You've probably never heard of him, and for years Jeremy Grantham liked it that way. But now the man who made billions by predicting every recent financial crisis is speaking out
'Anyone who says government can’t do this, or can’t do that, I say a pox on you' … environmental philanthropist Jeremy Grantham. Photograph: Martin Godwin for the Guardian
by Leo Hickman, The Guardian, April 12, 2013
One icy morning in February, a train pulled into Washington, DC. It was loaded with environmentalists planning to handcuff themselves to the gates of the White House, in protest at the building of a 3,500-km oil pipeline from Canada to the Gulf of Mexico. Amid the hundreds of placard-carrying protesters stood a somewhat incongruous figure in a suit – Jeremy Grantham, a 74-year-old fund manager. "What we are trying to do is buy time," he told reporters. "Buy time for the world to wake up."
One icy morning in February, a train pulled into Washington, DC. It was loaded with environmentalists planning to handcuff themselves to the gates of the White House, in protest at the building of a 3,500-km oil pipeline from Canada to the Gulf of Mexico. Amid the hundreds of placard-carrying protesters stood a somewhat incongruous figure in a suit – Jeremy Grantham, a 74-year-old fund manager. "What we are trying to do is buy time," he told reporters. "Buy time for the world to wake up."
Grantham – who occupies a legendary place in the world of finance for predicting all the major stock market bubbles of recent decades (and doing very well in the process) – had decided, after 15 years of low-key environmental philanthropy, to, as he puts it, "walk the walk."
"I was committed to getting arrested," says Grantham, a tall, slight man, as he looks out across the City from his London office on the 15th floor of a glass-and-steel tower next to the Bank of England. He speaks machine gun-quickly in a soft, mid-Atlantic accent. "But the day before [the protest] my wife checked with the lawyer, who said, 'Don't do that!'" It turned out that being arrested would give him serious problems when it came to travelling. "I've had a green card since completing my MBA at Harvard in 1964."
Grantham, co-founder and chief strategist of GMO, a Boston-based global investment group, manages $106bn (£69bn) of assets on behalf of 1,000 institutional investors, and employs 600 people, so he decided that the fallout would be too great. He was forced to stand back and watch as his daughter Isabel got arrested, alongside the actor Daryl Hannah, the US's highest-profile environmentalist Bill McKibben, and NASA climate scientist James Hansen.
So he is speaking out instead. From where he stands, this bubble, the "carbon bubble," is the biggest he's seen. "We're already in a bad place. The worst accidents are [only] 20, 30, 40 years from now." Such apocalyptic talk is often the preserve of deep-green doom-mongers – the kind of talk that has led many to reject environmentalism. But Grantham insists he's guided "by the facts alone." On some issues (immigration and education) he "would be considered rightwing," but with the environment, he says he calls it as he sees it. He is disdainful of those who ignore the data, or worse, misinform the public.
"I find the parallels between how some investors refuse to recognise trends, and our reaction to some of our environmental challenges, very powerful," he says. "There is an unwillingness to process unpleasant data. In a bull market you want to believe good news. You don't want to hear that the market is going to go off a cliff." He finds climate sceptics – led by a "little army of non-scientific, persuasive loony lords," as he characterises them (a barely disguised reference to the former Conservative chancellor Lord Lawson and Ukip's Lord Monckton, both of whom promote, to varying degrees, climate-sceptic views) – a frustrating ideological phenomenon. "They have profound beliefs – as opposed to knowledge – that they are willing to protect by all manner of psychological tricks. So you have people who are very smart – great analysts and hedge-fund managers – who on paper know that their argument is wrong, but who promote it fiercely because they are libertarians. Anyone with a brain knows that climate change needs governmental leadership, and they can smell this is bad news for their philosophy. They are using incredible ingenuity to steer their way around facts they do not choose to accept."
Grantham, who was born in Hertfordshire and raised by his Quaker grandparents in Doncaster, freely admits to being a "late arrival to all this." After completing a degree in economics at the University of Sheffield in the early 1960s, he worked for a short stint at Shell before going to Harvard for an MBA. In 1977, he co-founded GMO [Grantham, Mayo, Van Otterloo]. Making his clients – and himself – wealthy filled his working days until the mid-1990s. And then he went on holiday with his children, to the Amazon and Borneo. "And without thinking about it, you start talking about the logs along the side of the river and the lack of mature forests in Borneo." He smiles, seeing the risk of being accused of being driven by emotion rather than rigorous statistical analysis. "That played a role, but we didn't treat it as an epiphany."
And he didn't preach. For years he has remained, Oz-like, behind the curtain of the environmental movement. He has shunned in-depth interviews and expressed his views only in quarterly newsletters published on GMO's website, where he writes of long-term risk, climate change and dwindling resources – not just oil, coal and natural gas, but also phosphorus and potash, whose use in modern farming methods "must be drastically reduced in the next 20–40 years or poorer countries will begin to starve."
At the same time, he has poured an ever-larger amount of his personal wealth into his Grantham Foundation for the Protection of the Environment, which he runs, with family input (his children are trustees) and minimal staff, out of GMO's Boston headquarters. The foundation's latest tax filing shows that in 2011 he increased the fund's coffers by $46m (£30m), bringing the total to something approaching $400m (£260m), up from $106m in 2006. Ever the wise moneyman, he has largely reinvested this money, in order to guarantee the foundation's long-term security. But he also spends about $17m annually on his chosen causes, in the process becoming, according to one magazine, the "world's most powerful environmentalist."
Run your finger down the tax document and you see why. In 2011 alone, his foundation gave $1m to each of the leading US conservation charities, the Sierra Club and Nature Conservancy, as well as $2m to the Environmental Defense Fund, where his German-born wife Hannelore is a trustee and where Isabel has also worked. He is perhaps best known in the green world for funding the London School of Economics' Grantham Research Institute on Climate Change and the Environment ($2.2m in 2011), and Imperial College London's Grantham Institute for Climate Change ($1.9m in 2011), but he funds climate researchers in India, too. He has written large cheques for the Carnegie Institute of Science, the Smithsonian, 350.org, WWF, Greenpeace and, keen to counter what he calls the "misinformation machine," funds environmental journalism at National Public Radio, the Center for Investigative Journalism, grist.org, Media Matters and the Yale Forum on Climate Change & the Media. Until last year (when he decided investigative and environmental journalism was "dying out" due to cutbacks), he funded the world's most lucrative journalism award, the annual $80,000 Grantham prize for environmental reporting.
In the past few months, however, there has been a conspicuous gear-shift in his activities. In addition to being more outspoken, he intends to support new research initiatives, particularly into "avant garde, sustainable" farming techniques. He talks of a "hybrid" form of farming that takes the best of organic farming and the best from "Big Ag." He doesn't rule out "compromises" such as genetic modification, which some environmentalists will find hard to swallow.
Having said that, his interest isn't entirely selfless. "Fifteen years ago, we started a forestry division [at GMO] because I had fallen in love with land and trees, and because I realised it was a mispriced asset class. We have done extremely well in that sector, outperforming the benchmark for 15 years."
Many deep-greens – who claim the root cause for our environmental woes is the slavish quest for economic growth – will recoil at the thought of a hard-boiled capitalist such as Grantham underpinning so much of the environmental movement. He is unconcerned. "Capitalism does millions of things better than the alternatives. It balances supply and demand in an elegant way that central planning has never come close to. However, it is totally ill-equipped to deal with a small handful of issues. Unfortunately, they are the issues that are absolutely central to our long-term well-being and even survival."
More awkwardly, he insists his substantial investments in oil and gas don't contradict his green views. "We need oil. If we took oil away tomorrow, civilisation ends. We can burn all the cheap, high-quality oil and gas, but if we mean to burn all the coal and any appreciable percentage of the tar sands, or even third-derivative, energy-intensive oil and gas, with 'fracking' for shale gas on the boundary, then we're cooked, we're done for."
He does think there's some cause for hope. For example, "the business mathematics of alternative energy are changing much faster [than many people] realise." Looming carbon taxes ("hopefully, in the not-too-distant future"), coupled with the increasing affordability of alternative energy, will mean that coal and oil from tar sands run the "very substantial risk of being stranded assets." There there's the "amazing" fall in fertility rates across the world ("the absolute minimum hope of survival is a gracefully declining population").
But "China is my secret weapon," he says enthusiastically. His eyes widen with excitement, and he talks quicker and quicker. "The Chinese cavalry riding to the rescue. I have very high hopes for China because they have embedded high scientific capabilities in their leadership class. They know this is serious. And they are acting much faster now than we are. They have it within their capabilities to come back in 30 years with the guarantee of complete energy independence – all alternative and sustainable for ever. They have an embarrassment of capital. We have an embarrassment of debt. So they can set a stunning pace, which they are doing. And they could crank it up. To hell with their five-year plans, they should move up to 25-year plans. They would have such low-cost energy at the end of it they'd be the terror of the capitalist system. Low energy and low labour, that's the ball game."
But he argues that there is no reason why the west can't compete. "Anyone who says government can't do this, or can't do that, I say a pox on you; have a look at the Manhattan Project. They did remarkable things. They stuck the brightest minds out in the desert. They were herding cats with great egos, but it worked. If we did that on alternative energy, we'd be home free."
Read a longer version of this interview, discussing the books he's currently reading and his views on austerity and Superstorm Sandy, at guardian.co.uk/environment on Monday
