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Saturday, December 3, 2016

Jan. 27 (Bloomberg) — Last week, the New York Times reported that venerable Dow Jones Industrial Average component Coca-Cola Co. was awakening to the impact of climate change on its business.

The increase in unpredictable weather, droughts, floods and other climate-related events was disrupting the company’s product supply. Some of their “essential ingredients” are now under threat. Global warming, according to the article, is being seen “as a force that contributes to lower gross domestic products, higher food and commodity costs, broken supply chains and increased financial risk.”

This debate is no longer about whether global warming is real (it is) or whether humans are the most likely cause (you are), but rather, some very interesting and different questions that might be more professionally relevant to business: How is this going to affect business? What are the investing consequences? Who will be the financial winners and losers of climate change?

Investors should be considering this as a fight over market share, not a scientific debate. That is the approach taken by McKenzie Funk in a new book, Windfall: The Booming Business of Global Warming. The impact is across many industries. It’s time to throw out your preconceptions of climate change as a fight between green hippies and Big Oil. This is far broader and more complex. And it goes far beyond energy, to include agriculture, insurance, transportation, construction, recreation, real estate, energy exploration, food production, health care minerals and even finance.

The culturally constructed ignorance known as “agnotology” has been driven primarily by the oil and coal industries. Funk argues that we are about to move beyond that faux debate to a more important battle between even larger interests. Consider:

  • Insurers stand to make larger payouts because of more severe weather and more frequent natural disasters. However, this will inevitably lead to appreciable higher insurance premiums and potentially rising profits.
  • The travel and hotel industry is facing specific challenges. Ski resorts that were in prime snow making areas may find themselves no longer ideally located; warm weather destinations boasting access to reefs for snorkeling and scuba diving have troubles as reefs die out.
  • Energy exploration and mining is about to get a huge boost as formerly inaccessible Arctic regions are soon to have huge untapped resources exposed. Shipping across formerly unnavigable seas could alter transportation costs and ship designs.
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