What You Need to Know About Climate Change – AARP
Risk: Chaotic farming conditions
Impact: More expensive groceries
Think you spend a lot at the supermarket? Consider that last summer, at least a third of Iowa’s corn, soy and other crops were wiped out by powerful derechos, which caused devastating wind damage and torrential rains in the Midwest. Extreme weather also hurt the supply of a favorite beverage: Last year’s California wine grape crop decreased by 14 percent, largely because of wildfires.
Overall, the cost of food in 2020 increased by more than double the rate of the year before, the Consumer Price Index shows. Of course, the pandemic caused some production and distribution disruptions, but experts note that the climate contributed as well and will keep prices higher. Even more vulnerable are specialty crops such as coffee, cacao, tea, honey and vanilla beans. Says Amanda Little, author of The Fate of Food, “We will likely see more shortages and cost increases for the most delicious foods.”
Climate change poses an even greater risk in other parts of the world: Some populations in the Middle East and eastern Africa face famine.
Risk: Climate mitigation
Impact: More “green” investment
Within any crisis, opportunity and hope arise. Companies are investing in green technologies, and their successes could boost your retirement or investment funds. “Green investing” is red hot, with investors snapping up stocks, bonds and funds that focus on environmental sustainability.
In recent years, the number of investment opportunities in the ESG category (environmental, social and governance) has skyrocketed, with close to 400 ESG open-end funds and exchange-traded funds, according to fund tracker Morningstar. Some are investing in such assets as green bonds, wind power stocks and clean energy funds.
The additional choices give retirees and those approaching retirement options for diversification, says Mitchell Kraus, a financial planner and chartered socially responsible investing consultant in Santa Monica, California.
“Most ESG investments either outperform or perform similarly to conventional investing,” says Tensie Whelan, founding director of New York University’s Stern Center for Sustainable Business, citing a meta-analysis of more than 1,000 research papers the center conducted with Rockefeller Asset Management.
Yet just like any type of investing, risks remain. Investors could lose money, Whelan warns. And since there’s no universal, agreed-upon standard as to what qualifies as an ESG, there’s “wiggle room” for interpretation, she says.