(Article for the Jakarta Globe – 12 November 2012 issue)
MONEY WISE
CLIMATE CHANGE – HOW IT COULD AFFECT OUR POCKETS
Just days after the biggest ever storm to hit New York, a storm which apartfrom causing death and destruction, closed down Wall Street, cut off power tomillions and shut down the city’s subway system for the first time in its 100years’ plus history, is there anyone out there who still believes climate change
is not happening?
Is there anything we can do to stop it?
Given that carbon emissions are clearly part of the problem we could makeindividual contributions such as switching from cars to public transport. Not soeasy if you live in a city like Jakarta where nothing seems capable of stopping
the avalanche of private cars and motorcycles entering the scene. In China,
barely one person in 50 owns a car. But their ambition is to be on a par with
the US, where one in two owns a vehicle. Singapore alone sets an example to
the world by making car ownership prohibitively expensive and by providing apublic transport system so efficient that few have need for a private vehicle. If
only we had a world government on a par with that of Singapore.
There have been numerous global conferences on climate change.
Unfortunately the outcome has been little more than hot air as each country
has its own agenda so only limited progress has been made. Maybe a few more
big storms, floods and droughts will persuade politicians to act in unison.
Should we be changing our financial planning strategies?
As individuals we are not going to be able to reverse the trend overnight. But
we can at least anticipate the personal effects of climate change and takepractical and financial steps to mitigate the effects.
Practical measures would include ensuring we are prepared for floods andother disasters by being adequately stocked with non-perishable foods,
drinking water and emergency items like torches and candles. The conditions
we witnessed in New York a few days ago could easily be repeated in Jakarta in
coming weeks.

Financial measures would include checking if we have adequate insurance,
both personal in terms of life and medical cover and also general insurance tocover our homes and cars. Be sure to check whether your insurance includes
flood damage.
Make sure you have adequate cash reserves to carry you through any
emergencies, be they climate related or not. If you are an expatriate you
should keep funds not just locally but also in your home country or in an
offshore bank. The accounts should be easily accessible by credit or debit cardor via Internet Banking.
Whether man-made or a natural phenomenon, climate change is clearly
happening and one of its effects will be to create shortages of food, drinking
water and other natural resources. This in turn will inevitably lead to higher
prices. Saving more for the future, particularly for retirement, will become
even more important.
Are there investment opportunities?
Every cloud has a silver lining and for those who can afford them there areindeed opportunities which could help to offset the higher cost of living. Until
the world embraces greener forms of energy – the problem is they are
generally too expensive today – the demand for oil and related products willkeep rising. Consequently, investing in oil and energy companies or funds isbound to be a good long term play if you can live with periodic downturns
when falling demand depresses prices.
Not only is climate change leading already to shortages of certain foodstuffs
but the insatiable demand for energy is persuading many farmers and evengovernments to convert crops once destined for the table into biofuels. This
too offers opportunities by identifying companies that invest in this area or by
investing indirectly via managed funds into forestry or agribusiness. Expect
volatility though in the short term. Like energy it should be seen as a long termstrategy.
Interestingly, a fund was launched five years ago that embraces the theme ofclimate change by investing in companies that are likely to benefit from efforts
to accommodate or limit the impact. It has ironically lost money since launchalthough in the past 12 months it has returned 14%, which perhaps indicatesthat the world is at last waking up to reality.
Investing in the climate change theme is an area for serious investors toconsider but it should not constitute too big a portion of a portfolio. Like gold,
it should be seen as a hedge or insurance against possible troubled times. If allgoes well and the world economies and markets thrive it could still be a
profitable investment and at worst you will have paid a small premium.
Colin Bloodworth, director of PPI Indonesia, has spent over 20 years inIndonesia. If you have any questions on this or a related subject you cancontact the writer at indonesia@ppi-advisory.com