Urban Land Magazine - Urban Land Institute

Is sea level a financial matter?

Investors were pleased with the Federal Reserve’s (Fed) new approach to its balance sheet. The Fed has delivered its semi-annual Monetary Policy Report to Congress. The report recapped the events of late 2018 and reiterated the Fed’s intention to “…be patient as it determines what future adjustments to the federal funds rate may be appropriate to support the Committee's congressionally mandated objectives of maximum employment and price stability.” In other words, rate hikes are on hold for now.

It would be a shame to avoid a controversial subject this week. So, what about global warming? One can argue about whether it is caused by human behavior or perhaps is a process happening naturally and is beyond our control. What seems to be beyond the debate is that salt water has an economic impact due to sea levels rising at a more rapid rate during the past three decades. That is according to the U.S. GLOBAL CHANGE RESEARCH PROGRAM’S CLIMATE SCIENCE SPECIAL REPORT. The report states that since 1900 sea levels have risen between 7 and 8 inches. Since 1993, they are up 3 inches.

As levels continue to rise, people and companies around the world are likely to be affected. Morgan Stanley reported, “Many coastal cities around the world that look attractive to real assets investors – for example, Miami, New York, Boston, Osaka, Guangzhou, and Mumbai – are particularly vulnerable to flooding and other weather-related problems. And, infrastructure assets favored by investors, like airports, cell towers, and oil and natural gas pipelines, are often located in places prone to storms and extreme heat…Insurance will continue to be an important safeguard, but a limited one.”

Protecting property and improving infrastructure is likely to change demand for specific goods and services. Sarah Green Carmichael of Barron’s reported, “As we rush to protect basements and beach houses, companies in the home-improvement retail sector should benefit…So should companies that make products to cope with flooding, such as commercial-grade water pumps…Upgrades to infrastructure also mean good news for the construction sector…”

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