Climate Change: Can Your Stock Stand the Heat?


It's getting hot in here. According to a new report, 2012 was the warmest year ever recorded in the United States. And while it might seem like a little heat is the least of our worries, it's another sign that the world economy is constantly shifting.

The good news is, many corporations are already well on their way to preparing for and/or addressing the effects of climate change. From hurricane preparedness to supply sourcing to renewable energy, there are plenty of ways to heat up your portfolio and cool down the Earth. Here are three types of corporations preparing for climate change in three unique ways.

Purple is the new red
NOAA's National Climatic Data Center recently announced that 2012's average temperature for the contiguous U.S. was 55.3°F, a full degree above 1998's previous record. These newest numbers solidify a frightening upward trend, with 10 of the hottest years occurring within the past 15 years. Precipitation also clocked in at 2.5 inches below average, making 2012 the 15th driest year on record.

We're not alone, either. On the other side of the world, Australia's Bureau of Meteorology has been forced to add a new color to its forecast maps to account for unprecedented highs. Purple is the new red, where temperatures are expected to exceed 125°F in central Australia.

Source: Australia Bureau of Meteorology.

Here's what three types of companies are doing to keep green in their pockets and purple out of Australia.

Go green to make green
On the retail side, some consumer-facing companies have managed to make a financial case for climate change mitigation. Apple's minimalist packaging cuts costs, and its environmental impact reports far exceed industry norms . Organic-food purveyor Whole Foods Market composts, purchases wind energy credits, and practices responsible food sourcing as part of its "Green Mission" (link opens PDF file). Both companies enjoy industry-defying margins due to (a) cost-effective environmental strategies and (b) stronger brands that benefit from their environmental work.

But beware "greenwashing," a strategy that draws attention to a single environmental initiative to prevent critical eyes from falling on not-so-squeaky-clean activities. Even Apple and Whole Foods Market have their issues, and smart investors will investigate all company operations.

Storm reserves
From Katrina to Irene to Sandy, storms are bigger, badder, and more common than they were just 10 years ago. Utilities are battered each time a hurricane hits land, but some companies are prepared for the inevitable. Storm reserves are special savings accounts that remove the need for after-the-fact inflated costs and pleas to regulators to raise rates on customers. NextEra Energy, Northeast Utilities, and some of Duke Energy's Progress systems are already loading up on storm reserves. National Grid is in the process of switching over, but Consolidated Edison and Dominion still prefer to leave preparedness to Boy Scouts.

Blowing in the wind
Ninety percent of climate change preparedness for corporations comes from adaptation, but some companies are tackling rising temperatures head-on. General Electric's Ecomagination division has pushed the company to new heights, developing smart grid and wastewater recovery technology. As of 2012, Ecomagination has created more than 140 products and generated over $100 billion in sales.

GE just celebrated its 10th anniversary in the wind industry with its 20,000th wind turbine installation, and will continue to be a major manufacturer with Congress' recent extension of wind's production tax credit.

Where GE lets off, renewable energy utilities like NextEra Energy pick up. With almost 90 wind farms producing over 8,500 MW of electricity, NextEra is quickly changing the energy portfolio of the United States.

Something for everybody
Climate change will most directly affect insurance, real estate, energy, and agriculture sectors, but the impact of a warmer world will be felt throughout the entire economy. Many corporations are now including "climate change" in their official SEC 10-K annual report, outlining both the risks and opportunities that could result from erratic weather, increases in temperature, and regulations related to both.

For long-term investors, preparation today can be the key to profits tomorrow. Look through your own investments to see what they're doing to address climate change and adjust your portfolio accordingly.

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The article Climate Change: Can Your Stock Stand the Heat? originally appeared on

Justin Loiseau owns shares of Apple and General Electric Company. You can follow him on Twitter, @TMFJLo, and on Motley Fool CAPS, @TMFJLo.The Motley Fool recommends Apple, Dominion Resources, National Grid plc (ADR), and Whole Foods Market. The Motley Fool owns shares of Apple, General Electric Company, and Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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