Market Commentary
This week, the New York Times published an article titled “How Wall Street Turned Its Back on Climate Change”. The piece chronicles the enthusiasm of the markets for climate-focused investments earlier in the decade and the loss of momentum and interest in these investments in subsequent years. Having invested through this cycle – and other notable boom and bust cycles for sustainable investing – we read the article with a mix of familiarity and skepticism.
We do not believe that climate change is a political issue. Data supports that our planet is warming at an accelerated rate. A changing climate presents real economic costs and challenges. The National Oceanic and Atmospheric Administration (NOAA) reported that between 1984-2024 the U.S. has experienced 403 weather and climate disasters with damages of $1 billion or more. On a 2024 CPI-adjusted basis, the average number of such events between 1980-2023 was nine. The average between 2020-2024 was 23. That is, over the last five years, the number of such events in any given year has more than doubled. In addition to damage to property, these events take a human toll. Per NOAA, the 28 billion-dollar, weather-related events in 2024 resulted in 568 deaths. We know that the rise in weather-related disasters is not unique to the U.S. and acknowledge that our country doesn’t experience the severity of drought and famine that has been visited on other regions across the globe.
Robust analysis factors in these risks, where material. Insurance companies have reduced their coverage in climate-sensitive coastal areas, creating “insurance deserts” where coverage is prohibitively expensive or unavailable. We expect that real estate or municipal bond investors in these markets will factor the higher risk into their analysis. Frankly, we would not invest with anyone who dismissed these risks. While Wall Street may not be advertising “ESG” analysis, it’s still being done by conscientious investors.
True, “ESG” has fallen out of favor with certain investors. Further, this type of analysis has gained the scrutiny of Attorneys General of a handful of states concerned with the practices of select financial institutions. We would argue that such periods of retrenchment are necessary and may offer an opportunity for investors and financial institutions who remain committed to understanding the risks and opportunities associated with climate change.
Tide Cycle Resources (Tide Cycle) is an investment advisor registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. A copy of Tide Cycle’s Forms ADV Part 2 and Form CRS are available without charge upon request. The opinions expressed are those of Tide Cycle. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Forward-looking statements cannot be guaranteed. Nothing contained in this document may be relied upon as a guarantee, promise, assurance, or representation as to the future. This should not be taken as specific investment advice. We recommend consulting an investment/tax professional before making financial decisions based on any information provided.
Not all posts are archived here. Please reach out if there are other topics that interest you.