More than a year ago, legendary investor Jeremy Grantham announced he was devoting almost his entire fortune, more than $1 billion, to the fight against climate change.
Humanity is in the “race of our lives,” he warned, a terrifying competition between the Earth’s rising temperatures and the many ways people are responding to the crisis. Since then, the race has only sped up, the 81-year-old co-founder of Grantham Mayo Van Otterloo (GMO) now says.
“Everything is accelerating,” Grantham said in an interview at Bloomberg’s New York headquarters. “The disasters are terrible, one ugly event after another, and they seem to be happening quicker and quicker,” he said. He called the recent fires in Australia “apocalyptic.”
But also, he said, there is progress in combating such an overwhelming problem. “The technology is just amazing. One pleasant surprise after another,” he said, noting that innovations like electric cars and lab-grown food are transforming energy, agriculture and other fields.
Grantham, who predicted the tech bubble and financial crisis, discussed how the climate race is rapidly altering the world’s economic and investing future.
What’s your reaction to Larry Fink’s vow that BlackRock, the world’s largest asset manager, will make climate change a priority?
I say, “Brilliant well done, Larry.” That was necessary and incredibly welcome and may set a good example. And now we know you can bark loudly. Can you bite? And will you perhaps think about having your giant index funds vote a little greener? They're right at the bottom of the list. Legal & General in the U.K. is way at the top of the list, and Northern Trust is not so bad, and right at the bottom is BlackRock. So they can do better. You're not going to lose business in the index business because you become a little greener in how you cast your proxies. It's the one area I can think of where there's no real cost to either the buyer or the seller.
What’s been holding back companies and investors from doing more?
Capitalism has this strange ability to kind of paralyze the altruistic part of humans. So at the weekends, they’re altruistic, they love their grandchildren. Then during the week they take on the character of the corporation whose only job description, says Milton Friedman, is to maximize short term profits. If a human being does nothing except maximize their self interest, they're a sociopath. That's how it's defined. So during the week you behave like a sociopath and as if you have no grandchildren—or as if you hate the ones you have. And then at the weekend you become a loving grandfather again. That is apparently what capitalism does to us, based on the evidence.
You’ve argued that investors should sell oil and gas investments. What does it mean if more investors start to divest?