Q&A: Why I’m Investing in Climate Science

Jeremy Grantham is used to assessing risk. As chairman of the Boston-based investment management company GMO, he’s responsible for assets worth $140 billion. These days he’s worried about climate change, but he’s not just wringing his hands—unlike most people, he’s investing his own money to prepare for change. Most recently, he’s announced a £12 million ($23.6 million) donation to establish the Grantham Institute for Climate Change at Imperial College, London. The money will come from the Grantham Foundation for the Protection of the Environment, which has already supported a wide range of organizations including Greenpeace and the World Wildlife Fund. He spoke to NEWSWEEK’s William Underhill. Excerpts:

NEWSWEEK: You’ve given generously to environmental causes. Why such interest?
Jeremy Grantham:
It started when we first had some money and finally went to some fairly exotic places with children, about 20 years ago. It was the same story [of environmental degradation] wherever we went. You pretty soon realize: we have met the enemy and he is us. We are really doing a disastrous job with the planet.

Part of the solution must lie with business. How can you persuade industry to adopt greener strategies?
I’m in the financial business and you can’t help noticing that the early movers in the green business tend to be the early movers in almost everything else. They also tend to be more successful: they do best in the stock market and their earnings rise the fastest. It’s usually the Toyotas, not the GMs, that lead the parade. They can see that being a leader on the environment will be good for your image. It identifies you as someone ahead of the curve.

And there must be gains, too, for the ordinary citizen?
I would think the first quarter of what we need to do would actually yield a positive return on investment. The classic example is changing your light bulbs. When you change to the new energy-efficient bulb it has a magnificent payback. It uses 10 percent of the energy [of a standard bulb] and lasts longer.

Much research is already under way into climate change. What do you hope your new institute can contribute?
The scientists will be able to do more good science, but they are also very willing to engage a little more in intelligent communication than is their wont. The big problem with the environment isn’t the lack of good science: it’s getting people to listen to the good science. Some resources will also go into summarizing all the research that’s going on around the world. It could be a one-stop shop offering a summary of the scientific consensus and the range of serious opinion.

You have also funded a prize for environmental journalism.
The whole environmental world has been losing what I like to call the “propaganda” war. The enemy has done a wonderful job—especially in the U.S.—in obfuscating the critical data and obscuring all the damage that’s been done to the environment—not just through climate change. I thought we had better look out for people who have a flair for communication.

So far, the media has largely focused on limiting the effects of climate change. Shouldn’t we be thinking more of how we can adjust?
Yes, we do have to spend more of our resources looking ahead. We probably won’t win this war—and if we do it will be long and heavily compromised. We are going to have to learn to live with a lot of consequences, and timely planning will save a lot of pain and suffering.

Have you adjusted your company’s investment strategies to match your views?
We have absolutely no right to impose our own ethical standards on our client base. If Exxon is a brilliant profit maximizer, we will buy [its stock] when it’s cheap. But I can make it devastatingly clear [what I feel].

In the end, how can we be sure of the science?
For unforeseen scientific reasons, carbon dioxide might even have fairly benign consequences in the long run. [On the other hand,] there are very smart people who think our goose is already cooked. But even if you think we can muddle through quite nicely without doing much, you still have to act on the consequences as if you are wrong.