If you’ve ever played with dominos, you’re familiar with their cascading effects. Gently nudge one piece, and the force will ripple throughout the rest.
This process of cause and effect works much the same way in society and business: as global forces take hold, their effects are deeply intertwined with the financial markets.
The Climate Megatrend
Today’s infographic comes from BlackRock, and it explains how one such megatrend, climate change and resource scarcity, will be a long-term opportunity for investors.
Earth in the Hot Seat
In 2018, global CO2 emissions rose 1.7% to the highest level since 2013. These rising emissions have intensified the effects of climate change, with 2015-2018 being the four hottest years ever recorded. Society and the economy are starting to feel its negative consequences:
- Extreme weather events have become more frequent. In particular, floods and other hydrological events have quadrupled since 1980.
- In hotter, wetter conditions, infectious diseases spread more easily—between 2004-2017, total tick-borne illnesses increased by 163%.
- The global insured losses from natural catastrophes was $79 billion in 2018.
- Extreme weather effects, and the health impact of burning fossil fuels, cost the U.S. economy at least $240 billion in 2018.
It’s clear that climate change is having an immediate, serious impact on the world.
Many see climate change as a long-dated future risk, however, our research findings show that compared to the 1980’s, there are measurable GDP impacts in the market today
-Brian Deese, Global Head of Sustainable Investing at BlackRock
In addition to these issues, climate change is contributing to another problem: it’s becoming harder to feed the global population.
Over 7 Billion Mouths to Feed
Climate change significantly threatens global food security. As glaciers melt, the world’s freshwater supply—including what’s available for food production—melts with it. This is a significant problem, considering that between 2,000-5,000 liters of fresh water are needed to produce one person’s daily food intake.
As an added hurdle to food production, supply and demand are pulling in opposite directions.
The share of total employment in agriculture has dropped significantly over time. Even worse, among the food that is able to be harvested, roughly 30% is lost or wasted globally.
On top of limited resources, the world will have to contend with forces driving up food demand.
- Population growth: By 2050, the global population will grow by about two billion.
- More calorie-rich diets: As emerging economies grow their wealth, their populations seek richer foods like meat and dairy products.
How can society combat these pressing issues?
A Greener, More Plentiful Future
As society works to slow climate change and produce more with less, a myriad of investment opportunities will emerge.
- Renewable energies are becoming increasingly competitive.
- Electric & fuel cell vehicles are growing in market share.
- Products made from recycled materials are appealing to environmentally-conscious consumers.
- Agricultural machinery counters the declining workforce and increases productivity.
- Precision agriculture leverages real-time environmental data to help farmers make decisions.
Climate change and resource scarcity will be a driving force behind the actions of consumers, companies, and governments for years to come.
By staying attuned to this megatrend, investors will be able to spot long-term opportunities