Blain’s Morning Porridge 7^th July 2025: Climate Change?  We can’t pretend it isn’t happening, and should invest accordingly.

“We’re dashing ourselves against the rocks of a lifetime…”

A heatwave in London is unbearable – and we’re about to experience the third of this long, hot, summer. Elsewhere, increasingly chaotic climate events are triggering unpredictable weather disasters – including the tragic floods that hit Texas. We can’t deny the threat – but we can mitigate the effects if we acknowledge the threat is real, and invest accordingly.

Last week I was asked on a TV show what might be the catalyst for a market reset event. I doubted it be something from the American president’s lips (we are inured to what he says or does), or even the numbers aligning to confirm rising inflation and economic recession as a result of tariffs (stagflation) – markets are already set for data surprises.

Instead, my answer was a no-see-um that’s already in plain sight – Climate Change.

It’s a threat because we don’t understand it. And we fear what we don’t understand – we’d rather close our eyes and hope it doesn’t happen. But it does.

Last week I told the TV hosts the rapid warming in ocean temperatures, how these fuel the scale and frequency of freak weather events, plus rising insurance costs, all coming together in chaotic, unpredictable ways, could trigger market reversals, and demands for a dramatic policy reversals – which will fuel and rock unstable markets, and add even more dramatic political denial and polarisation. A perfect storm of political noise and dither alongside increasingly random and unpredictable natural disasters is a recipe for market instability.

I am not precient, but it was thrown into stark relief by the Texas floods over the weekend. It was tragic – so many killed by freak weather and the suddenly flooding rivers.

There has been much noise about how the scale of the disaster could be due to the swinging DOGE cuts in the National Oceanic Atmospheric Administration (NOAA) and the Disaster response agency, FEMA. It’s true budget cuts left NOAA understaffed by about 25% even before Musk cut a further 7% in February, leading the remaining staff to warn about irreparable damage to the agency’s storm tracking and prediction capability. FEMA’s disaster response capability was even more impacted by the decapitation of its entire senior management layer, wiping out decades of expertise in disaster response and management. Doge cut about 30% of its staff and pushed resilience planning out the agency to local authorities’ control, despite them saying they lacked the finance or expertise to replace the agency.

I can understand the power of faith, but when the best the Texan sheriff in charge of the SAR operation could offer was a request for people to pray, then you’ve got to wonder what happened that the wealthiest nation on Earth was left scabbling to cope?

However, it’s also true the Texan authorities were aware of the river flooding risk – it’s happened before. The authorities chose not to put warning sirens on the parts of the river that saw a girls’ camp swept away. They had been told it was a 1000-year event, and thus unlikely to happen again. No doubt there will be an enormous blame game as everyone denies it was their fault.

Trump is famously a climate change denier. Pulling the US out of climate agreements, slashing funding to universities, and killing Sleepy Joe Biden’s renewable power initiatives is a move designed to play to his voter base, confirmation of his intent to move America back to gas-guzzling internal combustion engines…. (Ironically, it appears the major beneficiaries of Biden’s climate investment subsidies were in traditional Republican states!)

On Friday, shortly before the flood, Trump signed his Big Beautiful Tax-Cutting Bill into legislation. Overwhelmingly it’s been dismissed by the commentariat as a disaster that is regressive (likely to impact the poor, while making the rich richer), and a major bond market risk. The cuts in Medicaid will have consequences – Yale predicts 100k additional deaths over the next 10-years. The economic consequences of pulling trillions of investments into renewables will be significant – Bloomberg carries a story about “Ghost Factories are a warning sign for Green Manufacturing’s Future”.

My own take on the Big Beautiful Bill is that it’s a genius piece of Private Equity shenanigans – the tech and money men backing Trump just levered up America with new debt, giving the headroom to boost the value of their equity by slashing corporation tax, allowing faster depreciation, and avoiding tax hikes that could have negatively impacted their personal worth. It will lead to dramatically rising income inequality as the rich get richer and everyone else pays for it. And the MAGA turkeys voted for it.

Whatever we think of the short-termism of Trump’s policies, his long-term legacy could be much more painful because of his climate stance.

Addressing Climate Change should be a three-stage process.

• We need to know exactly what is happening – hence the money spent on research, weather forecasting and climate modelling.
• We need to understand what’s causing it – hence the science of climate change seeks to investigate and advise on the most likely causes, which is generally taken by the bulk of scientists to be due to greenhouse gasses, and the scale of CO2 emissions since the beginning of the industrial revolution.
• We then need to invest in technologies – like renewable power to reduce the causes of climate warming, and where possible reverse the consequences of our actions.

It’s all very simple. Cause. Effect. Solution.

Or…. you can go with Trump and deny it’s happening. The starting point would be to ignore climate change data by stopping weather forecasting completely – the equivalent of redrawing predicted storm tracks to benefit your investment book. (Pretty much what Trump’s team have previously done!) One way to stop embarrassing weather questions and stop forecasting is to defund NOAA. Yep. Its ignorant. But it works – right up till a river in Texas bursts its banks, sweeps away a girls’ summer camp, and everyone thinks it’s an Act of God – not something that smarter investment and climate understanding could have identified and warned against.

Sensing easy money by dumping high cost ESG investment rules, there has been a massive pushback across the US investment community against anything that hints of Green economics or Renewable Power. Ever since Trump’s second administration began to look likely, then probable and then real, many US firms have gone back to guilt-free slash and burn energy investing. Short-termism at its best.

The rest of the world is taking a more cautious path. Investment in Europe and Asia has been roiled by the American shift, but leading sovereign wealth funds, including the Norwegian $2 trillion Norges Bank fund, the Japanese Pension fund, and Middle East fund remain focused on green investment and climate change mitigation.

We may not know the whole science of climate change, and we are struggling with energy transition from fossil fuel to renewables at a time when the demand for energy for AI is set to push prices higher, but we do know the global climate is becoming less stable, less predictable, and will have consequences.

That will include natural disasters, chaos, and unpredictability. It will accelerate immigration pressures from the zones most impacted by change and rising temperatures, and will trigger the need for greater investment into addressing disaster preparation and resilience.

The one thing we know for sure is pretending it isn’t happening is not a solution.

Out of time and back to the day job..

Bill Blain

Author, The Morning Porridge

CEO Windshift Capital

Partner Shard Capital