How financial professionals are thinking about climate change
We’ve got their advice on electric cars, ESG investments and more
It’s almost Earth Day, which makes it a good time to re-evaluate how our decisions impact the planet. Reducing, reusing and recycling are good first steps, but what else can we do to mitigate the effects of climate change — and what effects will those decisions have on our wallets?
A lot of people are wondering if now is a good time to buy an electric car, for example — or whether they should adjust their retirement portfolio to include more environmentally responsible investments. People with young families may be wondering whether it’s time to move to a city that’s less likely to experience severe weather or natural disasters, and older people may be asking themselves what they need to do to ensure that they leave the best possible legacy not only for their descendants — but also for the planet.
Looking for advice, we reached out to Gary Grewal, a CFP® who is the author of Financial Fives: The Top 325 Ways to Save, Earn and Thrive to Retire Before 65, to get the Certified Financial Planner perspective. We also connected with Jim Wang, founder of WalletHacks, to learn his thoughts on which hacks, tactics and strategies to consider — and we asked Patrick Hicks, head of legal at Trust & Will (a Haven Life partner), to find out how climate change might affect your long-term estate planning.
In this article:
Should you buy an electric car?
If you aren’t already driving a hybrid or electric car, switching to a vehicle that generates some of its power from renewable energy could be both environmentally friendly and financially sound. Gas prices are up right now, after all — and even after our current period of inflation subsides, gas may still be a high-cost resource.
“When you buy a car, and you have the means, buy one that is hybrid or all-electric,” says Wang. “Gasoline prices are volatile already and that’s before you even consider the impacts of climate change. The less you rely on fossil fuels, the better off you’ll be.”
You may also want to consider other methods of environmentally friendly transportation. Electric cars could save you money in the long run, but they come with an up-front cost — and a bicycle or a bus pass consumes fewer environmental resources and fewer dollars. “An electric car is certainly a wise investment, however one should not go into burdensome debt or stretch their budget just to have one,” Grewal advises. “It makes much more sense to try to save money first by biking, walking, taking public transit, or using one of the increasing numbers of electric car-share services.”
Should you take out natural disaster insurance?
In the past decade, we’ve seen unprecedented wildfires, floods, hurricanes, tornadoes and other natural disasters — which means it’s worth asking yourself whether you need to invest in an insurance policy to protect yourself and your loved ones as the planet continues to adjust its weather patterns.
“If you own assets,” Hicks explains, “it is important to continually assess what may be needed to protect those assets. Having adequate insurance is essential and you may need to explore additional insurance coverages or even physical improvements to help protect your assets from the impact of climate change.”
Grewal offers a slightly different perspective. “People should definitely consider sufficient fire and flood insurance depending on where they live,” he told us. “They should also consider the risk that premiums may rise and ask themselves whether they can afford them.”
Although fire insurance is often built into your home insurance policy, other types of natural disaster coverage must be purchased separately — and if you live in an area that is prone to floods or earthquakes, you may be surprised at how much this additional insurance could cost you.
“It’s one thing to be able to cover the deductible after a disaster,” says Grewal. “It’s another to be able to afford ongoing premium increases and rebuild one’s life. Insurance carriers are taking a firm look at climate change and beginning to price in the potential for higher costs, so homeowners in disaster-prone areas on a fixed budget should consider where they live for their long-term plans.”
Should you relocate?
The coronavirus pandemic prompted many people to reconsider where they lived — either by moving closer to family or by investing in homes large enough to contain home offices and Zoom classrooms. Other people are still asking themselves whether they should consider relocating — and if so, where.
“I think any long-term decision, such as buying a home, should consider the impact of climate change and how great volatility will impact it,” says Wang. “Before you buy anything, check whether it can be impacted by extreme weather patterns. You don’t want to tie yourself down to a property only to learn that it’s less desirable because of extreme weather!”
Grewal agrees — with a caveat. “Yes, there is a reason to move to a place less likely to be affected by severe weather. However, that should not be the only factor.” Grewal suggests taking cost of living into account before deciding whether or not to relocate — and Hicks suggests taking a look at local and statewide regulations. “Many cities are adjusting population density limits in zoning or moving to impose changes like eliminating natural gas appliances,” Hicks explains. “Some states are moving to regulate small engines. How will these impact your home or business?”
As you consider the various costs and benefits of moving, we’ll remind you that the total cost of living includes not only housing prices and grocery bills, but also the kinds of expenses many people forget to calculate, such as childcare costs, long-term career prospects and how often you’ll need to travel to visit grandparents, family and friends.
Some people may want to consider moving closer to aging parents, especially if your family lives in an area that may be protected from some of the more extreme weather risks. Since many employers have become very comfortable with remote work, you may be able to retain both your current job and your earning capacity while taking advantage of all the benefits associated with living closer to loved ones.
“I think any long-term decision, such as buying a home, should consider the impact of climate change and how great volatility will impact it.”
—Jim Wang, founder of WalletHacks
Should you begin ESG investing?
You may also be wondering if socially conscious investing — often known as ESG investing for its focus on environmental, social and governance issues — is a smart choice not only for your long-term financial plans, but also for our planet.
This is one case in which the advice is both clear to understand and easy to follow. “I tell my readers to consider investing with their values,” says Grewal. “If we vote with our wallets, it’s contradictory to invest in environmentally harmful companies yet still advocate for climate resilience.”
What about the bottom line? “While there are no guarantees, ESG investing has shown that it can meet or beat index benchmarks,” Grewal explains — which means that it’s possible to invest in our planet’s future without compromising your own.
Hicks agrees. “You may not need to choose between financial gains and your personal values, since many green companies are also high performers financially. Money is green, after all!”
Should you adjust your estate planning goals?
If you’ve already set up your affordable term life insurance plan with Haven Life, you’ve already taken the first important steps towards protecting your loved ones and leaving a legacy — and if you are an eligible Haven Life customer, you may already have taken advantage of the opportunity to continue the estate planning process by creating a no-cost will or trust through our Haven Life Plus partners at Trust & Will.
Your next step is to ask yourself how climate change might affect your estate — and how you can plan ahead to help minimize the negative effects and maximize the positive ones. “Considering the impact of climate change on your assets should be a necessary part of a coordinated financial and estate plan,” says Hicks. “This can help you maximize the impact you leave to future generations.”
This impact can be measured in the form of generational wealth — but it can also be measured in the form of planetary health. “Charitable giving is a key piece of estate planning for many people and there is a wide range of charities focusing on environmental causes,” Hicks explains. “You may wish to leave some bequest to such a charity to promote an environmentally-friendly future.”
If you want to get even more specific with your legacy, you have options. “There are some sophisticated planning opportunities for individuals who are looking to prioritize environmental impact in their estate planning,” Hicks told us. “For example, you may be able to create conservation rights in land you own, protecting that from future development. This can have pretty significant tax benefits as well.”
This Earth Day, ask yourself if you’re doing everything you can to leave your descendents — and the planet — the best possible future. Whether you dust off your bike, test-drive an electric car or look into socially responsible index funds, you have options. Take care of your loved ones, take care of your finances, and take care of the earth — after all, it’s the only one that we’ve got.
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Haven Life is a customer-centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.
Our editorial policy
Haven Life is a customer centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.
Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less hard if they are a fit for your situation.
Haven Life is not authorized to give tax, legal or investment advice. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Individuals are encouraged to seed advice from their own tax or legal counsel.
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