Investor Grantham: ‘Treacherous Politics’ Complicates Climate Funds Earnings Potentials

A financial investment expert’s 5-minute guide to global warming advises his clients that global warming “will be the most important investment issue for the foreseeable future.”

But financier Jeremy Grantham of Boston cautions that “treacherous politics” complicate hopes of helping people make money off their climate change investments. And he advises that it is a lot easier to market and a climate change-oriented investment fund than to outperform the market through that fund.

Grantham and his wife Hannelore head the Grantham Foundation for the Protection of the Environment, and they have underwritten expenses for The Yale Forum through a grant to Yale University’s Yale Project on Climate Change Communication. In an “Everything You Need to Know about Global Warming in 5 Minutes” piece in his Summer Essays-July 2010 newsletter, Grantham repeats what he calls “certain and straightforward” scientific data about carbon dioxide in the atmosphere. For instance, he writes that CO2 “creates a greenhouse effect and, all things being equal, an increase in its concentration in the atmosphere causes the Earth’s temperature to rise.” (emphasis in original)

“This is just physics,” Grantham notes.

Pointing to uncertainties involving other factors, he acknowledges that “it is impossible to be sure exactly how quickly or how much the temperature will rise” and explores a range of forecasts.

But he rejects those uncertainties as a justification for not acting. “Penalties can rise at an accelerating rate,” he cautions, leading to increased risks. “This is logically and mathematically rigorous and yet is still argued.” He points to societal benefits from efforts to reduce CO2 emissions and concentrations, such as increased independence from Middle East oil supplies, more clean-energy jobs, and domestic industrial innovations.

Grantham rejects the rationale of “right-leaning think tanks” and libertarians, saying climate change “is a classic tragedy of the commons.” He points to “hard science” from leading scientific organizations and writes that “at some point in the development of a scientific truth, contrarians risk becoming flat earthers.”

“Almost no one wants to change,” Grantham concludes. “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.”

Grantham’s online column and a number of comments addressing it are available here.

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