Earth Day 2024: Investing in a Warming Planet

When Earth Day rolls around each year, it reminds us that the planet and our environment are fragile, and time is short to address the problems of carbon emissions and global warming.

The world is way off track when it comes to meeting the goal of limiting global temperature rise to 1.5 degrees Celsius above preindustrial levels, which would avert the worst consequences of climate change. (For a good primer on climate goals and terminology, read this.)

More people are wrestling with the consequences of climate change. According to a Yale University global survey, more than 50% of people have experienced at least one extreme weather event or hazard, such as rising sea levels, flood, drought, long periods of unusually hot weather, wildfire, and severe weather. In many areas, survey respondents said they weren’t prepared for extreme weather.

Climate risk may imperil the global economy. Already, it’s making the path to sustainable 2% inflation and lower rates more difficult, according to Adam Bernstein, ESG/Impact Analyst for Gitterman Wealth Management. For example, reduced water levels in the Panama Canal caused by El Niño forced authorities to drastically cut ship crossings by over a third from a capacity before the drought, Bernstein says. In turn, that is forcing shippers to reroute vessels and highlights the vulnerabilities of global infrastructure to climate change.

At Morningstar, we believe the financial markets have a huge role to play in mitigating climate change—and that a world that’s grappling with global warming brings plenty of investment risks and opportunities. This Earth Day, we present an array of articles about global warming and investment, penned by Morningstar analysts and journalists.

To be sure, there’s plenty of uncertainty. There’s also hope. Investors are pushing companies to address climate risk, partly by wielding the power of the proxy. Regulators are forcing companies to clarify their emissions and climate risk. The state of California and the Securities & Exchange Commission have taken steps to force companies to report on emissions and climate impacts. The European Union already requires businesses, including many subsidiaries of US and other companies, to disclose the environmental impact of their businesses. You can read more here about what the SEC is doing and what Morningstar experts see in the regulatory landscape, including challenges to the SEC rule.

We offer lots of information about companies—how to make sense of a climate transition plan or which companies sport low environmental, social and governance risk, as well as those with the coveted wide or narrow Morningstar Economic Moat Rating. We also offer plenty of investment ideas, including water funds, climate-related funds, companies investing in climate adaptation, and cheap stocks of companies that are well-placed in the climate transition. And we share findings about why portfolios with low environmental, social, and governance risk are better placed to withstand a market crisis.

You’ll find some good links below. We’ll update this list throughout the Earth Month of April.