GMO believes that there are likely to be “tremendous investment opportunities” in the climate change sector for many years to come, according to a new white paper by Lucas White and Jeremy Grantham.
“The consequences of inaction on climate change are unthinkably high, and the world will continue to mobilize in ways not currently foreseen in order to address the biggest threat humanity has ever faced,” White and Grantham write. “We expect the unanticipated growth resulting from these efforts and the uncertainty about the path of the clean energy transition to provide investors with many opportunities.”
GMO believes that a value orientation and a deep understanding of the fundamentals will be the most effective way of identifying the winners.
“Investors that get this right stand to enjoy heroic returns,” according to White and Grantham.
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In this paper, “The Good Thing About Climate Change: Opportunities,” the pair addresses these climate change-related opportunities.
According to GMO, businesses that stand to benefit from heightened efforts to address climate change are those focused on the mitigation of climate change and the transition to a clean-energy world, and those that will help the world adapt to the effects of climate change.
Industries involved in the mitigation of climate change and the transition to a clean-energy world include solar, wind, nuclear, hydroelectric, geothermal, batteries and storage, smart grid, and clean power generation, according to the paper. This would also include lithium, copper and other critical materials, as well as companies involved in energy efficiency efforts — including energy-efficient building materials, energy-efficient lighting and electric vehicles.
The paper also looks at companies helping the world adapt to a changing climate, in particular those that would help agriculture productivity and water supply.
“The impacts of climate change on agriculture and water are particularly worrying,” the paper states. “A recent study published by the National Academy of Sciences concluded that as temperatures continue to rise, agricultural productivity could drop to levels last seen prior to 1980 by the year 2050.”
According to the paper, companies helping to support agricultural productivity through the production of seeds, fertilizers, farm machinery and so on would find desperate need for their products.
Meanwhile, the paper states that droughts, floods and changes in precipitation patterns also threaten water supply.
The paper believes companies focused on water recycling and treatment, water use minimization, and water system engineering will also find their services in high demand.