Weathering the Storm

For What It's Worth -

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Hi there,

We’re feeling a wee bit nostalgic as we write our 100th edition of FWIW, metaphorically flipping back through all the issues that led us to this one. It’s interesting to see how many topics are just as relevant today as they were 100 weeks ago and how some issues have evolved. (You, too, can scroll through our archive and perhaps find something you missed.)  A few pieces in particular from the news this week stand out:

  • 💳Debt ceiling debate: If you’re confused about why the debt ceiling exists, our explainer from 2021 is still pertinent today as Congress votes on whether to raise the limit for the second time in less than two years. Speaking of which, that debt ceiling bill is now on its way to the Senate after passing the House last night.
  • 🌱Greenwashing: We first shared tips on how to spot greenwashing way back in newsletter #2, and it’s popped up again and again. Now, regulators are starting to crack down on the issue — the UK’s advertising regulator has taken more than 20 enforcement actions against greenwashing, from airline slogans to hydrogen car ads.
  • 🧑‍🍼Parent-friendly workplaces: When we launched FWIW in 2021, the “Great Resignation” was in full force as hordes of workers left their jobs for greener pastures. While some of the issues leading to that movement are still around today (i.e., childcare shortages), it’s encouraging to see that mothers’ labor force participation has finally returned to pre-pandemic levels, thanks in part to increased workplace flexibility.
  • ♻️Plastic pollution: It’s no secret that plastic pollution has been a major problem for years, with landfills overflowing with plastics of all types, from toothbrushes and toys to the clothes on our backs. There are high hopes that more solutions will be on the way soon, as the UN meets in Paris this week to create what could be a landmark treaty to end global plastic pollution.

One more thing hasn’t changed much in 100 weeks (unfortunately) — the trend toward more frequent and intense extreme weather events. We have some tips below on how to fortify your portfolio for our wild weather world, plus a new quiz to test your knowledge. Have a great rest of your week!

News you can use

  • The next big investment is trash, says the Wall Street Journal. That’s because the growth of the green economy is making it more profitable to turn trash into treasure, like using methane fumes from garbage dumps to produce energy and transform used plastic into new bottles and jugs. Waste Management and Republic Services have traded at record highs since the passage of the Inflation Reduction Act.
  • America’s top bosses got the smallest pay increase since 2015 last year. The median total compensation for S&P 500 CEOs was $14.8 million in 2022, an increase of 0.9% from 2021, according to the Equilar–Associated Press study. The good news is the CEO Pay Ratio, a popular measure of fairness, went down to 186:1 from 190:1 in 2021, as employees saw their median pay increase 1.3%. The study also uncovers the highest-paid CEOs and the state that’s home to the largest pay packages. (Hint: It’s not New York or California.)
  • What does it feel like to join the trillion-dollar-market-cap club? Ask execs at Nvidia, which briefly crossed that threshold as its stock reached a new high before giving up gains. The chipmaker reported gangbuster earnings last week, fueled largely by the boom in AI. Wall Street analysts are already speculating which will be the next stock to enjoy an AI boost, with Marvell Technology and Arista Networks among the picks, per CNBC. You can read more about investing in AI in the FWIW archive.

Asking for a friend….

We know there is a lot to think about these days, and it can sometimes be a bit overwhelming. To help with those nagging questions, and so you have useful resources at your fingertips, here are a few links to resources and past stories relevant in these turbulent times:

The centennial get in-quiz-itive

As you know by now, this is the 100th edition of FWIW. It is a big milestone, and to celebrate, we sharpened our pencils (ok, keyboards) to put together a new, no-judgment quiz around some of the key topics we’ve covered over the past 100 newsletters so you can see how much intel you’ve absorbed and if there are any areas you might want to check out again to guide your investing journey.

To keep the party going 🎈🎉, we will be planting a tree ​​🌳 for every person who takes the quiz, so you can do good while checking up on your financial knowledge.

And if you miss a few answers? No sweat. You will see links to relevant content, so you can catch up on any stories you missed.

Good luck!

Alert: extreme weather ahead

Does it feel like Mother Nature is lashing out at several parts of the world every time you turn on the news? Floods, heatwaves, droughts, ice storms, cyclones, wildfires — these are extreme weather events, and scientists say they’re getting more frequent and severe as the planet warms up. A UN report predicted that if current trends continue, the world will go from around 400 medium to large-scale natural disasters per year in 2015 to about 560 a year by 2030. These disasters have a high human cost and an enormous economic impact, destroying infrastructure, homes, and livelihoods.

It’s hard to think of these tragic events in terms of investing, but the fact remains that our world is changing rapidly, and climate change and extreme weather will define all aspects of its future, including business. This is in terms of both risks and opportunities. How can you prepare for this long-term trend with your portfolio and even potentially have a positive impact? There are a couple of approaches.

Recovery and mitigation stocks

Preparing for, detecting, getting through, and rebuilding after extreme weather events is costly and complicated, and you could buy stocks involved in the process. There are different categories to explore, and we’ve included some examples below. One way to broadly invest in this area is to consider an ETF like the Procure Disaster Recovery Strategy ETF. It tracks the VettaFi Natural Disaster Recovery and Mitigation Index, which includes US-listed and foreign companies.

Emergency power

One of the first problems that arise for people in affected areas is a lack of electricity. According to an AP analysis published last year, “the number of power outages tied to severe weather rose from about 50 annually nationwide in the early 2000s to more than 100 annually on average over the past five years.” It’s possible to invest in the manufacturers of backup power generators, power stations, and batteries, which homes and institutions turn to when the grid is damaged. Some publicly traded examples are Cummins, Generac Holdings, Caterpillar, EnerSys, Energizer Holdings, and NRG Energy, which owns Goal Zero.

Mitigation, recovery, and cleanup

When communities and cities are in trouble and paralyzed, a wide range of businesses kick into action to bring them back to normal and return critical services. For example, companies holding current contracts with the Federal Emergency Management Agency like engineering and construction firm Fluor Enterprises, home manufacturer Champion Homes (a subsidiary of Skyline Corporation), and wireless providers Verizon and AT&T. Some other companies that have been involved in disaster management planning and services are water solutions providers Xylem and Ecolab, chemical and hazardous material spill responder Clean Harbors, fire-fighting foam maker Perimeter Solutions, and technical consulting firms Tetra Tech and AECOM. While investing in insurance companies, it’s also worth checking whether they are taking the higher risk of natural disasters in certain areas seriously.

Home improvement and hardware

Some examples of stores that may be frequented by those looking to safeguard or repair their homes are Home Depot, Lowe’s, and Floor & Decor Holdings. Self-storage operators have also reported increases in revenue in the aftermath of natural disasters, and investors can consider real estate investment trusts (REITs) like Public Storage and Extra Space Storage.

Data analytics

Satellite imagery, location and mapping technology, sensors, camera-equipped drones, and social media are all helping scientists collect vast amounts of data about the weather and natural disasters, which can then be used to improve forecasts and preparation and response efforts. For example, Alphabet’s FloodHub uses AI to show flood forecasts to at-risk communities in 80 countries. California’s Spire Global was recently awarded a contract by the Canadian Space Agency to work on a wildfire monitoring satellite. Verisk Analytics collects data points to evaluate insurance risk. Parrot says one of the use cases of its ANAFI USA drone that can fly in rainy and windy conditions is search and rescue.

Reducing emissions and climate adaptation

Another way to invest for a future where extreme weather will be more common is backing companies that are transitioning us to a cleaner and greener system and ensuring a safer world for future generations. Some of the biggest funds in this category managing investor assets over $1 million each are the iShares Global Clean Energy ETF, Invesco Solar ETF, and First Trust NASDAQ Clean Edge Green Energy Index Fund. It’s also worth considering funds and companies that are contributing to climate change adaptation in different sectors, like the Invesco MSCI Green Building ETF and Global X AgTech & Food Innovation ETF. Another option to explore is green bonds.

More transparency on climate risks is on the way

Almost 60% of companies in the S&P 500 hold assets at high risk of physical impacts under a moderate climate change scenario, according to an S&P Global study. The greatest drivers of physical risk are said to be wildfires, water stress, heat waves, and hurricanes.

Investors still lack much clarity when it comes to individual companies and the physical climate risks they face, but this may change as some US market regulators have proposed new rules that would require companies to disclose these details along with transitioning climate risks (regulatory, technological, market, or reputational). Until then, we hope that this overview of some of the options to consider when investing in a time of increased extreme weather activity is helpful and brings another perspective to the way you look at your weather app and The Weather Channel.

Before you go -

Would you and your friends play a board game about climate change? The nearly 9,000 people who raised $450,000 for Daybreak say yes!

** FWIW team members own shares of Alphabet, AT&T, Caterpillar, NRG Energy, and Verizon

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