Jeremy Grantham believes humanity needs to hit the ground running to save itself.
In the next several decades, human civilization will be in a race for its survival to grow new “green” technologies in the face of devastating climate change, said Grantham on Tuesday at the 2018 Morningstar Investment Conference in Chicago.
Grantham has a history of sounding valid early alarms. He successfully identified bubbles in Japanese equities in the 1980s, technology stocks in the 1990s and more recently financial stocks ahead of the global financial crisis of 2008, Now he's warning on climate change and chemical pollution.
"Fossil fuels will either run out, destroy the planet or both," said Grantham. "The only way to avoid this outcome is the rapid decarbonization of our economy."
Grantham, co-founder and chief investment officer of Boston-based Grantham, Mayo and van Otterloo, now has 98 percent of his net worth devoted to foundations addressing the causes and impacts of climate change and chemical pollution or to investments committed to environmental sustainability.
In his keynote address, Grantham said that the prevailing global economic regime, capitalism, is poorly suited to address issues like climate change.
“We should be concerned about the complete inability of capitalism to deal with any of these things,” said Grantham. “A corporation’s responsibility is to maximize profit, not waste money by attempting to save the planet.”
Grantham cited increased topsoil erosion, a potential symptom of climate change, as an example. A farmer just getting by would jump at the opportunity to triple their profits and agree to a Faustian bargain in which they sacrificed one percent of their soil for three times higher revenues.
In 100 years, however, that farmer’s great-great-grandchildren would no longer be able to yield any return from the land. By taking triple profits now, Grantham noted, the long-term ability of the farmer’s assets to produce revenue will be eventually eliminated.
“Look at business schools—every MBA candidate would sign that contract or fail the course,” he said. “That is capitalism.”