RWH047: Investing In The Era of Climate Change w/ Bruce Usher
Jul 7, 2024
01:43:51
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Bruce Usher, a Columbia Business School professor, discusses the investment opportunities in the low-carbon economy amidst climate change. Topics include protecting assets from environmental risks, the rise of electric vehicles and renewable energy, and the involvement of companies like Apple and Microsoft in sustainability efforts.
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Quick takeaways
Investing in climate change solutions presents a lucrative opportunity for investors as trillions flow into decarbonization initiatives.
The transition to a low-carbon future is reshaping the global economy, highlighting the urgency to adapt to environmental risks.
Extreme weather events are accelerating awareness of climate risks, prompting the need for immediate action and investment in climate solutions.
Investors are integrating ESG considerations to mitigate risks and respond to evolving market dynamics, emphasizing the importance of sustainability.
Investment strategies must account for decarbonization measures to prevent property devaluation, stressing the impact of climate change on asset values.
Deep dives
Historic Transition to Low-Carbon Economy
We are witnessing a historic shift towards a low-carbon economy to combat climate change. Estimates suggest a massive $150 to $200 trillion will be needed in investments over the next three decades. Businesses and investors are recognizing the urgency to decarbonize the global economy to avert catastrophic climate change.
Technological Innovations in Renewable Energy and Electric Vehicles
Over the past two decades, a remarkable surge in technological advancements has made renewable energy, electric vehicles, and energy storage more competitive and viable. Solar power and wind energy have experienced exponential growth, with solar energy projected to become the largest source of electricity globally by the mid-2030s. Electric vehicles are revolutionizing the automobile industry, offering greener and economically viable alternatives.
Physical Risks and Climate Change Challenges
The physical manifestation of climate change through extreme weather events like heatwaves, wildfires, and flooding has accelerated awareness of the immediate risks posed by climate change. These events are prompting individuals and businesses to adapt to the changing climate, emphasizing the need for urgent action and investment in climate solutions.
The Evolution of Social Norms and ESG Factors
Evolving social norms are driving businesses to prioritize environmental, social, and governance (ESG) factors in their operations. Companies are making ambitious net-zero pledges to demonstrate their commitment to sustainability and resilience. Investors are increasingly integrating ESG considerations into their investment analyses to mitigate risks and respond to changing market dynamics.
Climate Risk and Investment
Climate risk is highlighted as a significant factor affecting investment decisions, emphasized by Larry Fink's statement that 'climate risk is investment risk.' This notion is reinforced by discussions on the negative impact of companies like Coca-Cola, indicating the importance of considering social and environmental costs alongside financial performance.
Decarbonization and Asset Values
The importance of considering decarbonization in investment strategies is underscored, with examples of BlackRock emphasizing decarbonization as a critical investment driver. Insights suggest that failing to account for decarbonization measures could lead to properties losing their value, accentuating the impact of climate change on asset values.
Investment Strategies in Climate Solutions
Various investment strategies for addressing climate change are explored, ranging from fossil fuel-free funds to thematic funds focusing on climate solutions like electric cars and renewable energy. The discussion extends to impact-first investing, suitable for high net-worth individuals, emphasizing long-term, high-risk investments in climate solutions.
Policy and Climate Change
The Inflation Reduction Act is discussed as a significant legislative milestone addressing climate change and economic industrial policies. The Act signals the US's commitment to climate leadership, prompting global efforts towards decarbonization. The conversation highlights the importance of government actions aligning with long-term climate goals.
Overcoming Biases in Climate Thinking
Enhancing rationality in approaching climate issues is emphasized through economic and business lenses, promoting objective analysis. The need for informed decision-making and prioritization of impactful actions is stressed, moving beyond emotional reactions. The dialogue underscores the urgency of focusing on solutions rather than debating the reality of climate change.
Conclusion and Future Outlook
The podcast delves into insightful conversations on climate change's economic implications, investment strategies, policy interventions, and cognitive biases. It offers a comprehensive perspective on addressing climate challenges through informed decision-making, forward-looking investment approaches, and aligning with global decarbonization efforts.
In this episode, William Green chats with Bruce Usher, author of a book titled “Investing in the Era of Climate Change.” Bruce, a successful entrepreneur, investor, & Columbia Business School professor, discusses the “once-in-a-lifetime” investment opportunity created by the transition of the global economy to a low-carbon future. He explains how to protect yourself financially as environmental risks intensify, & how to profit as trillions of dollars flow into innovative climate change solutions that will change the world—from electric vehicles to solar energy.
IN THIS EPISODE YOU’LL LEARN:
00:00 - Intro
05:37 - Why Bruce Usher sees climate change as a huge opportunity (& risk) for investors.
08:34 - How the transition to a low-carbon future will transform the global economy.
10:53 - How extreme weather is finally altering perceptions of climate change.
13:45 - How to protect against environmental threats to your property.
20:39 - Why electric vehicles & renewable energy are key drivers of decarbonization.
33:42 - How Berkshire Hathaway is playing the energy transition.
49:05 - Why leading companies like Apple & Microsoft are serious about sustainability.
54:02 - Why it’s wise to consider environmental factors before buying any stock.
01:03:53 - How to invest in funds & ETFs that reduce your exposure to climate risk.
01:12:44 - How billionaires like Bill Gates & Jeff Bezos invest in climate change solutions.
01:23:01 - What consumers can do to reduce their negative impact on the environment.
01:27:47 - Why Bruce thinks humanity might still avoid catastrophic climate change.
Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.
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