I looked for a cheap Scandinavian etf, on the basis that as the southern European countries become too hot to live in, Scandinavia might become more attractive, so tourism, housebuilding, industry, etc might all benefit.

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Re: CLimate change and pension investment

#411015

Postby ursaminortaur » May 11th, 2021, 12:52 pm

tjh290633 wrote:One of these days the activity of the sun will decrease and we shall move into global cooling. For that reason I ignore any suggestions that I should invest to mitigate the effects of Climate Change. Carbon Dioxide is vital for life, for agriculture and you cannot stop breathing it out.

Stick to financial decisions.

TJH



Are you really buying into the little ice age idea of a grand solar minimum - even if a new grand solar minimum occurs in the near future the effect would be relatively small compared to the warming effects of fossil fuel CO2 release. As you say carbon dioxide is vital for life and you can not stop animals including ourselves breathing it out - you can though stop digging up and burning fossil fuels.

https://newslanded.com/2020/02/04/mini-ice-age-2020-solar-minimum/

Is Earth facing a global warming crisis or mini ice age? According to Professor Owens of Reading University, “The small reduction in the Sun’s energy associated with a solar minimum is vastly offset by effects caused by human activity, such as CO2 in the atmosphere.” He also told The Sun that it is unlikely that global climate will be affected in a detectable way. The effects Maunder Minimum was also influenced by multiple large-scale volcanic eruptions that brought down the temperatures. The Grand Solar Minimum was not the only factor affecting global climate during that time.

https://www.downtoearth.org.in/news/science-technology/cold-comfort-the-sun-is-cooling-doesn-t-mean-there-ll-be-no-global-warming-73488

But the National Aeronautics and Space Administration (NASA) is not very sure about such a conclusion. In February 2020, it released a statement that dispelled the fact that there would be any major effect on global temperature rise due to greenhouse gas emissions due to human activities.

It said even during a Grand Solar Minimum, the decrease in climate forcing would only be worth as much as three years of carbon dioxide growth in the atmosphere. NASA also said the impact of global warming would be six times greater than the cooling caused by the Grand Solar Minimum, and that even if the period lasted for a century, the planet would continue to warm.



https://skepticalscience.com/future-global-cooling.htm

Some of the names on the lists of 'scientists predicting global cooling' have been predicting imminent cooling for years now, like Don Easterbrook, Syun Akasofu, Habibullo Abdussamatov, Joe D'Aleo, and Nicola Scafetta. Many of these and other names on these lists are not climate scientists, which is no doubt why the claims specify that an increasing number of scientists as opposed to climate scientists are predicting imminent cooling.
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Several other listed scientists have predicted that we should expect global cooling due to solar effects, like Scafetta, Abdussamatov, Landscheidt, Archibald, and D'Aleo. However, consider the fact that the longest solar cycle minimum in a nearly century just ended, and as mentioned above, the past two years have been among the hottest in the instrumental temperature record. Solar activity has been flat for the past 50 years, and yet the planet warmed approximately 0.6°C during that period. And now we're expected to believe that solar activity is not only going to significantly dampen the anthropogenic warming signal, but cause substantial cooling? These claims strain credulity.


Longer term we are doomed since every billion years the Sun is getting around 10% brighter and hotter. Simply because of that the Earth will be uninhabitable for plant and complex animal life in about a billion years possibly sooner. Of course that is rather outside most people's financial planning horizon.

https://phys.org/news/2015-02-sun-wont-die-billion-years.html

The sun won't die for 5 billion years, so why do humans have only 1 billion years left on Earth?
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Life on the planet will run into trouble well before the planet itself disintegrates. Even before the sun finishes burning hydrogen, it will have changed from its present state. The sun has been increasing its brightness by about 10% every billion years it spends burning hydrogen. Increased brightness means an increase in the amount of heat our planet receives. As the planet heats up, the water on the surface of our planet will begin to evaporate.


https://en.wikipedia.org/wiki/Future_of_Earth#Solar_evolution

At present, nearly half the hydrogen at the core has been consumed, with the remainder of the atoms consisting primarily of helium. As the number of hydrogen atoms per unit mass decreases, so too does their energy output provided through nuclear fusion. This results in a decrease in pressure support, which causes the core to contract until the increased density and temperature bring the core pressure into equilibrium with the layers above. The higher temperature causes the remaining hydrogen to undergo fusion at a more rapid rate, thereby generating the energy needed to maintain the equilibrium.[71]

The result of this process has been a steady increase in the energy output of the Sun. When the Sun first became a main sequence star, it radiated only 70% of the current luminosity. The luminosity has increased in a nearly linear fashion to the present, rising by 1% every 110 million years.
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The rate of weathering of silicate minerals will increase as rising temperatures speed up chemical processes. This in turn will decrease the level of carbon dioxide in the atmosphere, as reactions with silicate minerals convert carbon dioxide gas into solid carbonates. Within the next 600 million years from the present, the concentration of carbon dioxide will fall below the critical threshold needed to sustain C3 photosynthesis: about 50 parts per million. At this point, trees and forests in their current forms will no longer be able to survive.[75] the last living trees being evergreen conifers.

XFool
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Re: CLimate change and pension investment

#411029

Postby XFool » May 11th, 2021, 1:21 pm

tjh290633 wrote:One of these days the activity of the sun will decrease and we shall move into global cooling.

"One of these days"...

Meanwhile, while we are waiting:

https://www.icgam.com/~/media/Files/I/ICGAM-V2/responsible-investing-documents/COP26-responsible-investing-2021.pdf

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Re: CLimate change and pension investment

#411032

Postby scrumpyjack » May 11th, 2021, 1:37 pm

I don't think there is any point in the investor trying to take much account of climate change in their investment decisions, apart from avoiding being overweight in sectors obviously directly affected like Oils. It will be so many decades, or possibly centuries, before severe effects are felt, like France turning into a desert, or Scotland becoming tropical!

Even oil companies, which one would assume to have no long term future - plastics and chemicals will still be needed and oil prices may rise very sharply as exploration stops but demand is still there. I think we can expect the oil cos to waste huge amounts trying to build up clean energy businesses but being thoroughly out performed by newcomers without their baggage.

I suspect technological advances in computing and AI will have a much greater impact on which businesses will be successful.

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Re: CLimate change and pension investment

#411035

Postby BhotiPila » May 11th, 2021, 1:42 pm

I'm thinking about electric. About to buy the Legal and General battery value chain ETF, BATG, on the basis that it invests in primary producers and there is/will be heavy pressure to constantly improve battery technology and there is likely to be a shortage of some constituents - like nickel. BATG invests in miners, refiners, battery development and battery producer companies. Also thinking about Drax as it produces and uses biomass (not that it is really particularly carbon neutral as it imports the biomass from N. America) to generate electricity, it also has hydro-storage facility in Scotland which takes about 30 secs to come online, both of these give it a role in the future energy mix as a buffer supplier to the grid to supplement the more variable wind and solar renewables. I have not disposed of NG and SSE as I think they will have an important role - but have been toying with the idea because of political risks. I'm planning to get rid of BP and Shell but hoping for the price to rise a bit first. I bought Greencoat Wind ETF (UKW) last year but their performance has been disappointingly flat even as wind has assumed more importance. On reflection, and notwithstanding Tesla, I think perhaps investing in the underlying technologies may be more sustainable and successful than investing in the final producers of consumer goods (e.g. cars).

BP

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Re: CLimate change and pension investment

#411039

Postby BhotiPila » May 11th, 2021, 1:55 pm

scrumpyjack wrote:I don't think there is any point in the investor trying to take much account of climate change in their investment decisions, apart from avoiding being overweight in sectors obviously directly affected like Oils. It will be so many decades, or possibly centuries, before severe effects are felt, like France turning into a desert, or Scotland becoming tropical!

Even oil companies, which one would assume to have no long term future - plastics and chemicals will still be needed and oil prices may rise very sharply as exploration stops but demand is still there. I think we can expect the oil cos to waste huge amounts trying to build up clean energy businesses but being thoroughly out performed by newcomers without their baggage.

I suspect technological advances in computing and AI will have a much greater impact on which businesses will be successful.


I respectfully disagree. The evidence of rapid ongoing climate change is all around and severe effects are already evident; I fear for the future of my grand children who should be expected to live well into the next century.

I fully agree that advances in AI and computing will have a great impact on businesses and nowhere more than in agriculture, where again rapid change is being felt (remote sensing, targeted gene editing, targetting of pests and diseases, urban farming etc).

BP

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Re: CLimate change and pension investment

#411042

Postby scrumpyjack » May 11th, 2021, 2:01 pm

BhotiPila wrote:
scrumpyjack wrote:I don't think there is any point in the investor trying to take much account of climate change in their investment decisions, apart from avoiding being overweight in sectors obviously directly affected like Oils. It will be so many decades, or possibly centuries, before severe effects are felt, like France turning into a desert, or Scotland becoming tropical!

Even oil companies, which one would assume to have no long term future - plastics and chemicals will still be needed and oil prices may rise very sharply as exploration stops but demand is still there. I think we can expect the oil cos to waste huge amounts trying to build up clean energy businesses but being thoroughly out performed by newcomers without their baggage.

I suspect technological advances in computing and AI will have a much greater impact on which businesses will be successful.


I respectfully disagree. The evidence of rapid ongoing climate change is all around and severe effects are already evident; I fear for the future of my grand children who should be expected to live well into the next century.

I fully agree that advances in AI and computing will have a great impact on businesses and nowhere more than in agriculture, where again rapid change is being felt (remote sensing, targeted gene editing, targetting of pests and diseases, urban farming etc).

BP


I don't disagree about the possible effects of climate change, simply whether it is sensible for the private investor to base their investment approach on it. I don't think that is sensible as the effects on what may be a successful or unsuccessful investment may well be the opposite of what the PI predicts! So much public money will be thrown at the problem, it will be very political and big companies trying to change are IMO likely to fail. How many ICI and GECs are still around?

murraypaul
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Re: CLimate change and pension investment

#411043

Postby murraypaul » May 11th, 2021, 2:06 pm

BhotiPila wrote:I'm thinking about electric. About to buy the Legal and General battery value chain ETF, BATG, on the basis that it invests in primary producers and there is/will be heavy pressure to constantly improve battery technology and there is likely to be a shortage of some constituents - like nickel. BATG invests in miners, refiners, battery development and battery producer companies.


I was interested in this a while ago for much the same reasons.
The problem, as with most investment thoughts, is that everyone else has had the same idea.
From being basically flat for a couple of years it has more than doubled in price in the last year.

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Re: CLimate change and pension investment

#411050

Postby jonesa1 » May 11th, 2021, 2:16 pm

scrumpyjack wrote: It will be so many decades, or possibly centuries, before severe effects are felt, like France turning into a desert, or Scotland becoming tropical!


Strong effects are already being felt in many places, such as increased incidence of the most powerful Hurricanes in the Americas, glacial melting causing increased flooding in mountain communities as well as threatening fresh water supplies in lower lying areas, increased incidence of fires in Arctic Circle forests. We're already seeing some disease carrying insects extending their ranges, it's likely to be a few decades before malaria starts to be seen again in the south of England, but it's forecast (based on the current rate at which Aedes aegypti is extending its range) that the mosquito which carries dengue, yellow fever and zika will be firmly established around the European Mediterranean by 2030. All of these effects (and many more) will have significant economic impacts in rather less than decades.

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Re: CLimate change and pension investment

#411054

Postby sunnyjoe » May 11th, 2021, 2:28 pm

I have invested in a number of companies that I think will benefit from the push towards decarbonising the economy

The Renewable Infrastructure Group (TRIG) - owns and operates wind, solar and battery power stations in UK, Ireland, France, Germany and Sweden

Greencoat UK Wind (UKW) - does what it says

General Electric (GE) - among other things, wind turbines hydrogen ready gas turbines, energy storage, grid stabilisation tech

Siemens Energy (ENR) - wind turbines hydrogen ready gas turbines, energy storage, grid stabilisation tech, electrolysers

BP - moving into solar power (again), offshore wind and EV charging

Shell - ditto

National Grid - earns a regulated return from electricity network assets. The quantity and value of those assets and subsequent return will rise. Also earns unregulated income from electricity interconnectors to other countries. The number of such interconnectors is rising

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Re: CLimate change and pension investment

#411130

Postby tjh290633 » May 11th, 2021, 6:00 pm

Dod101 wrote:I would hope that sub consciously we recognise the impact without having to sit down and draw up a blue print for what might happen. Few of us will be investing in buggy whips for instance nor I hope in too many coal mines. OTOH many of us will one way or another be investing in the likes of Tesla. As to what will happen to the likes of Shell? I do not know. It is still a big important company and I cover my back by continuing to invest but only within a diversified portfolio.

In other words, whilst I am aware of changes taking place, I do not feel that I am in a position to see the future and tend to make changes at the stock specific level as and when it seems to me to be required.

I think it is a fair question though, especially if you have a multi decade investment horizon.

Dod

We have to recognise that coal is essential for some metallurgical processes, and that oil is a valuable feedstock for the production of many plastics. Miners will have to deliver the raw materials needed for batteries, semiconductors, etc.

Tesla is an overblown hyped up outfit. Their ideas of autonomous driving are crazy. They might fit interstate highways, but Devonian lanes with high hedges are way out of their class. Currently it is a cult.

Global warming theories are largely spouted by people who are paid to produce them. Somebody will no doubt put the cold April down to the lack of aircraft putting CO2 into the atmosphere. But that probably caused the warm March, because of less water vapour in the atmosphere.

TJH


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