Thoughts from Our Domestic Equity Team
The National Climate Assessment and Development Advisory Committee (NCADAC) recently published a draft climate assessment report, engaging over 240 authors in its creation. Their conclusion is very similar to what we have been thinking about in our “Climate Shift” theme. The report talks about how climate change is already affecting the American people and how certain types of weather events have increased in both frequency and intensity.
Understanding how the climate is changing requires a consideration of fluctuations in the average climate as well as changes to “extremes”, such as storms, droughts and flooding. The impacts that are expected to have the greatest effect are those involving shifts in the frequency, intensity, duration and timing of extremes. These types of changes are often more difficult to study than changes in the average climate, due to a smaller data sample. That being said, most environmental research, including NCADAC’s, concludes that extreme climate events are increasing.
At present, our portfolio is focused on the adverse impacts of climate change on crops. The agricultural sector is expected to see increasing disruption from extreme heat, droughts, and heavy downpours. U.S. food security and farm incomes will also depend on how agricultural systems adapt to climate changes in other regions of the world. In addition, both in the near- and long-term, we anticipate that extreme weather will affect commodity prices. Based on our expectations, we will continue to calibrate our portfolio to take advantage of these broad changes.
Submitted by: Nainesh Shah, CFA – Senior Securities Analyst and Portfolio Specialist
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