The summer of 2023 brought another round of record global temperatures. With about four weeks left in August, it is possible more heat records will be set.
Those aren’t the good type of records, either. Extreme heat can cause unnecessary health problems, even fatalities. From the perspectives of economics and investing, rising global temperatures can adversely affect economic activity. That highlights the need for companies and governments to continue making investments in sustainability – a movement that could propel exchange traded funds such as the Calvert US Large-Cap Core Responsible Index ETF (CVLC ) and the Calvert US Select Equity ETF ((CVSE ).
CVLC and the actively managed CVSE are relevant at a time when stakeholders from the public and private sectors are scrambling to beat the heat. This is a necessary and expensive endeavor.
Necessary because as noted by a Dartmouth College study published in 2022, the global economy lost $16 trillion in output from 1992 through 2013 due to climate change. That’s a massive figure and one that could be increasing because global temperatures are doing the same.
Climate Investments Now Mandatory
The issue of climate change is irrefutable and cannot be ignored. There’s a silver lining there because there could be positive implications for assets such as CVLC and CVSE.
“The economic costs of extreme heat do not encompass the totality of the economic costs of climate change," Justin Mankin, an associate professor of geography at Dartmouth, said in an interview with Insider. “So this implies that our economy, and our well-being that we secure via our economy, is far more sensitive to the climate than we understood previously.”
While CVLC and CVSE are domestically focused ETFs, many of their holdings are multi-national companies. That’s a positive from a revenue diversification perspective, but could imply vulnerabilities, particularly in emerging markets. As such, some US-based firms may be compelled to make climate-related investments in other markets. This would be in effort to protect their international business models.
Domestic investments are necessary as well as various studies prove extreme heat hinders economic activity in the world’s largest economy.
“In the US, researchers found that reduced labor productivity alone during high heat cost the country $100 billion annually. That figure could double by 2030 and amount to an estimated 0.5% of GDP, a study by the Adrienne Arsht-Rockefeller Foundation Resilience Center found,” reported Insider.
Those woes are compounded by health issues, which can lead to lost working days and reduced productivity.
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