As Britain sweltered in the hottest June on record, businesses and homeowners invested in technology to make our living spaces and offices more comfortable.
The latest figures show only about 5 per cent of British homes have air conditioning, but the number is growing and predicted to rise further.
The UK air conditioning market is expected to grow at 6.3 per cent a year and be worth £1.7billion by 2034.
But it’s not just aircon companies which benefit when our environment heats up – there are other challenges which many of us will pay to solve. From pest infestations to houses not fit for purpose, the firms promising to cool us down and improve our buildings and infrastructure should make profits which are sustainable in a very real sense.
Many of these companies are global, so they aren’t listed on the UK stock market, while others are privately held infrastructure businesses. But you can fill your portfolio with funds which give you exposure to these climate-related businesses in a diversified manner. Here are some of the best to consider.
Air conditioning
The leading brands benefiting from an air-conditioning boom include the US businesses Johnson Controls and Carrier.
These stocks would have done anything but cool your portfolio in recent months. Carrier shares are up 10 per cent this year and Johnson Controls are up 33 per cent.
You can buy shares in these businesses individually through platforms such as Hargreaves Lansdown and Interactive Investor, but there are tax implications if you hold US shares as well as the danger of currency fluctuations.
The leading brands benefiting from an air-conditioning boom include the US businesses Johnson Controls and Carrier.
An alternative is to hold a fund which contains them.
Options include First Trust’s exchange-traded fund (ETF), Nasdaq Clean Edge Smart Grid Infrastructure, which has Johnson Controls as its biggest holding. Another possibility is Impax Environmental Markets, which James Carthew, head of investment company research business QuotedData, describes as being created with climate problems in mind.
The investment trust recently took a stake in Aaon, which makes heating, ventilation and air-conditioning for businesses. Impax is down 1.7 per cent over three years, but those who bought in three months ago are sitting on close to a 7 per cent gain.
Building & adjusting homes and offices
As well as cooling the homes and offices we’ve got, we also need to build new ones that can withstand tougher temperature shifts.
Funds that give you exposure to this fast-growing area of the market include Ninety One Global Environment, which is up 3.3 per cent this year and 4.1 per cent over three years.
Key holdings include design business Autodesk, whose software is used by designers and builders to make more sustainable businesses, as well as the French ‘smart’ building systems company Schneider Electric.
Darius McDermott, who runs research centre FundCalibre, says Ninety One Global Environment is good for those who want to shift their portfolios towards climate resilience because it ‘focuses on companies delivering real-world solutions in renewable energy and resource efficiency’.
Another possibility is SDCL Efficiency Income, an infrastructure investment trust which trades at a startling 46.8 per cent discount to its net asset value. The shares are up 31 per cent in the past month, as the company swung from a loss to a £70 million profit and said it was progressing opportunities to ‘release liquidity’ in the face of a low share price. Shares are down 37 per cent over five years.
Agriculture & pest control
Climate change means changing agriculture needs and different challenges to contend with.
Seeds will be needed which can grow in hotter climates, watering systems to deal with drier, wetter or windier weather and ways to combat stubborn pests in homes and fields.
That’s good news for pest controller Rentokil, which has had a torrid time due to struggles in the US. The company is UK-listed but generates nearly two-thirds of its revenues across the Atlantic. Its shares are down by nearly a third (31 per cent) over five years and by a quarter over three years.
STS Global Income investment trust snapped them up last November, with manager James Harries describing the business as a ‘high-quality global asset at a tantalising valuation’. It also yields nearly 3 per cent.
Agriculture fans could turn to India, with McDermott suggesting Stewart Investors Asia Pacific Leaders fund, which has Mahindra & Mahindra as its top holding.
The company’s agribusiness provides microirrigation solutions, herbicides, fungicides and seed potatoes made to help crops withstand warmer temperatures.
Those who have already invested in the fund have seen their money increase by 27 per cent over five years and 6.3 per cent over three years.
For those who want something more niche, the British business Innovation Agritech specialises in vertical farming – tackling the problem of trying to farm on scorched land with indoor ‘aeroponic’ systems that use less water.
As well as being useful in a warmer world, vertical farming could help Britain with food security, allowing us to produce more of our own crops to ensure that we’re less reliant on fragile global supply chains.
The company first issued shares in March.
However, you can only access this one via JP Jenkins – a ‘matched bargain’ facility which essentially tries to match buyers with sellers of unlisted shares at a stated price.
You can trade your shares only if you can find someone to buy or sell them, and there is much less regulation – so this is an investment for the brave.
