Grantham Tells Investors Climate Change Will Trample Them

Jeremy Grantham

Jeremy Grantham is as passionate about climate change as they come in the industry, enough to allow him to think that climate change will trample our portfolios somehow.

There are countless folks who want to tell us all about how bad climate change will be at a time where both they and many of us won’t even be here anymore. It is not that thinking about preserving our planet beyond our stay is foolish, and it’s not unreasonable at all to take more responsibility for the welfare of future generations and want to make a difference.

We don’t have to look 50 years down the road or more to see the effect of this now, when we look at how we have overtaxed our ecosystem and are turning it into a dump more and more each year. Somehow, the present and near term has been set aside quite a bit in our quest to look far down the road, and there are some pretty big issues that will hit long before climate change will be that big of a deal, our losing our water supply and seeing so many people die of starvation as a result for instance.

No one talks very much about the role that overpopulation is playing in these dark scenarios, and the most fundamental problem we have as far as the world’s resources go is just how many more people that we have than our planet will support. This issue will be decided one way or another though, although we may prefer to at least look to minimize the culling of our population by way of watching them die.

Jeremy Grantham, co-founder of asset manager GMO, has appointed himself a champion of climate change in the investment community, and is doing what he can to get us to invest in more eco-friendly stocks, even though buying stock is in no sense real investing and makes no difference at all to the real world, something a lot of people don’t understand.

This is nothing new for him as he’s been on his soapbox about this for a long time now, and no doubt obtains some real personal satisfaction from his crusade even though none of this could ever help or even affect climate change. When you pretend, as long as you believe, one person may end up satisfied at least from the illusion.

We’ve written on this before, but his latest remarks are well deserving of another article on this. Perhaps in a moment of weakness, during a recent interview where his passion about these issues got the best of him again, he is now telling us that “climate change is going to trample through your portfolio and kick its ass.”

This takes the game to a whole new level, where we’ve now gone from his telling us that other people should hold the stocks of companies that he objects to, which makes no difference, to telling us that our portfolios are in danger now from all this.

We’re not even sure how this is supposed to be even possible, but some people scare pretty easily, so we can’t just let him make such remarks and not at least try to understand what he could be even talking about here.

We’re left to speculate on why he thinks that climate change now has our portfolios in jeopardy in any way right now, as he follows this remark with his view that our wanting to pursue our own advantage is the mark of a sociopath. Placing these thoughts side by side is actually pretty amusing, because he’s trying to appeal to our self-interest on the one hand by wanting to protect our portfolios and our getting our ass kicked, and then telling us that we should want some of this lest we act like sociopaths.

The self-interest part has nothing to do with investing, other than it is presumed that we invest to promote it. Provided that you understand that this cannot be about more than your making or losing money personally, unless you are a masochist, your intention at least is going to be driven purely by self-interest, which cannot be divorced or even diminished from the investing process because this is the reason that we do it or would ever want to do such a thing.

Grantham may prefer that we cut back on our carbon footprint for instance, in deference to future generations or to promote a sense of satisfaction, but none of this has to do with what is supposed to be the topic at least, investing.

It is worth mentioning though that this attitude is not even useful in promoting his social goals, as when the view is presented this way, demanding others replace their own preferences with yours by trying to berate them, as he does, will only serve to further polarize things.

Provided that we wish to confine our discussions to what is rational, which very often is not a requirement at all, we need to realize that self-interest is much broader than Grantham believes, and is actually the outcome of rational thought itself. Acting requires an incentive, and whatever this incentive may be, whether it is building our bank accounts or making the world a better place, all comes from self-interest.

Otherwise, we would be asking people to act in matters against their interest, which makes no sense at all. If we allow ourselves to get emotional enough, it can seem to be, but if you really want to convince someone, you need to provide sufficient reasons to stimulate their interest enough to have them choose what you wish them to.

If We Wish to Change People’s Behavior, We Need to Appeal to their Interests

These incentives are sometimes measured in monetary gain, but they all fall into what we could call a pursuit of happiness or satisfaction, which includes helping others or the world if that makes us happy. When you ask people to act in a way that makes you happy but they are not made happy as well, wanting to simply impose your preferences upon others, that’s what you call overly selfish.

If you want to drive people away from your views, there is no better way than this to do it. The most you can do is to explain your views and perhaps ask them to find it in their hearts to support you, but if you fail and they do not find it, you shouldn’t then just want to smack them around instead.

It would certainly benefit the world if we worried about the future more, and while the climate change movement has gathered a whole lot of moral support, this is happening at the expense of some other big issues that will affect our future, most notably our running out of land and water to feed our people.

When the appeal is just focused on it getting a little warmer in the future, and perhaps some coastlines going underwater someday, that’s actually not that big of a deal and does not involve them making their arguments convincing in the eyes of many. The fact that their findings are also a matter of some dispute doesn’t help matters either.

Grantham needs to be applauded for at least mentioning that the biggest problem with climate change is how it will harm agriculture, although if that is our view, it’s difficult to imagine why we wouldn’t want to run with this ball further, and not miss the bigger crisis that is approaching much more quickly than climate change, which is our losing the ability to feed a population base that continues to explode. We’ve sucked most of the water out of the ground for irrigation, which we are addicted to, and this will be a very big deal soon.

None of this has anything whatsoever with investing in stocks though, and since that is again supposed to be the topic here, we need to turn away from all of his side conversation and look at how this actually may affect our portfolios.

Grantham points out how declining oil stock prices are affecting people’s portfolios, but regardless of the reason why this is happening, the issue here isn’t climate change, it’s bad investment decisions.

If we were dumb enough to hold on to dying stocks to the point where they kick our ass, it’s not climate change that has done the kicking, we got kicked by choosing to hold bad stocks. We did not have to take this beating, but for whatever reason, we have chosen it, and have no one to blame but ourselves for these fates.

Climate change or any other factor that may affect the companies that we hold stock in will play out in the prices that our stocks trade at, and whether we give a damn about these issues ourselves, we always have self-interest to rely on to allow us to simply choose not to be harmed financially from these things.

The message here instead needs to be that if you hold stock in companies that are prone to being beaten down by climate change or anything else, when we see this happening, we should look to step aside.

This cannot mean something that might happen 50 years from now though, and this is where Grantham really loses his way. He suggests that some stocks may be beaten down long after we are dead and this is supposed to be something that we need to act upon right now.

He also thinks that our wanting to own stocks he likes will help as well. He is putting his money where his mouth is and expects us to follow his lead. Investing in stocks is a financial decision though, and Grantham may think that his ideology should take preference, and he is welcome to this view, but it really does not have any substance at all behind it.

There surely is a segment of the investing population that may derive some additional satisfaction by holding stocks in “green” companies, and Grantham is preaching to the choir in speaking to them, but we owe it to them to at least explain that their doing this has no effect upon the world at all. If they still wish to pretend otherwise, like kids who suspect Santa Claus does not exist but still choose to believe because it makes them happier, that is their choice.

We should not want this whole thing to be set out in such a way that portrays it as a moral drama between the forces of good and evil and then think that we’re doing anything to influence this by holding the stock of one company over another If the battle cry was instead to get people to actually invest in these greener companies by putting up venture capital, now we’re at least at the point where our investing may make some sort of difference,

This is the battlefront where these people need to be fighting on, not the stock market, where their sabre rattling cannot even possibly produce any positive change or any change for that matter.

We Can’t Get Kicked by Stocks Unless We Allow Them To

We’re still left with the matter of climate change kicking our portfolios though, and although there are already cases where certain types of stocks are being beaten up, it’s the “beaten up” part that matters if we want to avoid taking one ourselves. When stocks are being beaten up, we need not even wonder why because it is time to go regardless.

If we are supposed to be advising people financially, as Grantham is presumed to be doing in his role, we owe it to them to at least try to provide sound advice and not rely on just looking to scare them beyond any reasonable level of merit.

Perhaps ABC, that is more in harmony with Grantham’s long-term views, will be more bullish in 2050 than XYZ, a company that is doing much better now but is expected to fade in 2050. It is not 2050 though, and if we are worried about such a thing, it has to at least be happening for us to have a reason to want to not be involved in whatever punishment will be delivered.

It is a lot like Jeremy Grantham fired up his Delorean and took a little trip into the future, and came back with some stock recommendations. Unless we are going to be joining him on his next trip and will be investing some money in the future where this may all be playing out, we might care about what is to happen but this has no bearing on us today financially.

In fact, if we look away from the present here and take paths that will not provide us with what we want now in favor of perhaps being up more decades from now, this does not make any sense as we could just go with whatever is working at the time instead and at least look to achieve our goals of portfolio growth. If you want it kicked, looking away from it is perhaps the best way to have this happen, especially when we’re complying with demands such as Grantham’s to ignore the relevant and embrace the irrelevant.

We especially do not want to make the mistake of thinking that people need to sell now to avoid financial circumstances that are far into the future, and then think that we cannot extract ourselves from these battles easily enough. Those who have been pounded by falling oil stocks did not need to choose this, and their continued willingness to subject themselves to whatever ultimate harm may arise is all by choice.

If, instead, we tell people that if they don’t get out now, in a situation where there is no present danger, and things turn sour one day, they will be forced to hang on and pay the full price here, we at least need to realize that there aren’t any laws forcing you to hold stocks past their time. This therefore should be a contingency plan at best, not a current problem that we believe needs to be addressed long before we even need to worry about it.

Investing is all about self-interest, whether Grantham likes it or not, and if he wants to have us join his cause, he at least needs to confine his appeals to not only our own interests but what may make sense for us to do in order to promote them. He has much work left to do.

Self-interest is in fact king. You won’t win the favor of a king by looking to take up arms against it and think that you can bring the king down by spitting paper wads at it, no matter how good this makes you feel.

Eric Baker


Eric has a deep understanding of what moves prices and how we can predict them to take advantage. He also understands why so many traders fail and how they may help themselves.

Contact Eric: [email protected]

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