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.
Subscribe to 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.
-
Watch out for fake Steven Bartlett video – you could lose thousandsScammers are trying to tap into the Trump tariffs chaos, but knowing what to look out for could save you thousands of pounds, says Kalpana Fitzpatrick
-
Can Donald Trump fire Jay Powell – and what do his threats mean for investors?Donald Trump has been vocal in his criticism of Jerome "Jay" Powell, chairman of the Federal Reserve. What do his threats to fire him mean for markets and investors?
-
Out of America's shadow: Why Trump's tariff chaos may be good for non-US stocksOpinion Upending global investment and trade could benefit other countries at the expense of the US market, says Cris Sholto Heaton
-
LendInvest: a promising fintech firm going cheapOpinion LendInvest has made some mistakes in the past, but it’s now primed for growth, says Rupert Hargreaves
-
BP's 'long, painful decline' – and why next year could be even tougherOpinion Long-suffering shareholders in oil giant BP have been pushing for change. It won’t come soon enough, says Matthew Lynn
-
Investment trusts tap the profits in exotic and obscure global marketsOpinion Peter Walls, manager of the Unicorn Mastertrust fund, highlights three investment trusts as he shares where he'd put his money
-
The star small and mid-cap stocks income investors have overlookedOpinion Thomas Moore, senior investment director, Aberdeen, highlights three company stocks as he shares where he would put his money
-
Falling revenues and mounting debt spell trouble for Jumia TechnologiesStruggling African e-commerce platform Jumia Technologies looks headed for the exit, says Dr Matthew Partridge.
-
Chemring Group: an explosive investment opportunity in defenceEuropean states are raising their military spending, and Chemring Group looks well placed to profit
-
Next reports £1 billion in annual profits for the first time – what's next for the retailer?Clothing retailer Next has become only the fourth member of its sector to surpass £1 billion in annual profits. What does this mean for the company's future?
