Now that chunks of the ice cap keep falling off, each bit probably raising global sea levels by a millimetre or so, nobody can afford to be dismissive of what campaigners went on about for all those years.

For investors in particular, climate change is a factor worth of weighty consideration in assembling a portfolio.

However, it seems that either no investor has even thought about it, or those who have found the idea ridiculous, questioning the connection between their portfolio of stocks and shares and greenhouse gasses.

Yet things are happening that should concern everyone with an investment portfolio. For a start, governments across the world have been busy passing laws that penalise companies emitting greenhouse gasses.

Other companies face direct effects from climate changes, from cement manufacturers to mining companies.

And when it comes to insurance, who is going to reimburse thousands of Dutch homeowners for their drowned houses, not to mention the inhabitants of the southern states of the USA, who are being afflicted by hurricanes like never before?

It is true that having a good grasp on global warming could offer benefits to savvy stock pickers.

Businesses well-poised to meet mandates for reducing carbon emissions, developers of alternate energy sources and even forward-looking insurers could conceivably profit from climate-change concern.

The clearest risk that climate change now poses to investors is in the European utilities sector. New laws have limited the amount of greenhouse gasses that companies can produce.

Utilities, for example, now have to cut back on burning greenhouse-gas-emitting fuels, such as coal and oil, or pay the price.

The regulations which came into effect in January 2005 have driven up wholesale energy prices in Europe and this has consequently resulted in a price rise for customers.

David Lee, Director of research at Aequos, the market-leading supplier of information to IFAs, said: “Retail investors are increasingly interested in understanding the environmental impacts of their investments and media coverage such as the BBC’s Climate Chaos season has reinforced this.”

How are industrial sectors affected?

Consider metals and mining companies. This sector of the economy is challenged by long-term climate risk because of its high energy use and its emissions.

For the same reason, rising costs will also affect sectors like car making, cement production and chemical companies.

Many uncertainties remain about the effect that climate change will have on companies if global warming continues along the lines that scientists have predicted it will.

Investors need to examine the action that companies take and the targets they set to assess if those companies are working against the long-term risk of climate change.

Assessing risks

Environmental group, Friends of the Earth, reported that in 2005, 47 per cent of 112 large publicly traded companies surveyed in the auto, manufacturing, oil and gas, insurance, utilities and petrochemicals sectors addressed climate change in securities filings last year.

According to the report, utilities had the best record, with 24 out of 25 disclosing climate risks in the previous year. Property and casualty insurers came in last with a 15 per cent disclosure rate.

But it has become apparent following recent natural disasters, that insurance groups are becoming much more vocal about climate-change-related risks.
Following Hurricane Katrina, figures showed a 15-fold increase in insured losses from catastrophic weather events in the past three decades. These losses have far outstripped premium increases, inflation and population growth over the same period.

While the catastrophes can’t entirely be blamed on global warming, it is an undeniable factor.

Climate-minded investors might want to consider the growing ranks of SRI investment funds that seek out holdings with an environmentalist mindset. These funds don’t focus specifically on global-warming-related investments.

Follow the carbon

Companies operating in nations that signed the Kyoto Protocol on reducing greenhouse-gas emissions are typically subject to stricter record-keeping requirements regarding air pollution.

Carbon emissions are now a financial issue that have a real price following the introduction of the EU Emissions Trading Scheme in 2005.

A survey commissioned by Henderson found that under half of firms traded on the UK FTSE 100 Index disclose carbon emissions.

Simon Thomas, Chief Executive of Trucost, independent environmental analysts, said: “For the first time investors can evaluate how well an investment fund is managing its carbon emission risk. The results show that funds with larger Carbon Footprints do not produce higher returns; that SRI funds do not necessarily lead to environmentally sound investment…

Investors should look at what fund managers actually do with respect to the environment, not what they say.”