Nigardsbreen glacier with melting blue ice. Jostedalsbreen National Park, Norway.Wikimedia

What a wonderful opportunity climate change represents for intelligent investors and entrepreneurs!

Climate change is well underway – the time to prevent it is long over. Better to take a proactive stance and figure out what needs to be done to maintain or improve living conditions for all people in light of this new reality.

Approaching climate change this way leads to the realization that commercial opportunities, philanthropic opportunities, and opportunities to reconsider the structure of civilization itself abound. This way of thinking makes perfect sense to me but apparently represents a grand leap for many.

How much of an outlier I am became clear to me while speaking with the president of a sustainability consulting company. His practice is a prominent one whose clients include some of the most influential corporations in the US. My new consultant friend confided to me that most of his clients come to him as a result of a crisis – perhaps taking the form of a vote called by a dissident shareholder group, a suit filed by the government, or by negative press coverage from an affected community.

For most of his clients, sustainability programs represent an added cost of doing business that are, by and large, perceived as helping to maintain the company’s current book of business rather than as adding to it. Framing sustainability projects as a pure maintenance cost means that these projects often are considered discretionary and are the first things to be cut when the economy turns down.

The PR or legal crisis that originally caused the uproar can be tidied up with the help of professionals like my consultant friend, but if the underlying structural issues are not embraced by the organization and changes not incorporated into the corporate culture, crises are bound to reemerge.

Flooding along the Missouri River. After massive flooding along the Missouri River in the spring of 2019, many want to blame the agency that manages the river’s dams for making the disaster worse, but it may not be that simple. The U.S. Army Corps of Engineers says much of the water that created March’s flooding came from rain and melting snow that flowed into the river downstream of all the dams, and at the same time, massive amounts of water filled the reservoirs and some had to be released. Flickr

In my view, the problem with the superficial approach is that, attempting to clean up immediate problems without making structural change allows companies to hold onto the illusion that their business model is fine as is. This attitude, in turn, makes it impossible or unlikely for the firm to to adjust to evolving structural conditions.

Rigidity might be a virtue when riding out a temporary storm; it most certainly is a liability when trying to survive a paradigm shift. Eventually, the discrepancy between reality and what the company wants to believe is reality becomes too great, causing a catastrophic realignment.

The process of climate change is inexorable and continuous. This does not, however, mean that the effects will be incremental. The fact is that putting off thinking about climate change does not make it go away – ask the tent-living residents of the Florida panhandle about which I wrote last week.

The company that fails to take a hard look at its business model – preferring instead to mount a half-hearted, temporary PR campaign – may find itself suddenly underwater or in flames in a literal and figurative sense.

Investors who own these businesses too, are in for a shock:

I thought that utility’s dividend was supposed to be safe!

I didn’t expect the value of that land to fall like that!

Who would have known that bonds could lose so much value?!

Families concerned with building and maintaining intergenerational wealth in the 21st century must Invest in Reality. The reality is that the climate is changing in ways that will not be kind to those clinging to the status quo. Intelligent investors take note.