Expected global warming, demand for clean drinking water and new sources of power will create lucrative investment opportunities in companies exploiting these trends for up to five years before such firms become expensive, argues Citi Global Wealth Management.

While not all scientists think global climate change is happening or to the extent some people fear, there is a strong consensus among many countries that action is needed, which creates investment opportunities, Edward Kerschner, chief investment strategist at Citi Global Wealth Management, told a gathering of journalists.

He responded to the point that according to US satellite data, average global temperatures have declined, not risen, since 1998.

“What is happening is not really the issue. It is what people believe is going to happen,” he said. It has taken decades for political leaders to create a consensus on the need to act through such agreements as the Kyoto Accord on reducing carbon emissions, he said. A sudden change of heart on this issue is extremely unlikely, he said.

But he accepted that the current trend of investing in alternative energy sources had pushed up valuations of some companies to the point where they were not attractive, at least not for the moment.

“On climate change [related companies], there is something of a bubble and we have downgraded some of the names [of companies],” he said, referring to Citi’s list of 112 companies that are linked to the climate change issue.

Citi has identified a large list of companies expected to profit from areas such as water supply, road-building, nuclear power, solar power, biofuels and other sectors.

Based on the duration of previously successful investment themes, such as the impact of the ageing Baby Boom generation, Mr Kerschner reckons that opportunities to make money from global warming could run for about five years before the affected businesses become fully valued.

A key theme, he says, is the likely increase in demand for nuclear power which, despite the controversial issue of how to store nuclear waste, has the advantage of being able to produce a continual level of electricity in all weathers and with no Co2 emissions.

“Even in the classic oil businesses, nuclear is now part of their future. Nuclear is going to be a significant part of the world that wants to be climate-friendly. We are going to see a nuclear renaissance,” he said.