WHEB Commentary

The heatwave and climate change; how do we adapt? – July Monthly


Weather news in the era of climate change has become somewhat boring. It’s a relentless procession of new record high global temperatures. And as a result, a noisy accompaniment of other records. Heaviest rainfall, strongest winds, largest storms… the list goes on.

All this of course follows the predictions of climate scientists. And is attributable to human actions, in the form of greenhouse gases emissions. But between the repetition and the uneasy discomfort, it has become easier to switch off.

This summer’s northern hemisphere heatwave has tuned people in again. This is partly because it is so visible. The newspaper cliche is that you don’t run snow stories unless there’s snow in London. So when it’s over thirty degrees in London, the heatwave is in the news. Never mind that the effects of climate change have been very visible in the tropical zones for years. This heat wave has hit home because it’s happening in the developed world.

It’s also different because it is so devastating. The tragedy in Mati, in Greece, provides enduring images of the terrifying powers at work. But the statisticians will tell an equally horrifying tale of deaths from related causes all over the world.

So the heatwave and its causes have become impossible to ignore. The natural progression is to wonder why the response seems so inadequate.

In the Anglo-Saxon world, Brexit and protectionism absorb all available political energy. The rest of the world doesn’t need Anglo-Saxons to provide solutions. But it does need the USA to engage. And it needs strong multilateral institutions. At the moment it has neither.

Our industrial mirror reflects both the urgent issue and the gummed-up policy response.

The business world is great at responding to urgent issues. For a couple of years now there has been a clear narrative about climate adaption in hotter zones. That drumbeat is getting louder, and spreading from emerging to developed economies. We hear it most in our Water Management and Environmental Services themes. It’s also clear in our Resource Efficiency theme.

Any company which handles heat or water tells the same story. Scarcity and volatility are rising. This creates challenges for supply chains, and opportunities for the solution providers. In our portfolio, these include companies such as Stantec, Johnson Controls, and Xylem. The growth opportunities are only increasing.

Meanwhile, some of our themes are more closely related to stemming emissions. Sustainable Transport and Resource Efficiency, for instance. Most obviously, Cleaner Energy.

In all these themes, we’re past the point where technologies still need to be proven. We have the technical roadmaps in place. The growth is already there. But there is a rate at which these industries need to grow to really change the course of climate change. And on the whole, they’re not making it.

This gap should be bridged by governments. Not by providing subsidies – they’re not needed – but by regulating against the emitters. Sadly, progress has stalled and even reversed.

In June, the Trump Administration proposed an energy plan that would protect coal power plants from closure. Our stocks Siemens Gamesa and TPI Composites, in the wind turbine value chain, will still grow healthily. But it’s a stunning backward step.

The USA is even rumoured to be considering supporting incandescent lightbulbs again[1]. It’s unclear that that would turn anyone away from Acuity Brands’ LEDs, which are far better value. But the message is awful. Even in Europe, the powerful car lobby is being allowed to fudge emissions data. Our Sustainable Transport stocks such as Norma, Aptiv, and TE Connectivity have bright futures regardless. They can spare some percentage points in growth, even if it makes little sense.

But as we swelter away, the question remains: will we reach sustainability? And will it come soon enough?

[1] https://www.washingtonpost.com/news/powerpost/paloma/the-energy-202/2018/08/08/the-energy-202-trump-administration-preparing-to-do-away-with-obama-era-lightbulb-rules-document-says/5b69e49c1b326b0207955f99/?noredirect=on&utm_term=.22e59dc56ab7

 

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