If there was one bit of optimism in the Intergovernmental Panel on Climate Change’s sixth assessment report, it’s that humans can still mitigate some of the worst effects of climate if we act now.
Some changes are likely permanent or won’t be reversed for centuries, such as sea-level rise and more acidic oceans, but the report’s authors say that removing emissions will cause global warming to cease and temperatures to stabilize over the next decades.
“It’s not too late to address; you just need to move very quickly,” says Deirdre Cooper, co-portfolio manager of Ninety One’s Global Environment Strategy.
The IPCC’s report comes on the heels of a new $1 trillion infrastructure project recently passed by the Senate, which includes funding for federal public works programs that could help with decarbonization, such as improving the electric grid.
There are a swath of sectors to consider to invest in a climate-change mitigation theme, from well-known companies to under-the-radar ideas.
“Solving the climate crisis is an ‘all of the above’ story. It truly takes everything,” says Pavel Molchanov, an analyst at Raymond James.
Upgrading the electric grid. Cooper pointed to a June 2020 study from the Center for Environmental Public Policy at the University of California, Berkeley, which showed the U.S. can deliver 90% clean, carbon-free electricity nationwide by 2035, dependably, at no extra cost to consumer bills and without the need for new fossil fuel plants. The study used the recent cost declines for solar, wind and battery storage for its conclusion.
Companies like NextEra Energy
a company that Cooper’s fund owns, are among utilities aggressively building renewable energy production.
Shutting coal plants will pay immediate dividends, Pavel says, and Europe is phasing out coal. These assets aren’t being mothballed, but owners are retooling them to burn wood pellets to produce electricity. Enviva Partners
is a major supplier of sustainable wood pellets to those plants. While it’s not completely carbon-free, emissions are significantly less than coal, and it’s a renewable product because it comes from sustainable forestry, he adds. “This is a one-of-a-kind company,” he says.
Decarbonizing transportation. Spurred by Tesla
traditional carmakers including Ford
announced they would make 50% of their fleets electric by 2030, and European carmakers pledge to be electric by 2030. Cooper points out European sales of electric cars track between 15% to 20%, versus 2% a few years ago, with prices comparable to internal combustion engine cars. Electric vehicle sales in China are also rising.
Aside from the carmakers, Cooper says investors can look across the electric-battery chain. Her firm owns Chinese firm Wuxi Lead Intelligent that makes the machines to make electric-vehicle batteries, and Infineon Technologies, a German semiconductor manufacturer.
Other transportation areas are trickier to get to zero-carbon, such as steel production and in the airline and shipping sectors, she says. Research and development may lead to improved technology, and hydrogen fuel cells, a nascent form of alternative energy, may play a part.
Reducing single-use plastics. Crude oil is also used to make new plastic. Research by the Center for International Environmental Law show plastic lifecycle emissions could reach 1.34 gigatons per year — equivalent to the emissions released by more than 295 new 500-megawatt coal-fired power plants by 2030. That makes reducing new plastic generation critical. Primo Water
makes and distributes reusable bulk drinking-water containers, such as five-gallon jugs used in home and office water dispensers. Pavel says Primo addresses two problems: reducing single-use plastic containers and improving water quality.
Rethinking food. U.S. agriculture contributed 9.9% of total U.S. greenhouse gases in 2018, according to the Environmental Protection Agency. Food is an area that is ripe for decarbonization, say Cooper and Pavel. A University of Michigan study shows food consumption contributes anywhere from 10% to 30% of typical U.S. household carbon footprint.
Sustainable agriculture investing remains in its early stages, but a growing area is the alternative-proteins sector. Meat products have larger carbon footprints than grain or vegetable products because of methane produced by animal flatulence. No. 1 on the list is beef, whose greenhouse gas emissions per kilogram are 7.2 times more than chicken.
“There is no way to get to zero carbon and consume the amount of beef that we do today,” Cooper says.
Alternative-meat products are hitting market shelves that can be easily substituted in meals where meat isn’t the star of the dish. “It doesn’t necessarily mean that meat never exists,” she says, noting her fund has a small position in Beyond Meat
Adapting new buildings. Alicia Karspeck, head of research at Fabric Risk, a market-risk platform focusing on climate, says while mitigation grabbed most of the headlines, she says we’ll need to start thinking how to adapt to new climate scenarios. The IPCC will release a specific report next year addressing impacts and adaptation.
Investment opportunities may come from shoring up existing infrastructure and creating new infrastructure in areas that might see climate migration, such as northern parts of the country, particular the northern Midwest. The Senate infrastructure bill includes funding for water projects and rail, among other programs.
Karspeck noted an executive order from President Joe Biden requires that any new infrastructure built with federal dollars must include climate and future conditions information. “They’re trying to create new engineering standards, which is why it’s so impactful,” she says.
Buildings constitute 38% of the world’s carbon emissions, so making buildings more energy-efficient can significantly cut emissions, and one way is to improve windows. Pavel says View
is the leading supplier of electrochromic glass, which changes its tint in response to changes in sunlight, becoming darker when there is more solar glare. Less solar glare means the building uses less electricity for air conditioning, Pavel says, and can reduce the building’s energy usage by as much as 20%. It’s for commercial buildings, and can be used in new construction or retrofitted.
Pavel points out companies mitigating climate change aren’t all startups with unproven technologies. Primo Water and Enviva Partners, for example, pay dividends and are profitable.
“These are not concepts. They’re real businesses with real revenue from real customers,” he says.
Debbie Carlson is a MarketWatch columnist. She doesn’t own any of the funds or stocks mentioned in this article. Follow her on Twitter @DebbieCarlson1.