[Vision2020] Investment Fund Chairman on Climate Change: Jeremy Grantham Says Buy It

[Ted Moffett]

An elite investment economist, who is certainly in the 1% class, takes the
impacts of anthropogenic climate change seriously, and puts his money where
his mouth is...

He was recently interviewed March 2013 on the "Charlie Rose" show which can
be experienced at this website:

http://www.charlierose.com/view/interview/12812

An older article on Grantham's analysis of climate change from 2010 is
pasted in below.

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http://www.huffingtonpost.com/janet-ritz/investment-fund-chairman_b_658701.html
Janet Ritz <http://www.huffingtonpost.com/janet-ritz>

Publisher, editor, the-environmentalist.org
Posted: July 26, 2010

Jeremy Grantham, Chairman of the Board of Grantham Mayo Van Otterloo
(GMO<http://www.gmo.com/>),
a Boston-based asset management firm that is one of the largest funds in
the world, has written in his quarterly letter:

Conspiracy theorists claim to believe that global warming is a carefully
constructed hoax driven by scientists desperate for ... what? Being needled
by nonscientific newspaper reports, by blogs, and by right-wing politicians
and think tanks? Most hard scientists hate themselves or their colleagues
for being in the news. Being a climate scientist spokesman has already
become a hindrance to an academic career, including tenure. I have a much
simpler but plausible "conspiracy theory": that fossil energy companies,
driven by the need to protect hundreds of billions of dollars of profits,
encourage obfuscation of the inconvenient scientific results.

Grantham's asset management fund controls over 170 billion dollars. He is
the investor and fund manager who predicted the failure of the bubble style
of economics, postulating that economies had a tendency to "return to the
mean." The quarterly report by Grantham gives his view on the direction of
the economy and the trends therein. He has included a section (on page
seven), entitled: "Everything You Need to Know About Global Warming in 5
Minutes" and recommends investment that will reduce our dependence on
fossil fuels.

A summary of his points are as follows ( full report here -
PDF<http://www.gmo.com/websitecontent/JGLetter_SummerEssays_2Q10.pdf>
):

• Rising C02 in the atmosphere is a fact with a 40% increase since the
advent of the Industrial Revolution.

• The greenhouse effect of rising C02 is proven by physics.

• Changes in solar output cannot account for the rise in temperature over
the last 50 years.

• "A warmer atmosphere melts glaciers and ice sheets, and causes global sea
levels to rise. A warmer atmosphere also contains more energy and holds
more water, changing the global occurrences of storms, floods, and other
extreme weather events."

• Grantham refutes skeptics who argue that money should not be spent
because of uncertainty. He posits that "since the penalties can rise at an
accelerating rate at the tail, a wider range implies a greater risk (and a
greater expected value of the costs)."

• He brings up Pacal's question: What is the expected value of a very small
chance of an infinite loss? Pascal's answer, "Infinite." Grantham expounds
on Pascal here:

The benefits, even with no warming, include: energy independence from the
Middle East; more jobs, since wind and solar power and increased efficiency
are more labor-intensive than another coal-fired power plant; less
pollution of streams and air; and an early leadership role for the U.S. in
industries that will inevitably become important. Conversely, what are the
costs of not acting on prevention when the results turn out to be serious:
costs that may dwarf those for prevention; and probable political
destabilization from droughts, famine, mass migrations, and even war. And,
to Pascal's real point, what might be the cost at the very extreme end of
the distribution: definitely life changing, possibly life threatening.

• The biggest cost of global warming will be the lack of biodiversity,
which he reminds his readers is priceless.

• He has a message to his own group that he labels as "die-hard
contrarians"

Dear fellow contrarians, I know the majority is usually wrong in the
behavioral jungle of the stock market. And Heaven knows I have seen the
soft scientists who lead finance theory attempt to bully their way to a
uniform acceptance of the bankrupt theory of rational expectations and
market efficiency. But climate warming involves hard science.

• He warns that fossil fuel corporations are using denialists and
conspiracy theorists to obfuscate the truth that warming is happening in an
attempt to preserve their profits.

• Grantham asks why we are even arguing the issue. He points out the
pattern of behavior from the tobacco industry and warns that many of the
same operatives responsible for the delays in the truth about the dangers
of smoking are now working to do the same with climate change.

The obfuscators' simple and direct motivation -- making money in the near
term, which anyone can relate to -- combined with their resources and, as
it turns out, propaganda talents, have meant that we are arguing the
science long after it has been nailed down. I, for one, admire them for
their P.R. skills, while wondering, as always: "Have they no grandchildren?"

Grantham's last two points stand best without editorialization:

"Almost no one wants to change. The long-established status quo is very
comfortable, and we are used to its deficiencies. But for this problem we
must change. This is never easy."

"Almost everyone wants to hear good news. They want to believe that
dangerous global warming is a hoax. They, therefore, desperately want to
believe the skeptics. This is a problem for all of us."

Investors, take note. One of your own has weighed in on the fact of climate
change and has recommended that you buy it. His buy order: The benefits,
even with no warming, are too profitable to pass up. The risks, at the very
least, are too great to ignore.

Grantham's entire report is available at this link
(PDF)<http://www.gmo.com/websitecontent/JGLetter_SummerEssays_2Q10.pdf>
.

More on this topic at *THE
ENVIRONMENTALIST*<http://www.the-environmentalist.org/>

*________________________* <http://www.the-environmentalist.org/>

*Vision2020 Post: Ted Moffett
* <http://www.the-environmentalist.org/>
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