Four Climate Change Investments Hiding In Plain Sight

&l;p&g;Since writing &l;a href=&q;; target=&q;_blank&q; rel=&q;noopener noreferrer&q;&g;Finding Silver Linings in the PG&a;amp;E Bankruptcy&l;/a&g; last week, I have borne the brunt of one of my conclusions; namely, that the seemingly endless stream of bad news related to the effects of climate change is spurring industry innovation to help mitigate and adapt to it.

I say that I have borne the brunt of this effect because, as I write this, I am surrounded by piles of presentations from start-ups and listed companies that are trying to pitch me on how their solution will help counter climate change. I barely have enough hours in the day to read everything I&a;rsquo;m being sent!

In my article &l;a href=&q;; target=&q;_blank&q; rel=&q;noopener noreferrer&q;&g;Winning at Climate Change Investing&l;/a&g;, I broke down the different technology stages for companies involved in this business into Evolutionary Applications, Novel Adaptations, and Revolutionary Developments. I have &l;a href=&q;; target=&q;_blank&q; rel=&q;noopener noreferrer&q;&g;written about a company&l;/a&g; that I believe to be just on the cusp between a Novel Adaptation and a Revolutionary Development: Carbon Engineering. Today, I wanted to focus my attention on a few companies in the Evolutionary Application category.

These are companies that are improving present products or processes to allow current systems to operate more efficiently.

&l;img class=&q;dam-image getty size-large wp-image-1127294306&q; src=&q;×0.jpg?fit=scale&q; data-height=&q;640&q; data-width=&q;960&q;&g; Shiloh&s;s components are used in auto body parts, the chassis, and in the propulsion system.

One company at which I have been looking is Shiloh Industries &l;a href=&q;; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;SHLO&l;/a&g;. This is a small-cap name that focuses on material sciences and design changes to specialize in creating &l;a href=&q;; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;strong, lightweight auto components&l;/a&g;. While this may not strike you as a climate change related business, by decreasing the weight of automobiles, fuel-efficiency is improved for gas-powered vehicles and range increases for electric ones.

Another example of an Evolutionary Application firm doing good work is a small, private company I just learned about that makes an improved version of something known as &l;a href=&q;; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;plastic mulch&l;/a&g; for traditionally-grown agricultural operations. Mulch film helps trap water in the soil &a;ndash; especially important as higher ambient temperatures create &l;a href=&q;; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;drier soil&l;/a&g; &a;ndash; and protect from weeds that would otherwise be managed through carbon-intensive herbicide application. Apparently, the company&a;rsquo;s mulch films, while not biodegradable, can be broken down and recycled into fuel, and also have other characteristics that make them attractive to farmers.

&l;img class=&q;dam-image bloomberg size-large wp-image-34192983&q; src=&q;×0.jpg?fit=scale&q; data-height=&q;627&q; data-width=&q;960&q;&g; A sugar cane farm&s;s secondary crop of watermelons is protected by rolls of plastic mulch in Bundaberg, Queensland, Australia, on Thursday, Aug. 13, 2009. Photographer: Eric Taylor/Bloomberg

Another company in which I&a;rsquo;ve been interested lately is the German spin-out from Siemens&a;rsquo; semiconductor business called OSRAM Licht AG &l;a href=&q;; target=&q;_blank&q; rel=&q;noopener noreferrer&q; target=&q;_blank&q;&g;OSAGY&l;/a&g;. OSRAM is the second-largest producer of LED behind Japanese company Nichia, whose most important revenue source is its line of LEDs and sensors for the automotive industry.

The part of OSRAM in which I am most interested, however, is its specialty LEDs, which are being used in vertical farming applications, such as those explained in my articles &l;a href=&q;; target=&q;_blank&q; rel=&q;noopener noreferrer&q;&g;Agriculture is Broken; AgTech Can Fix It&l;/a&g; and &l;a href=&q;; target=&q;_blank&q; rel=&q;noopener noreferrer&q;&g;AgTech: A Great Investment for the Future&l;/a&g;.

There are still quite a few kinks to be worked out with vertical farming before it starts making money for investors, but successful vertical farms and those that are ultimately unsuccessful alike will need LED lamps.

&l;img class=&q;dam-image bloomberg size-large wp-image-40687698&q; src=&q;×0.jpg?fit=scale&q; data-height=&q;639&q; data-width=&q;960&q;&g; A researcher walks past a room where plants are stimulated by LED-produced artificial light at the Chinese Academy of Agricultural Science (CAAS) building in Beijing, China, on Monday, Feb. 20, 2017. Government-funded research on vertical farming reflects the changing mindset of China&s;s leaders. Runaway growth created the world&s;s second-biggest economy, yet the catalyzing coal mines and smokestacks filled the environment with poisons and ate up valuable farmland. China is turning to technology to make its land productive again. Photographer: Qilai Shen/Bloomberg

In the mind of an option expert, OSRAM&a;rsquo;s specialty LED business might be viewed as kind of a real call option; an investor pays a little for its current book of business, but with that small outlay, gains access to a large future upside as vertical farming becomes &l;em&g;de rigueur&l;/em&g;.

The last company that I&a;rsquo;ll mention is one with whose executives I&a;rsquo;ll be speaking with next week and which I may write a longer article about soon. It is a private firm that provides concentrated solar installations that presently aid in Enhanced Oil Recovery (EOR) in oil fields, and which look like they might be applied to other uses, such as mini-grids, as well.

&l;img class=&q;dam-image bloomberg size-large wp-image-34123838&q; src=&q;×0.jpg?fit=scale&q; data-height=&q;462&q; data-width=&q;960&q;&g; 760 parabolic troughs with more than 182,000 mirrors harness energy from the sun at the Acciona SA Nevada Solar One concentrating solar power (CSP) plant near Boulder City, Nevada, U.S., on Tuesday, Sept. 22, 2009. The 400 acre Solar One site is the world&s;s third-largest concentrating solar plant, and produces 64 megawatts of energy, enough to power more than 14,000 homes. Photographer: Jacob Kepler/Bloomberg

Two of these companies are small caps; two are private. As such, they might not appeal to or be accessible to all retail investors. That said, the opportunities exist, and the number seems to me to be expanding rapidly.

There are also businesses that are working on Evolutionary Applications embedded within very large cap companies. These are businesses that a clever private equity investor might be able to carve out and profit from as a standalone company.

While all the opportunities leave me with too little down time, it is good news for intelligent investors. Investing in a new paradigm is the only way to build and maintain intergenerational wealth in the years to come. This is where I am focusing my attention and where I think you should be focusing yours!

&l;em&g;The author presently has no positions in any companies mentioned in this article&l;/em&g;.&l;/p&g;

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