Bet Against the Seven Horsemen of the Apocalypse

The Ringwraiths from The Lord of The Rings: The Fellowship of The Ring, 2001. CLICK AHEAD for the seven biggest challenges to sustainability.0xA0Photographer: Warner Bros./Everett Collection

You know they're out there.

Even people still squeamish about one or another global mega-risk must, deep in their seats of reason, twitch at the thought of these things taking a toll:

  • Climate change.
  • Water scarcity.
  • Vast urban waste.
  • Food insecurity.
  • Public health burdens.
  • Economic inequality.
  • Demographic cliffs.
See below for charts describing each.

These are notorious, fuzzy, amorphous risks that belong to everyone and therefore to no one. That's why unabashed leadership in the fight against them is so hard to come by in either the civic sphere or private sector. These problems can seem infinite, and, what's worse, can be addressed only in what seem like infinitesimal measures. Who wants to own the global food insecurity problem? Any takers? Why even bother, right?

Well, we'll see. The latest helpful but infinitesimal step comes from Morgan Stanley Research, which asked its equity research analysts to pick stocks from companies that are either girding themselves for or trying somehow to forestall at least one of these seven "sustainability themes," as they call them. Or "horsemen of the apocalypse," as we're calling them.

The chosen companies must meet several criteria. Stocks should promise "a positive return over a shorter time horizon." A year, the analysts say, should be short enough to pique some investors' interest.

Other criteria: The companies are all rated "overweight," because they think that the stock may perform better than the industry average, on a risk-adjusted basis for the next year or 18 months. Lastly, the stocks included in the research should have the potential for at least a 10 percent increase above their current prices, and also have a market cap above $2 billion.

In many cases, the companies selected fall outside the familiar lists of consumer-product, car or industrial companies who are anticipating these trends in their long-term strategies. (Think Unilever, Ford or General Electric.)

Morgan Stanley Research ended up with a diverse group. The top five "sustainability picks" in the U.S., for example, are a mix: Sun Edison, a solar-power provider; Cubist Pharmaceuticals, which develops products for emergency rooms and other "acute care" facilities; Tesla Motors; Whole Foods Market; and Chart Industries, which makes freezing and gas-handling products for medical and food industries.

The research will be updated regularly. Alas, it's unavailable to non-clients. That's okay, though. What's important is that research firms are focusing new lenses on new problems that many investors don't intuitively consider.

Many thoughtful reports put sustainability in front of investors. The utility of the Morgan Stanley Research piece might not be transformational results of the effort, but the fact that they thought to undertake it at all.

Seven Snapshots of 21st-Century Risks:

Climate Change

Source: IPCC WGII AR5 Chapter 19

Water Scarcity

Source: WWAP, prepared with data from FAO AQUASTAT (aggregate data for all countries except Andorra and Serbia, external data) (website accessed Oct 2013), and using UN-Water category thresholds.

Vast Urban Waste

Source: World Bank

Food Insecurity

PPP = purchasing power parity. Regional aggregates include only developing countries. Source: FAO and World Bank

Economic/Energy Inequality


Public Health Burdens

Source: GIS/World Health Organization

Demographic Cliffs (Aging)

Source: UN World Population on Ageing 2013

More by Eric Roston (@eroston on Twitter):

Visit The Grid for the latest about energy, natural resources and global business.

Before it's here, it's on the Bloomberg Terminal.