.
Early in my investing career, a senior colleague said to me: “Stocks don't care what you think about stocks.'' In other words, my opinion about a stock has nothing to do with how it moves. This was an invaluable insight because too often individuals think that their opinions influence real-world outcomes and lead to serious mistakes.1
The same goes for climate change. No matter what individuals think about it, the fact remains that we can observe in real time that climate change has real-world effects.
Let's start with the impact of climate change on short-term weather. Scientists are debating whether ocean warming and other phenomena are increasing the number and frequency of hurricanes, tornadoes, fires, and other natural disasters. We may or may not be able to elucidate a scientific model that proves the association with absolute certainty.
The market doesn't care what you think about climate change
But the market doesn't care if we can build the model. What we can observe is that coastal areas in Florida are experiencing a construction boom, hurricanes are causing hundreds of billions of dollars in damage, and homeowners insurance is tough. It is difficult to obtain and much more expensive than in other parts of the country.
Homeowners in Florida face serious obstacles when it comes to homeowners insurance. Many insurance companies have reduced their presence in Florida by not renewing or restricting new business writing.
Additionally, 16 companies voluntarily withdrew from the state, including AAA, Bankers Insurance, Centauri Insurance, and Lexington Insurance. Since 2017, 16 more insurance companies have gone bankrupt. Still, other companies like Liberty Mutual are not responding to requests for quotes in Florida zip codes, and Farmers Group has stopped writing new policies across the state.
These market fluctuations have resulted in homeowners experiencing rising costs and struggling to find the coverage they need.
Insurify's proprietary data reveals that Florida homeowners already pay an average of $11,759 in annual premiums. This is the highest of any state, and rates are likely to rise further next year. ”2
The insurance market doesn't care what you think about climate change
The insurance market doesn't care whether anyone thinks climate change is real, whether Florida's home insurance market is flawed, or whether the plan to build on a barrier island was a mistake. All we know is that hurricanes are becoming more frequent and more powerful, and the losses they incur require much higher premiums. Or they may not offer a price at all.
Energy markets don't care whether anyone really believes that wind turbines kill birds or whales, cause cancer, or other unconventional ideas. All we know is that Texas, a major oil-producing state, has strong winds and wind turbines are very profitable.
Texas State Auditor of Public Accounts3 Texas has been the leader in U.S. wind energy production for 17 years, accounting for more than a quarter of all U.S. wind energy, producing more than 40 MW and employing 25,000 jobs with annual incomes of more than $100,000. Pointed out. Approximately 28% of all electricity in Texas comes from wind, and its marginal costs are often among the lowest in the state.
Whether people prefer internal combustion engines to electric vehicles (EVs) has nothing to do with climate change. What we observe is that EVs are now about 9% of the car market (up from 5% in 2022), and EVs and hybrids together are about 30% of the car market .4
As unit prices fall, batteries become cheaper, and charging infrastructure improves, the proportion of EVs will increase. The market doesn't care if anyone opposes the rise of EVs or that the trend may be slightly influenced by incentives. Opposition to treating horseless carriages as devil's carriages[4] It didn't work. Like early EVs, the first cars were curiosities owned by wealthy eccentrics. It took a while for horse-drawn carriages to become popular, but the trend was irreversible as they were cheaper, better quality and faster than horse-drawn carriages.
What is the lesson from all this? The market, the real world, and the economy don't care whether you believe in climate change or not. Climate change has direct effects, many of which are not yet observable, but the real world is already adapting and changing as a result of the direct effects of climate change.
Climate change activists will no longer have to worry about people who don't believe in climate change. They can stop worrying because climate change doesn't care what anyone thinks.
You may also like: Navigate benchmarks, incentives, and time horizons for net-zero investing
