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Oct. 8, 2018, 9:31 a.m. EDT

5 ways for your stock-market investments to profit from climate change

There’s more than just electric vehicles and solar power

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By Jeff Reeves, MarketWatch


MarketWatch photo illustration/Getty Images

Editor’s note: This article was first published on Sept. 24. It has been updated to include news of the UN report and the Nobel prize for economics.

There’s been a lot of focus in recent weeks on the impact of Hurricane Florence, from the initial drama on the Carolina coasts to sustained rainfall that has swamped communities that are 100 miles or more inland. And a United Nations-led scientific panel on Monday warned of the need for reforms far beyond anything governments are currently either doing or planning to do if the world is to avoid catastrophic climate change.

Read: U.S. pair win Nobel Economics Prize for work on climate and economy

But amid the commentary about how this will affect the S&P 500 /zigman2/quotes/210599714/realtime SPX -0.16%  and specific sectors, it’s worth examining discussing the broader trend of extreme weather brought on by climate change and considering which stocks and investment themes are best positioned to profit from this.

Here are five ways to do that:

Electric vehicles

One of the largest sources of greenhouse gas emissions is the internal combustion engine.

Though the Trump administration has tried to roll back fuel efficiency standards, it is facing a tough fight from California, which is looking to cut automobile pollution. Moreover, electric vehicles are increasingly becoming the norm elsewhere, such as in Norway, where more than half of new car sales are hybrid or full electric vehicles . Even China has taken steps in this direction, halting production of some 500 of its dirtiest car models earlier this year.

The trend away from traditional engines is clear, though it’s harder to discern who will win the electric vehicle race. Tesla Inc. /zigman2/quotes/203558040/composite TSLA +5.66%  certainly has first-mover potential, but recent troubles including a possible criminal probe make it difficult for some investors to have confidence in the dynamic company or its firebrand CEO, Elon Musk. In fact, as I wrote recently, legacy auto maker General Motors /zigman2/quotes/205226835/composite GM +8.95% is holding its own with its Bolt and Volt EVs, despite the buzz factor behind Tesla.

Read: Tesla is ‘headed to the graveyard,’ warns iconic member of Detroit’s old guard

If you want to pick a single stock, you can bet on the field via a fund like the Global X Autonomous & Electric Vehicles ETF /zigman2/quotes/208908060/composite DRIV +1.45% or the KraneShares Electric Vehicles & Future Mobility ETF /zigman2/quotes/207579419/composite KARS +1.30% . Both are very young funds with only modest assets under management, but contain a comprehensive list of stocks that represent the future of automobiles.

Specialty building stocks

In the age of climate change and extreme weather, what goes into a typical home will change. Just consider the LEED standards developed by the U.S. Green Building Council that are now commonly cited in new construction, or increasing calls for residential building codes to reflect a warming climate and extreme weather events.

A play on this trend is Johnson Controls /zigman2/quotes/203776087/composite JCI +3.14% . Its Building Technologies & Solutions segment, which includes HVAC systems sold under the York and Hitachi name as well as energy-management consulting, cleared $22.8 billion in sales in fiscal 2017 out of about $30.2 billion in total revenue. Similarly, Ingersoll-Rand /zigman2/quotes/202048975/composite IR -2.40%  relies heavily on sales of its Trane HVAC products; they contributed $11.2 billion out of $14.2 billion in total revenue for fiscal 2017 .

Or look at Owens Corning /zigman2/quotes/202113551/composite OC +0.26% , a leader in roofing and insulation products (think its Pink Panther branding). The 2016 acquisition of roof underlayment manufacturer InterWrap further strengthened its already dominant position in this building materials market.

/zigman2/quotes/210599714/realtime
US : S&P US
2,659.41
-4.27 -0.16%
Volume: 4.22B
April 7, 2020 5:09p
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/zigman2/quotes/203558040/composite
US : U.S.: Nasdaq
$ 545.45
+29.21 +5.66%
Volume: 17.92M
April 7, 2020 4:00p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$100.58 billion
Rev. per Employee
$439,627
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/zigman2/quotes/205226835/composite
US : U.S.: NYSE
$ 21.30
+1.75 +8.95%
Volume: 30.41M
April 7, 2020 6:30p
P/E Ratio
4.66
Dividend Yield
7.14%
Market Cap
$30.44 billion
Rev. per Employee
$849,994
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/zigman2/quotes/208908060/composite
US : U.S.: Nasdaq
$ 11.58
+0.17 +1.45%
Volume: 15,746
April 7, 2020 3:49p
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/zigman2/quotes/207579419/composite
US : U.S.: NYSE Arca
$ 19.52
+0.25 +1.30%
Volume: 3,833
April 7, 2020 8:00p
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/zigman2/quotes/203776087/composite
US : U.S.: NYSE
$ 28.27
+0.86 +3.14%
Volume: 5.96M
April 7, 2020 6:30p
P/E Ratio
72.58
Dividend Yield
3.68%
Market Cap
$21.59 billion
Rev. per Employee
$241,221
loading...
/zigman2/quotes/202048975/composite
US : U.S.: NYSE
$ 24.82
-0.61 -2.40%
Volume: 4.25M
April 7, 2020 6:30p
P/E Ratio
32.55
Dividend Yield
N/A
Market Cap
$10.31 billion
Rev. per Employee
$401,463
loading...
/zigman2/quotes/202113551/composite
US : U.S.: NYSE
$ 38.40
+0.10 +0.26%
Volume: 1.56M
April 7, 2020 6:30p
P/E Ratio
10.42
Dividend Yield
2.50%
Market Cap
$4.16 billion
Rev. per Employee
$352,850
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