View From a Height
Commentary from the Mile High City
Monday, February 17, 2003
CNN quotes a Reuters report about the financial effect of global climate change on businesses. Sort of. Like most global warming stories, it's really about politics. And what isn't about politics is about bad science, and bad statistics.

The report claims that agriculture and tourism are vulnerable to increasingly violent weather, and that weather-related insurance claims are doubling every 10 years. Countries are preparing to implement new regulations. But businesses can, by changing their practices, make sure that we don't all drown, or fry, or freeze. Put together, this looks pretty imposing. Investors should be worried. But it pulls apart easily.

First of all, legislation is not, strictly speaking, a matter of global warming. It's a matter of policy, which may or may not have anything to do with reality. In fact, the science doesn't support any sort of radical legislation, and the costs here are almost completely divorced from the reality of climate change.

But even leaving aside the notion that our activities here have something to do with climate change, there are enough logical disconnects to power the average left-wing op-ed, or freshman term paper. The one hard statistic, not projected into the future, is about the doubling of weather-related claims. How long have they followed the trend? How much is a result of stricter building codes, economic development, or the movement into previously uninhabited areas? They either don't know, or they're not saying.

It's been notes elsewhere that "increasingly violent weather" may also be a part of a natural cycle, having nothing to do with climate change, and that agriculture stands to benefit, if it adapts to longer growing seasons. That last point contains a more subtle objection to the Reuters article, and the mindset behind it, poised to produce bad laws. The successful businesses, the ones that investors should be looking for, are not those that adapt by being more "green." As an investor, I look for a business that can adapt to these changes. So I'd look for an agricultural company that can grow warmer-weather crops, or one that's buying up large swaths of Alberta. I would look for a tourism company that's figured out how to market mountain resorts with a shorter ski season, and so forth. What companies use the by-products of these crops?

A successful business isn't necessarily one that adapts to the legislative climate alone.

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