Jeremy Grantham: investors are waking up to climate change

Investors are starting to pay attention to the risks that climate change poses, says Jeremy Grantham of US fund manager GMO.

"As climate change has become increasingly problematic... the investment community is starting to pay attention to the investment risks it poses," says Jeremy Grantham of US fund manager GMO. The good news is that "you don't have to sacrifice returns in order to invest in companies helping the world address climate change". Prices for many firms in the sector look reasonable relative to their prospects. "Despite strong growth projections, the climate-change sector has generally been trading in line with the broad equity market."

While US president Donald Trump's decision to pull America out of the Paris Agreement was seen as a big blow for the sector, "climate change is a global problem... and rather than wavering on their promises, other countries have instead rallied together to reaffirm their commitments". For example, "Germany, France, China, India and others are setting goals to eliminate internal combustion engine vehicle sales within the next two decades or so, and many countries are targeting dramatic increases in renewable energy capacity".

In any case, public subsidies are just the "icing on the cake". Even without subsidies, "we are approaching an inflection point where clean energy solutions will be cheaper than conventional alternatives". Indeed, "various projections indicate that electric vehicles will be cheaper than internal combustion engine vehicles within five to ten years", making them "an economic no-brainer". This, alongside "a growing global awareness of the magnitude of the problem we're up against, will support secular growth in the climate-change sector for decades to come".

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues 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

Sign up
Dr Matthew Partridge

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri