A 401(k) for a Warming World

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"Global Warming: Who Loses—and Who Wins?"
Climate change in the next century (and beyond) could be enormously disruptive, spreading disease and sparking wars. It could also be a windfall for some people, businesses, and nations. A guide to how we all might get along in a warming world By Gregg Easterbrook

Climate change could have a broad impact on industrial sectors, and thus help or hurt your stock investments and retirement funds. What types of equity might you want to favor or avoid?

Big Pharma. Rising temperatures might extend the range of tropical diseases such as malaria and dengue fever. A 2005 World Health Organization report suggested that global warming may already cause 150,000 deaths annually, mainly by spreading illnesses common to hot nations. If diseases of the poor, low-latitude regions of the world began to reach developed countries, large amounts of capital would flow into the pharmaceuticals sector as the affluent began to demand protection—so it could prove profitable to be holding pharmaceutical stocks, although exactly which shares to buy would be influenced by laboratory discoveries that are impossible to predict. But consider the social upside: If malaria threatened the United States, this scourge might finally be cured.

Health-Care Service Providers. The contrarian view is that a warming world would, on balance, improve public health in high-latitude areas. Though hot regions in the developing world experience high rates of communicable diseases that scare us, people are still far more likely to die from the cold than from heat—overall death rates in winter are much higher than those in summer. Retirees living in Florida, for instance, have less reason to fear a hot summer than those living in Vermont have to fear a cold winter. If the cold areas of affluent nations became less cold, we would expect longevity to increase. That would be good for society, and also a reason to hold health-care (and pharmaceutical) stocks, since the elderly require far more in the way of hospital services and drugs. The assisted-care industry might also be in for a long bullish run.

Electricity Producers. The World Energy Council has estimated that global demand for electricity will triple by 2050. The lion’s share of the increased demand will be in developing nations, but the United States and the European Union nations will need more megawatts too—and that’s even assuming increases in energy efficiency. It is all but certain that some form of greenhouse-gas regulation will come to the United States; many Fortune 500 CEOs already assume this. The result will be an electricity sector that’s much more technology- and knowledge-sensitive than today’s. Lots of brainpower and skill will be required to increase electricity generation and reduce greenhouse-gas emissions at the same time. It’s reasonable to guess that power-production firms with a track record of innovation, such as Duke Energy (which pioneered many techniques to improve the efficiency of nuclear-power plants), will be the kind of energy-sector stocks to own. Don’t be surprised if nuclear energy, which is nearly greenhouse- gas-free, enjoys a boom in coming decades. General Electric, Westinghouse, and Siemens are some of the leading producers of new “inherently safe” power reactors designed so they can’t melt down even if all safety systems are turned off.

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Gregg Easterbrook is a contributing editor of The Atlantic. He is the author of The Leading Indicators and The King of Sports: Football’s Impact on America.

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