Jeremy Grantham: We Are Not Equipped to Deal with Climate Change

We will completely de-carbonize our economy this century, and it will be the biggest economic event since the Industrial Revolution, according to Jeremy Grantham. But we face a painful path to that end, including more frequent natural disasters and disruption of our food supplies.

Grantham spoke at the Morningstar Investment Conference on June 12. He is the co-founder and chief investment strategist of Boston-based Grantham Mayo Van Otterloo (GMO). He is an investor with 50 years of experience in the markets, and he is widely recognized for predicting the asset bubbles that led to the 2000 and 2008 recessions.

Grantham presented his predictions about how climate change and the advance of technology will impact markets. According to Grantham, accelerating climate damage will define the future of the global economy.

But luckily, technology will help us.

Grantham said that he has 98% of his personal net worth allocated to two foundations in this space. “I am all in on the topic of climate and toxic damage to the environment,” he said. He is also part of GMO’s asset allocation team, which launched climate change funds discussed in this recent interview with Advisor Perspectives.

In his keynote address, Grantham reviewed his forecasts related to the future of climate change. “You could call this presentation the story of carbon dioxide and homo sapiens,” he said.

According to Grantham, fossil fuels have played a very central role in the development of civilization. But the Industrial Revolution was not based on the steam engine, he explained. “It was based on the coal that ran the steam engine,” he said. “Without coal, we would have very quickly run through all our timber supplies, and we would have ended up with what I think of as the great timber wars of the late nineteenth century.”

“Fossil fuels will either run out, destroy the planet, or both,” he said. “The only possible way we can avoid this outcome is, frankly, to complete de-carbonize of our economy.” This will be the most significant economic event since the Industrial Revolution, Grantham predicted.

Here are Grantham’s four major predictions about climate change.

  1. We will have an abundant pipeline of cheap energy thanks to technological advances

Lack of green energy will not be the issue that brings us down, according to Grantham. Advances in technology, particularly the technology of de-carbonization, are accelerating, he said.

“When we come back in 40 years, I'm pretty confident that there will be a decent sufficiency of cheap green energy on the planet,” he said. “In 80 years, perhaps, it is likely we will have full de-carbonization.”