In recent years we have become very familiar with climate change and how it affects our lives and investments. Given the existential threat it poses, we tend to focus on the risks and costs: the risk of rising temperatures, the cost of avoiding disaster.
These risks and costs are an important part of assessing which companies make promising long-term investments. Firms with strong emissions-reduction policies stay ahead of regulators, for instance; those with close supply-chain relationships are better equipped to manage the impact of more volatile weather.
The other global emergency
However, this approach could result in investors missing a wealth of opportunities. Climate change is one of two closely connected global emergencies. The other is the loss of biodiversity and natural habitats. Biodiversity (the variety and abundance of species) is only just beginning to be discussed by asset managers. The focus is on the risks that loss of biodiversity brings: three quarters of our food is animal-pollinated and over 70% of cancer drugs are sourced from chemicals and compounds found in nature. The destruction of biodiversity affects almost every sector and over half of global GDP.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Investors have begun to reward the companies selling products that can solve the climate crisis. So what are the opportunities in relation to biodiversity? What is the biodiversity equivalent of renewable energy? Food. The way we grow, sell and consume food is linked to over two-thirds of biodiversity loss, and so food is crucial to addressing it. Reducing pesticide use, water consumption and packaging is a key driver of change.
Three stocks to save the world
AGCO (NYSE: AGCO) is changing the way we consume and produce food. This long-established US business makes farm machinery, but has a particular focus on hardware and software that allow users to take a “precision” approach to agriculture. Such “smart farming” (using sensor and satellite technology to fine-tune irrigation or fertilisation to the specific needs of small areas, for instance) greatly reduces the amount of chemicals applied to the land and saves money.
Fresh water is under constant stress from agriculture. Over 70% of it is used in the food-production chain and most of the rest in industrial processes. Evoqua Water Technologies (NYSE: AQUA) is a world leader in water treatment, with technologies to filter, disinfect, recover nutrients and more. Its products increase safety and efficiency for those consuming and using water in industrial processes, but also allow for clean disposal in the environment.
One way to help nature is to avoid damaging it in the first place. The fast-evolving circular-economy sector (which involves reusing, repairing and recycling existing materials for as long as possible to tackle waste and climate change) is an excellent source of ideas for companies using innovation to help us move away from the extractive economy (a resource-based economy dependent on extracting natural resources for money). Australia’s SIMS (Sydney: SGM) is a leading metal-recycling company, but it also deals with household items, data-centre equipment and electronic components. The volume of waste in the electrics category is increasing rapidly and it represents the company’s fastest-growing segment.
-
Higher earners face £377 bill if Reeves puts up income tax – do you fit the Treasury’s definition of ‘working people’?Labour’s election manifesto pledged not to raise National Insurance, VAT or income tax but prime minister Keir Starmer appeared reluctant to repeat the promise this week
-
Ofgem could write off £500 million of energy debt for 195,000 households – would you be eligible?Energy debt costs the average billpayer on the Ofgem price cap £52 a year.
-
Yoshiaki Murakami: Japan’s original corporate raiderThe originator of Japanese activism, Yoshiaki Murakami, was disgraced by an insider-trading scandal in 2006. Now, he's back, shaking things up
-
Cash in on the vast growth potential of the companies electrifying the worldOpinion Martin Todd, portfolio manager, head of sustainable equities, Federated Hermes, highlights three electrification companies where he'd put his money
-
Galliford Try has firm foundations for strong growthBuilder Galliford Try has a finger in a wide range of pies, notably important work in the public sector
-
Card Factory is a stand-out small-cap going cheapIn a digital world, we still value the personal touch. That’s good news for Card Factory, whose unique business model is suited to weather all economic storms
-
8 of the best smallholdings for sale nowThe best smallholdings for sale – from a medieval cross-passage farmhouse in Taunton, Somerset, to a former farmhouse with an orchard in the Welsh Marches
-
How much gold does China have – and how to cash inChina's gold reserves are vastly understated, says Dominic Frisby. So hold gold, overbought or not
-
How to invest in undervalued gold minersThe surge in gold and other precious metals has transformed the economics of the companies that mine them. Investors should cash in, says Rupert Hargreaves
-
Debasing Wall Street's new debasement trade ideaThe debasement trade is a catchy and plausible idea, but there’s no sign that markets are alarmed, says Cris Sholto Heaton
