Jeremy Grantham got rich steering clients away from bubbles in late-1980s Japan, in turn-of-the-century tech stocks and in U.S. housing before the 2008 financial crisis. Now, the 83-year-old co-founder of Boston investment company GMO admits he may be benefiting from another bubble—in green investing.
This time, the value investor known for pessimism sounds downright sunny. He says the plan he laid out years ago to pour nearly his entire $1-billion-plus fortune into the climate-change fight is working. He’s making lots of money, while recruiting other superwealthy people to pursue similar strategies that mix philanthropy and investing.
For Grantham, the capital flowing into green investing over the past couple of years reflects his warnings for more than a decade: Floods, fires and extreme weather have made warming undeniable, creating momentum for carbon taxes and other climate-friendly policies that will transform the world’s economy.
“This is going on as far as the eye can see. It’s an unfair advantage for green investing,” Grantham said. “There may be a bubble that will affect this for a year or two, but it will come back bigger and better than other groups because of this tailwind. This is going to be the most important investment theme for the rest of your life.”
At the COP26 climate summit in Glasgow, Scotland, this month, more than 450 firms managing $130 trillion—about 40% of the world's financial assets—pledged to reach net-zero carbon emissions by midcentury, and to set interim goals for 2030. To exploit this green boom, Grantham is making risky bets. Venture capital and other private investments now compose more than three-quarters of the $1.4 billion in assets he manages across a foundation, a charitable trust and his personal holdings.
Half the portfolio is slated for green venture investments, including $74 million deployed by Grantham and his team in 34 startups that they designate “neglected climate opportunities.” For these, he said, “we only pick ideas that seem extremely important, ideas that have the potential to change the world.”
Grantham says his venture-capital portfolio has returned 19% annually over the past decade, including a 102% jump in 2020, a “watershed” year. The spectacular gains were powered by QuantumScape Corp., the maker of a new type of battery, which went public via a special purpose acquisition company last year.
Capricorn Investment Group, founded by EBay Inc. billionaire Jeff Skoll, recommended QuantumScape to Grantham in 2013, when he was relatively new to green investing. “We took a very deep breath,” Grantham said. The $12.5-million stake was his largest single investment.
Most of Grantham’s early climate investments were “completely disastrous,” he said, but QuantumScape more than made up. At one point in late 2020, a frenzy for green SPACs pushed the value of Grantham’s QuantumScape shares to more than $630 million, a 50-fold return. As an early investor, Grantham couldn’t sell until May—by which point the share price had dropped to around $25 from more than $130. Grantham still got about 10 times his initial investment.
Grantham doesn’t reject traditional philanthropy: Since 2001, he and his wife, Hannelore, have donated about $400 million to environmental causes and he’s promised to give away 98% of his fortune, which was primarily earned from GMO, or Grantham, Mayo, Van Otterloo & Co.
To run his grant-making and investing, Grantham has hired a team of 10, led by foundation president and Chief Investment Officer Ramsay Ravenel and including specialists on climate-related topics. Recent investments include companies working in agriculture, which is a big emitter of carbon and methane that Grantham worries will have trouble producing enough food as climate change intensifies.
Greenlight Biosciences, Grantham’s second-largest direct investment, makes RNA molecules designed to be an environmentally friendly alternative to pesticides. In August, the firm said it’s going public via a SPAC. Other investments include Kula Bio, which makes a fertilizer, and Regrow, which develops carbon monitoring technology for soils.