Turning lemons into really pricy lemonade. Bloomberg on the investment companies banking on massive windfalls as the planet heats:
Investing in climate change used to mean putting money into efforts to stop global warming. Now some investors are taking another approach. Working under the assumption that climate change is inevitable, they’re investing in businesses that will profit as the planet gets hotter.
Derivatives that help companies hedge against abnormal weather and natural catastrophes are drawing increased interest from big players. In January, KKR bought a 25 percent stake in Nephila Capital, an $8 billion Bermuda hedge fund that trades in weather derivatives.
Drought is helping spur business at Water Asset Management. The New York hedge fund, which has about $400 million under management, buys water rights and makes private equity and stock market investments in water treatment companies.
Ole Christiansen is also investing to take advantage of rising temperatures. “Last summer we were exploring in south Greenland, mainly for gold,” says the chief executive officer of NunaMinerals (NUNA), a local mining company. “It has previously been covered by a glacier, but most of that glacier has disappeared.”
Piet Dircke, who oversees water management at Arcadis, says his phone was ringing nonstop in the days after Sandy. “The climate is changing. Sea level is rising. That’s quite obvious,” says Dircke. “It’s almost a natural growth market.”