Wall Street Worries About Global Warming

Too bad my blog isn't more influential. I've been ahead of the curve on
this 'global warming is bad for business' thing. It'll cost a lot more
to deal with the consequences than the cause, it'll cut into the bottom
line in a lot of industries, and things like crop failure and decreased
fishing will play as much hell with markets as it will with people's
lives.

Now, it looks like Wall Street's catching up to me. Two
points I've made are beginning to gain ground among the captains of
industry and the investor class; global warming's going to be real expensive to ignore (Global Warming is About Money, OK?)
and there's a real risk that the industries most responsible for
climate change will have it come back and bite them in the ass later (Will Big Oil Suffer the Same Fate as Big Tobacco?).

Reuters Alertnet:

CHICAGO,
Dec 13 (Reuters) - The topic of the conference was climate change and
the rhetoric was sobering, haunted by scientific projections of a
roasted world for our children and a looming environmental disaster of
Biblical proportions.

But this was no talk shop of environmental
activists. It was a meeting of Wall Street investors, insurance
executives, state treasurers and pension fund managers, who between
them manage about $3.7 trillion in assets.

"The insurance
industry has historically taken on social issues. I know of no social
issue that is bigger than this one," said Tim Wagner, director of
insurance for the state of Nebraska.

The consensus of Wagner and
others addressing the conference of the Investor Network on Climate
Risk (INCR) was that institutional investors are still too near-sighted
to factor climate change into their investment decisions.

While
there will be costs to the U.S. economy from climate change, the
problem for Wall Street is that those costs are unknown and in the
future. Many drew a parallel to the asbestos and tobacco industries,
which were hit by lawsuits after the fact.

"The value
proposition is one the Street isn't really recognizing," said William
Page, a portfolio manager at State Street Global Advisors.

Let me tell you, it's hard being a unknown visionary...

The
vice president of global investment research at Goldman, Sachs &
Co., Michael Moran, makes a 12-step recovery analogy; "The first step
to recovery is acknowledging you have a problem." A point I've made
more than once is that the short term thinking of investors is
unsuitable to dealing with long term problems. It's not costing them
now and it won't cost them next quarter, so what's the problem? Wall
Street has always had a 'we'll cross that bridge when we come to it'
mentality.

But this isn't true of the insurance industry. They
have to take a longer view of risk and they have examples of the costs
of climate change. Alertnet again:

For insurance
companies, climate risks are already center stage following Hurricane
Katrina, which caused about $125 billion in damage in 2005, with $45
billion covered by private insurers.

Nebraska's Wagner estimated
that Hurricane Andrew, which damaged or destroyed 125,000 homes from
Florida to Louisiana in 1992, would cause $150 billion in damage if it
hit Miami today -- one-third of the U.S. property and casualty
insurance industry's capital base of about $450 billion.

"Insurance
availability will be an issue. Insurance affordability will be an
issue," said Wagner, who heads the National Association of Insurance
Commissioners' task force on climate change.

Some $2 trillion in real estate was at risk from future storms in coastal communities of Florida alone, he said.

"The
increasing scientific consensus is that this represents a trend beyond
natural variability and a likely increase for the future," said Gary
Guzy of Marsh USA, a unit of insurance broker Marsh & McLennan Cos.
<MMC.N>.

Other industries see future risk as
well. While interests like agriculture and insurance come immediately
to mind, less obvious industries see future risks.

News.com.au:

The
world's biggest mining companies, including BHP Billiton and Rio Tinto,
are among the six biggest listed Australian companies at most risk from
global warming.

By contrast, those firms with the most to gain
from climate change include Investa Property, Origin Energy and metals
recycler Sims Group.

That's the conclusion of Citigroup
researchers, who released a report yesterday examining the risks and
opportunities global warming poses for the ASX 100.

The
problem for the mining industries will be the increased difficulties
posed by higher water tables and equipment exposed to the elements. If
mining will be affected by global warming, what other industries will
be and how many of them are preparing for it?

The first wave of
climate change activists were environmentalists and lefties. The next
wave will be guys in blue suits and red ties in corporate board rooms.