Investment and climate change
Discussion
I am by no measure informed enough to make meaningful comment, but it's interesting.
'Why value investors should doubt “climate science”. By nature they’re sceptics, and at key junctures become contrarians. I show why they should disbelieve the orthodoxy – and why it matters.'
https://www.livewiremarkets.com/wires/why-value-in...
'Why value investors should doubt “climate science”. By nature they’re sceptics, and at key junctures become contrarians. I show why they should disbelieve the orthodoxy – and why it matters.'
https://www.livewiremarkets.com/wires/why-value-in...
He makes two main points AFAICS
a) Climate change impact claims are overdone
b) Value investors are good at spotting "madness of crowds" trends and taking advantage of them
IMO it's a shame he's mixed these two together. b) is a valid statement, although as always it's trickier in execution than in theory. As far as a) goes, I guess someone writing an article punting their own business will want to catch a free ride on the topic of the moment. I know I do it frequently on all sorts of topics
a) Climate change impact claims are overdone
b) Value investors are good at spotting "madness of crowds" trends and taking advantage of them
IMO it's a shame he's mixed these two together. b) is a valid statement, although as always it's trickier in execution than in theory. As far as a) goes, I guess someone writing an article punting their own business will want to catch a free ride on the topic of the moment. I know I do it frequently on all sorts of topics
For an article about value investing, it's very short on value.
Climate change scepticism is only helpful to value investors if the perceived climate change risk is actually priced in and thus investments are undervalued if you consider the climate change risk overstated. The article doesn't attempt to perform this analysis at all. It just has lots of quotes about value investing and climate change scepticism.
Whereas much of the concern on the climate change side is that the perceived risks are not being priced in: that businesses are still being priced based on assets that may become stranded and future cashflows that won't be realised with the consequent impact on future investment portfolios.
The article also narrowly focuses on climate change scepticism. It doesn't take into account that investments might still be impacted by technological and societal changes arising from concerns about climate change. For example, the investment into renewable energy has scaled up production and brought down prices to make it the cheapest form of energy regardless of climate concerns. Just because the climate doesn't change as much as feared doesn't mean we'll continue burning coal. A climate change sceptical investor risks missing these trends in their focus on temperature records.
Climate change scepticism is only helpful to value investors if the perceived climate change risk is actually priced in and thus investments are undervalued if you consider the climate change risk overstated. The article doesn't attempt to perform this analysis at all. It just has lots of quotes about value investing and climate change scepticism.
Whereas much of the concern on the climate change side is that the perceived risks are not being priced in: that businesses are still being priced based on assets that may become stranded and future cashflows that won't be realised with the consequent impact on future investment portfolios.
The article also narrowly focuses on climate change scepticism. It doesn't take into account that investments might still be impacted by technological and societal changes arising from concerns about climate change. For example, the investment into renewable energy has scaled up production and brought down prices to make it the cheapest form of energy regardless of climate concerns. Just because the climate doesn't change as much as feared doesn't mean we'll continue burning coal. A climate change sceptical investor risks missing these trends in their focus on temperature records.
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