One of America's top fund managers believes that humanity is in "the race of our lives". British-born Jeremy Grantham is one of the founding partners of GMO, a US money manager that looks after more than $100bn worth of investments.
In recent years, 74-year old Grantham has become increasingly convinced that the most important challenge for society and opportunity for investors is how to change our ways and escape from our current, unsustainable use of natural resources.
Regardless of your views on climate change, Grantham's latest quarterly letter makes some pretty compelling and depressing arguments. Put simply, if current rates of population and economic growth and the subsequent depletion of resources and damage to the environment were to continue, our current mode of existence would "self destruct".
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
If that sounds implausible, warns Grantham, we should remember that "reckless use of resources and natural systems [have] brought down so many civilisations before ours".
But Grantham isn't entirely pessimistic. We have, he says, "two extraordinary lucky gifts that were not available to any prior stressed civilisation". One is declining fertility rates as countries get richer, women have fewer children, giving hope that population levels may fall to more manageable levels.
The other, more obviously investable silver bullet', is renewable energy, says Grantham. Solar and wind power, combined with more efficient electricity grids and improved energy storage, are the first examples of a technological leap forward that could be accompanied by lower energy use, says Grantham.
"For once, all of the innovations, corporate start-ups, and risk taking, the best parts of the capitalist system work to decrease our use of depleting hydrocarbons and therefore to increase our chance of stabilising our civilisation."
Of all the renewable technologies Grantham is most optimistic about solar energy. Over the last decade we have seen a "truly remarkable decline in the cost of electricity from photovoltaic cells", says Grantham.
Grantham draws parallels with Moore's Law' the observation that (loosely speaking) advances in technology help half the cost of computing every two years. "If the physical limits on photovoltaic efficiency, and hence its price, are similarly manoeuvred in future decades, then the price of photovoltaic energy would guarantee us cheap and plentiful energy forever."
Grantham is less optimistic about wind energy, believing that the increasing costs of the raw materials such as steel, cement and aluminium - needed to make wind towers, means that wind energy will cost more in 2025 than it did in 2000.
He also had a dire warning for coal investors. In coming years it will become ever more obvious that the carbon dioxide produced by coal, "imposes the increasing costs of rising global temperatures: unstable weather for crops and rising costs of more weather-related events."
If society eventually starts charging coal producers for the costs of offsetting these factors, says Grantham, then coal "is likely to be a hopeless choice for electricity generation in 20 years".
So anyone considering investing in coal today should bear in mind that many of the assets may well end up being "stranded" ie they will not have "time to make a positive return on their investment before they will have become uncompetitive or illegal".
