The Future of Cool

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Happy Thursday, and welcome to our new subscribers!

We’re now midway through July and the markets still haven’t gotten the message that it’s beach season. Wobbling stocks and falling bond yields have us thinking this should be the summer of the roller coaster instead of the hammock. And yesterday’s news that the Consumer Price Index (CPI) rose 9.1% in June didn’t do much to settle nerves (and we’re thinking the “Very Bad” headline that Bloomberg ran did not calm Wall Street’s Wednesday anxiety).

Our advice? Keep calm (and carry on). Historical data shows that trying to time sales or purchases based on short-term information is extremely difficult, and a long-term view has a way of working out (and reducing anxiety!).

So, while everyone else is reading the daily headlines and imagining the future of the financial world looking like the remnants of an exploded star they just learned about while looking at the initial images beamed back from the James Webb Telescope, do your own research and seek returns that meet your comfort level while also aligning with your values.

How do you do that? Everyone is on their own path, and each of us has different priorities when investing, but we recommend you start with the advice that was at the core of a 2021 (yet still largely relevant) MarketWatch piece from our very own FWIW founder Jean Case.

1. Start by defining what matters most to you. Many investors start with what is termed “screening” to ensure they both include (positive screening) and exclude (negative screening) certain types of investments, so that their full portfolio more closely aligns with their values.
2. Pick a trading platform or advisor where you can focus your efforts. A respected trading platform offering sustainable investing options, or a professional advisor, can help you build the confidence and security of knowing investing professionals are monitoring both the performance and risks of the investments you make.
3. Follow the data. It's vital to look for transparency in intention, measurement, and reporting in the areas you care about to determine if a company or fund is authentic in its impact claims and promises.

Then, check out some of our favorite FWIW resources:

• Largest ESG or Sustainable Funds
• How to Research ESG Stocks and Funds
• How to Practice Faith-Based Investing
• Investing in Women: A Guide To Gender Lens Investing

Whether you are looking for opportunities to buy during these turbulent times, or holding until the dust settles, keeping your eye on sectors and companies that are well-positioned for the future is always key to investing with a longer-term horizon in mind. In that spirit (and inspired by the record-high temps you may be seeing on your weather app), we dive into how to invest in green cooling solutions a bit farther down in this issue.

News you can use

• 54 companies in the S&P 500 index have revealed all their indirect emissions (Scope 3) to investors this year, triple the number in 2021, says Bloomberg Law. This comes as the SEC prepares to pass a rule to mandate climate change-related disclosures. About 4 in 5 frequent investors surveyed recently said it’s difficult to assess whether companies are actually operating in ways that are as environmentally friendly as they claim. Help is on its way.
• Birth control may get a lot more accessible if the FDA approves an application from French company HRA Pharma — which was recently acquired by Perrigo Company plc (PRGO). HRA is seeking approval to sell its birth control pill over-the-counter in the US, making it as easy to buy as cough syrup. With the recent rulings from the Supreme Court, we’ve seen a lot of interest from investors in “femtech,” and expect more startups in the reproductive health space to get attention from investors.
• The Alphabet 20-for-1 stock split lands in portfolios on Friday. The shareholder-approved split of Alphabet (GOOGL) — yes, we all still call it Google — is one of the most widely-held stocks in the world. The split will not change the overall value of the stocks that many hold, but will increase the total number of shares held by 20x. Read more about stock splits here.

Green cooling for a heating planet

We hope you’ve found some good popsicle and salad recipes, because it’s been a scorching couple of weeks here in the US, and in many other parts of the world. Heat waves, and the even more ominous-sounding heat domes, are breaking temperature records and putting power grids to the test.

Summers are getting hotter and longer than usual. While floods, hurricanes, tornadoes, and earthquakes sound scarier and inspire more disaster movies in Hollywood, it’s actually extreme heat that kills more Americans each year than any other severe weather event. Hot weather also affects crops, livestock, ecosystems like forests, and food storage. A grim reminder of this recently was the death of thousands of cattle in Kansas, where temperatures crossed 104 degrees.

The Cooling Conundrum

We need cooling for our homes, schools, office buildings, transportation, and “cold chains” that transport and store vaccines and perishable food — and demand is growing as the planet overheats, populations grow, and living standards rise in emerging markets.

There are an estimated 3.6 billion cooling appliances like refrigerators, freezers and air conditioners in use globally, and that number is growing by up to 10 devices every second. While 90% of US households already have an AC, the vast majority of people in hot countries like India, South Africa, and Brazil are yet to own one, and installations are expected to climb rapidly.

While this prosperity is good news for humanity, climate scientists point out we are trapped in a vicious cycle. Cooling systems contribute to global warming in the two ways mentioned below, which leads to greater cooling needs down the road:

• Dirty energy: Nearly 10% of the electricity consumed globally in 2016 was used for space cooling alone. This electricity is mostly generated from fossil fuels.
• Polluting refrigerants: Cooling systems use chemical compounds like hydrochlorofluorocarbons (HCFCs) and hydrofluorocarbons (HFCs), which are potent greenhouse gasses that leak into the atmosphere and accelerate global warming.

Altogether, cooling is said to account for over 7% of global greenhouse gas emissions, and it’s only going to climb higher if we fail to act.

Investing in the Solutions

Policies, technology, and financing are adapting to develop sustainable options. If you’re looking to invest in the future of cooling solutions, we’ve identified some of the sectors and companies involved to guide your own research:

Energy-efficient appliances and smart buildings

Many governments are looking to set higher energy efficiency standards for cooling devices; in the US, new minimum requirements go into effect January 2023. If you’re looking to invest in the makers of the most efficient products out there, you can start with the US government’s ENERGY STAR certified lists. Some of the public companies selling central air conditioning systems (HVACs) that are ranked at the top include Lennox International (LII), Ingersoll Rand (IR), Johnson Controls (JCI), and Carrier (CARR), which was one of Goldman Sachs’ energy efficiency stock picks recently. You can also consider component suppliers, like Emerson Electric (EMR), which has committed to a science-based, net-zero target across Scopes 1, 2, and 3. (More about what this means here.)

These days a growing number of buildings are being fitted with automation tech to make them more energy efficient, and intelligent heating, ventilation, and HVACs are set to gain demand. These are known as “smart buildings,” and in May, a Bank of America analyst identified Johnson Controls as a leader in the sector and called HVAC “a key driver of the global decarbonization market which includes replacement driven by higher efficiency technology.” And for those who are interested in prioritizing passive systems to reduce power needs, take a look at construction companies with energy efficiency claims, like Carlisle Companies (CSL) and Installed Building Products (IBP), or green building funds like The Global X Green Building ETF (GRNR) and The Invesco MSCI Green Building ETF (GBLD).

Next generation planet-friendly tech

As governments seek to curb the use, production, and leaks of hydrofluorocarbons, companies are aiming to replace it in appliances with natural refrigerants or hydrofluoroolefins (HFOs) that have low global warming potential and are non-ozone-depleting. Honeywell International (HON), The Chemours Company (CC), and The Linde Group (LIN) are some of the firms producing these safer refrigerants. Other new approaches that may lower cooling emissions are membrane-based ACs, solar-powered ACs, heat pumps, and the cooling-as-a-service business model.

Whatever cooling strategies align with your investing goals, we hope this primer helps you stay cool 😎!

Before you go -

Limewire, the 2000s music sharing platform, has relaunched as an NFT marketplace. We’re not sure how we feel about NFTs, but the new ad is pure nostalgia.

** FWIW team members own shares of Alphabet and spent more time than we should have looking at the latest images from the James Webb Telescope.