By Jeff Reeves, MarketWatch
Global warming is real.
The debate we should be having, then, isn’t whether climate change deniers should be given equal time, but what we should be doing about the scientifically proven trend of global warming.
The future of energy
Low fuel prices and new climate policies are rapidly transforming the American energy sector, while escalating wars in the Middle East and a nuclear deal with Iran are clouding the global oil picture. Amy Jaffe of University of California, Davis joins Lunch Break with Tanya Rivero. Photo: Getty
In many ways this is a harder problem to tackle than proving global warming exists. A fact is a fact, and science is science, but politics and environmental policies are slippery.
Nobody knows for sure how to strike a balance among businesses, consumers, and the environment. But what is increasingly clear is that the earth’s warming will dramatically impact the global economy. If you’re a long-term investor looking to position your portfolio for the next decade or two, global warming is one durable trend you should take into account.
Here are three leading investing ideas that can protect your portfolio from the impact of global warming, as well as position you for profits as certain industries benefit from changes in the global business climate:
Water scarcity is becoming a long-term trend. While the impact of California’s drought has been widespread and well-publicized, a recent World Economic Forum report highlights water as a key global challenge for economic security. “Globally, water demand is expected to exceed supply by over 40% by 2030,” the WEF estimates.
Naturally, this growth in demand and scarcity in supply means companies providing clean water are going to be in a favorable position. And given that most water utilities are legalized geographic monopolies like their electric utility cousins, it’s easy to see why these stocks make sense as long-term investments.
The biggest water stocks by market capitalization include American Water Works /zigman2/quotes/205092314/composite AWK +0.22% , Aqua America and American States Water /zigman2/quotes/200784308/composite AWR +0.78% . All have market caps of $1.5 billion or more and pay dividends that are 2.2% or better.
If you prefer to play the trend broadly, there are several exchange-traded-fund options, but my favorites are the Guggenheim S&P Global Water Index ETF /zigman2/quotes/202053228/composite CGW +1.51% and the First Trust ISE Water Index Fund /zigman2/quotes/204195960/composite FIW +1.35% . Both carry pretty reasonably priced expense ratios of 0.64% and 0.59%, respectively, and both are a bit more diversified than their rivals.
Also note that some of these funds’ holdings are not utilities, but rather manufacturers that make flow systems for industry. These ETFs are not as pure as a direct play on a water stock — which is why these funds are in the red year-to-date while all three previously mentioned water utilities are up between 5% and 9% so far in 2015.
Hand-in-hand with the increasing demand and scarcity of supply in water comes the increasing demand and scarcity in the supply of food around the world.