So many have been asking me this season about climate change. People worry at the increase of natural disasters. They also worry for the future of their children and grandchildren. Investments are part of this picture too: we need to guard against losses, and avoid investing in anything that wreaks havoc on the world environment. Politics come in because some regions are actively fanning the flames that burn our planet. We also see “business” sometimes stemming the tide and reducing the calamity.
As we open here, I share with you that Virginia and I will away exploring the Danube Sept 12-26. Unlike 16-year-old Greta Thunberg who recently sailed through Atlantic storms to address a climate conference in New York, Virginia and I will travel with Air Canada and Lufthansa, regretting that flight is one of the largest human contributors to global warming. While away I’ll have environmentally friendly email access most days but please also reach Ben (x.222) or Christine (x.225) in our office with anything you need.
POSITIVE FOR THE ENVIRONMENT.
There are many positive forces at work in the discussion of climate change. One is that younger generations favour more energy efficient choices where possible. Another is the speedy take-up of plant-based proteins. I enjoyed my first Beyond Meat avocado burger before realizing how fast this movement is accelerating. Even with meats, people are reducing beef and pork in favour of fish and chicken for their lower environmental hazard. Maple Leaf has announced it is expanding speedily into meatless protein.
Coal remains among the biggest climate scandals. China now consumes half the world’s coal production. India uses 25% and is still increasing. This industry in India rides almost entirely on government loans and subsidies because publicly owned banks are cautious of the global revolt against dirty fuels. In Europe we have higher standards of ESG (environment, sustainability, governance) as countries and companies favour cleaner and renewable energies.
Current catastrophes will fuel positive actions. This week, Dorian brought a 21-foot storm surge over the Bahamas and it’s set to hit or at least brush past Florida and the eastern seaboard. More storms are coming; greater storms are coming. I recall touring the historic Galveston which was rebuilt after their most devastating flood in 1900. The seaward face of Galveston was raised to 17 feet, with land sloping downward to drain safely into the bay northward. When a bigger surge arrives to wash away homes and infrastructure, people and politics will galvanize for change.
The mighty Amazon holds our planet’s lungs as 7% of the world’s rain forests. For 35 years we’ve sought to preserve the rain forest but Brazil, Congo, New Guinea and other regions show tragic losses. Why? For palm oil, coffee, beef, biofuels, and various other food exports. We are the consumers, and when we decide to change, business changes. Even before consumers change, business leaders start fearing what’s on the horizon with public opinion, shareholder revolts, and international courts. A 1998 example is Talisman Energy in Sudan, showing how a company can self-destruct by miscalculating its responsibilities. That was minor compared to what the future holds. So business now seeks to turn out new products. Surprise, soon you’ll have environmentally-friendly synthetic coffee with your meatless burger and non-plastic straw. See https://www.newfoodmagazine.com/article/92868/synthetic-coffee-could-reduce-deforestation-and-protect-resources/
Necessity is the mother of invention. And humanity has more resources than ever. So the urgency of climate change will itself fuel innovations to help preserve our earthly home. This is a serious discussion. It is truly inter-generational. It can unite workers and thinkers, retirees and homemakers, rich countries and poorer, for we all need to breathe. The worst-case scenario isn’t known, but in our grandchildren’s lifetimes, even 2-degrees in temperature and a 4-foot permanent rise in ocean waters is beyond our imagining. It changes the map, worldwide.
We will innovate. Business expands the innovation. Investors will be rewarded while saving the planet.
RISKS AND RETURNS IN A DEMOCRACY.
It’s not just about democracy because governments take various shapes and democracy follows local patterns. China is an autocracy, yet while they consume the most coal they’re quickly increasing the portion of renewable energy. Brazil is normally considered a democracy but the Bolsonaro regime has allowed such widespread burning that the street lights are on at 3pm seeking to penetrate the deathly smog (like winters in London England until 1952). Developing countries feel justified in boosting their economies on dirty fuel, but citizens choking on the particulate will vote to breathe.
Can governments, autocratic or democratic, act quickly enough to preserve the air we breathe, the water we drink, the land on which we grow our foods? There is a tipping point beyond which the answer turns negative. For instance it’s unknown how soon lost rain forests in the Amazon will be unrecoverable. When so much land is farmed it never again becomes rain forest. What is unique about the Amazon is that the rain forest creates its own clouds: not dependent on ocean or lakes, the dense forest itself is the lake from which the Amazon derives its moisture to create new rain. If it goes, little will be left.
Democracy is in a tough spot today. People avoid news of the US, UK, elsewhere, and with our own national election in October polls show a historic loss of confidence in political process. Many don’t believe there is any solution in politics, any impact to be made in voting. Short of attending in person to hand back one’s ballot (a most forceful way of recording dissent) we seem to be voting for whichever group might do the least harm. Churchill’s comment, “democracy is the worst form of government except for all those other forms that have been tried…” should encourage us to meet and speak with our candidates directly … and get out to vote. All of us.
One hopes people will vote and also declare their beliefs and concerns to elected leaders. We hope consumers will conscientiously make millions of choices about the products and services we buy and consume, so businesses everywhere will aim to earn profits for a healthier planet.
CONNECTING TO OUR WEALTH.
I’m a conscientious optimist. There are fears and dark edges everywhere but there have been fears before and we survived. This is no permission to ignore humanity’s harmful heritage today. Together as voters, investors, businesses, neighbours and friends, we can encourage a better world in the best ways we know how. Above are some brief notes and thoughts and I hope you will reply to me and add further along these themes. I treasure the opportunity to hear from you.
Taking a moment on this summer’s investments, not a lot has changed. Canada’s productivity currently leads the G7 nations. Corporate earnings have been strong. Employment numbers are easing but not falling. Interest rates are the opposite of what seemed popular a year ago, having fallen by half. $17 Trillion of bonds pay less than zero, especially in Europe, and such negative rates are a modest possibility even in Canada and U.S. Brexit seems delayed again. Hong Kong seems a bit safer as Beijing avoids an echo of Tiananmen. The world trudges onward. And among the unique risks in today’s world we aim to invest where companies can grow and increase profits, reducing debt, lowering risks, while increasing yields and sustaining our investors’ income and future wellbeing.
PS: Do share this letter if it will interest and encourage friends!
Yours in Financial Security for LIFE!
Brian Weatherdon, MA, CFP, CLU, CPCA. 905-637-3500
627 Guelph Line, Burlington, Ont. L7R 3M7. 1-877-937-3500
Author: A Lifetime Of Wealth — And How Not To Lose It (2013). Protecting Life, Loved Ones, and Future Dreams (2013). Your Business, Your Retirement: Halton Retirement Study (2015).
** This monthly letter touches on key strategies in Canadian and global investing and financial planning. This letter is not an offer to sell any kind of security, insurance, or program. Historical returns and risk measures are not a valid guide to future performance. Returns are from publicly available sources and research from a variety of firms including but not limited to GLC, RBC, CIBC, Mackenzie, Franklin Templeton. Opinions reflected in this letter belong solely to the author and no other body is responsible for the content expressed here. We value opportunity to consult alongside your legal and accounting firms to advance your financial security and unique goals. We are grateful always to receive your comments and questions.