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Investing Prophet Jeremy Grantham Takes Aim at Climate Change (bloomberg.com)
127 points by mooreds 3 months ago | hide | past | web | favorite | 94 comments

>With topsoil disappearing at a rate of 1 percent a year and “only 30 to 70 good harvest years left depending on your location,”

Well, that's definitely a scary framing. Does anyone have sources for this specific prediction?

Aside from launching his (for-profit) climate fund, (for-profit) vc investments, and funding research, I'd be very interested in more details on how the money will be used.

There are solutions to this- driving through eastern Colorado and west Kansas you'll find many farmers using no-till techniques and planting winter cover-crops that create topsoil and increase soil quality. Farmers have a vested economic interest in keeping the soil productive.

Meanwhile from what I understand from talking with some friends in agricultural engineering in places like California where farmers expect to be pushed off their land eventually by rising land prices they are using destructive practices to extract as much as they can before they go defunct.

The USDA is offering incentives for good soil stewardship and the 2018 Farm Bill featured a number of soil health policies, such as restrictions on pesticides and a soil carbon pilot program: https://www.nrdc.org/experts/mae-wu/final-farm-bill-blossoms...

> in places like California where farmers expect to be pushed off their land eventually by rising land prices they are using destructive practices to extract as much as they can before they go defunct.

Assuming the land is going to be used for non-agricultural uses (residential/commercia, covered in some material in some way) and "destructive practices" means over-farming, but not otherwise polluting or causing damage, I'm not sure I see a problem with that (but I may not be thinking of some consequences).

Then again, that's a lot of assumptions...

There may be a tiny minority of farms in pristine locations that will eventually get pushed off their land, but I suspect the vast majority are in areas where the land is absolutely undesirable for anything besides farming. If you've ever driven across California's central valley you'll know what I mean.

California will one day be uninhabitable by 99.999% of the population. The rich will have to fly in day workers. It would be a good time to start investing in drone taxis, I suppose.

Downvoted for hyperbole.

Current world population about 7B, 0.001 of that is 700,000. That's less than the population of San Francisco.

If we do this with just the US population, you get about 3000.

“Tree Crops: A Permanent Agriculture”, by Russel Smith (1929) is an excellent, well sourced book on the subject. The title also hints at the origin of the term “permaculture”, popularized by Bill Mollison.

There’s a lot of solid scientific evidence out there for soil repair as carbon sequestration; in fact the appendix of the IPCC report that shook the world last year lists soil repair as one of the top things we can do to address climate change.

1: https://www.goodreads.com/book/show/714112.Tree_Crops

I was just about to post something similar. From what I've been reading, fully optimized land management can both sequester an enormous amount of carbon and provide better crop yields.

The scary part is that even if you cannot provide food to even, let's say 3% of the human population, it will create massive destabilization, initially in the part of the world affected, then globally. I remember that at the start of the various Arab Spring revolts, protests were about the cost of food.

I have never been to Egypt, and maybe I have a distorted view of the situation there, but I don't understand how it can sustain a population of 100 millions, on basically a thin strip of arable land around the Nile surrounded by a huge barren desert. It can not be sustainable.

First of all, the Nile basin covers 32% of the area of Egypt (330 000 km²), which is a bit more than the size of Italy who supports a population of 60 million.

Secondly, due to the climate they also get two-three harvests per year.

That said, they still import nearly 20% of their food - https://tradingeconomics.com/egypt/food-imports-percent-of-m...

Thanks, it put things in perspective.

The river quite literally brings life to that 'thin strip'. Without the Nile it would be desert.

Isn't food instability a contributing factor to the crisis in Syria?

From what I understand it led to (young) people leaving the countryside to live in cities. This lead to large congregations of unhappy unemployed young people, all new to a particular area. These people then grouped up and protested about the ruling regime, which was the start of the current crisis.

Exactly, that's a good summary as far as I understand it. In other words, we're already seeing the impacts of food insecurity as a result of climate change and it will only get worse from here.

None of the previous comments on this topic indicated that the food instability was caused by climate change. Are you just assuming that?

From what I can recall it is due to an overlong drought. This could be due to climate change or not.

There are arguments from both sides: https://www.inverse.com/article/25318-aleppo-syria-conflict-... http://www.sussex.ac.uk/broadcast/read/41428

Also worth remembering that something as complex as the Syrian Civil war is bound to have multiple causes.

I'm not sure if you have to verify as some sort of investing class to access but GMO (Grantham's fund) has a lot of papers published. This: https://www.gmo.com/docs/default-source/research-and-comment...

has that quoted figure and references this: 2 D.R. Montgomery, Dirt: The Erosion of Civilizations, University of California Press, 2007.

> Generating three centimeters of top soil takes 1,000 years, and if current rates of degradation continue all of the world's top soil could be gone within 60 years, a senior UN official said on Friday.


> "Generating three centimeters of top soil takes 1,000 years,"

Such a vague assertion leaves me with more questions than it resolved. Topsoil should properly be measured in volume, not distance. Presumably they mean a given area will gain three centimeters in 1,000 years, but what area and under what conditions? There are some environments with zero topsoil and some environments with quite a lot of topsoil, so is that "three centimeters per 1,000 years" figure a global average for natural topsoil renewal? I can't imagine how that's a valid measure of anything. You'd have massive regions totally devoid of topsoil like the Gobi Desert dragging down global averages.

And what about anthropogenic topsoils? Maybe one of the most famous examples is terra preta in the Amazon, which not only is madmade but reportedly regenerates itself at a rate of 1 centimeter per year (a few hundred times faster than that "3 centimeters per century" figure..)

It's also just wrong.

Maybe this is true under "natural conditions" (however you want to define those). But intentional farming practices can produce this much top soil every year. The problem is that few farmers use those practices. But I do, and I can tell you that planting green fertilizers and nitrogen-fixing cover crops, and then plowing them under, will produce pretty good topsoil very quickly.

Yep. You can definitely "grow" topsoil very very quickly. Similar to the ratio between the productivity of land for hunting-gathering and agriculture.

Source: Farming & gardening background in the midwest.

> Topsoil should properly be measured in volume, not distance.

Presumably topsoil generation is proportional to land area, and volume per unit area reduces to distance. 3 cm per 1000 years is equivalent to 30 m^3 per km^2 per year.

That said, the number still seems wrong. Table 5.2 in [0] indicates that regeneration rates range from 0.25 mm/year to 2.0 mm/year. 3 cm per 1000 years is equivalent to 0.03 mm per year, almost an order of magnitude lower than the lowest rate in that table.

[0] http://www.fao.org/docrep/009/t0733e/T0733E06.htm

> Topsoil should properly be measured in volume, not distance

Should it though?

And regardless of how clear or unclear that is, I gotta say I dislike seeing when the sum of a multitude of reports is expressed in a headline, only for people to nitpick through it without even attempting to check the actual methodology for themselves.

1 cm/year is 33 times faster than 3 cm/100 years, not a few hundred times faster.

AFAIK terra preta is far from fully understood, and farther still from being widely used. Very cool stuff though.

Only responding to the one part of your comment, it was 3cm/1000 years, so a few hundred (333) years was accurate.

You are both right, farmers measure rainfall in inches, (which translates to inch acres) so it is both a mesurement of distance (inches) and acres (how many they own) think of centimeters per year the same way. Yes topsoil can be made much faster than these numbers given but there are consiquesnces, methane is released from the process of composting which is 19 times the greenhouse gas than the CO2 released from burning. Also the volume is affected by soil compaction and the production potential is affected by increased salinity from unused fertilizer, the outlook is scary but humans always adapt.

> "ROME (Thomson Reuters Foundation) - Generating three centimeters of top soil takes 1,000 years, and if current rates of degradation continue all of the world's top soil could be gone within 60 years, a senior UN official said on Friday."

The article is crap, it doesn't answer any of my questions. You think I didn't check it before I commented? It quotes Maria-Helena Semedo throwing out that figure without any clarifying context or explanation. Without saying where it came from or what it's actually a measurement of.

Also, three centimeters per one thousand years is much slower than three centimeters per century.

The statement was about the global reserve, so clearly these are all global averages.

I don't see volume being very natural reporting unit as farming usually counts by area, so reporting a total volume just forces everyone to convert to length themselves.

You want more details, read the Status of the World’s Soil Resources report: http://www.fao.org/3/a-i5199e.pdf

Farmers know their area, so when they count rainfall in inches it's implicitly volumetric.

The problem with that UN official quote is the area being talked about is poorly defined. Is it the global average for all farmland, or the global average of all land area (including Antartica?) The official doesn't clarify, but it matters because if it's the later that number is obviously being suppressed by regions that lack topsoil and were never considered arable in the first place. How long does it take the sand dunes of Gobi desert to create a centimeter of top soil? And I'm sure permafrost regions create new topsoil at an absolute snails pace if at all (although global warming might change this!) It seems obvious that regions like this will make that global average number seem a lot more dire than the situation actually is.

Don't get me wrong, I'm confident that topsoil erosion is a real problem that needs to be addressed. But I think that number; without the official providing any clarification, justification or context for it; qualifies as alarmism. It's obviously not going to take farmers 1,000 years to regenerate three centimeters of top soil on their fields.

I can't wait for the final report of the IPBES, alias IPCC for Biodiversity. I've heard that the conclusions should be even direr than the IPCC's reports on climate change and will require more urgent actions than the one needed to limit/decrease CO2 emissions. When the media will start writing about it (there's a word for that: anthropocene), we'll realize that the two must be fight at once (and fast), and that we'll have to completely reinvent our industrial system in a few decades. IMO, no civilization has ever faced such a challenge, and this time, it isn't a country/empire/species at stake but the biosphere's. Buckle up !

There’s a permaculture technique called Keyline Irrigation — one of its claims is that top soil can be generated at a much quicker pace as the result of a practice known as subsoiling, wherein a large blade cuts deep grooves into a field. The blade cuts plant roots which in turn decompose, and aerate the soil, providing pathways for water to infiltrate.

It hasn’t been scientifically validated. Anecdotal reports from farmers like Mark Shephard are that it works. [1]

1: https://books.google.com/books/about/Restoration_Agriculture...

"> Generating three centimeters of top soil takes 1,000 years, and if current rates of degradation continue all of the world's top soil could be gone within 60 years, a senior UN official said on Friday. https://www.scientificamerican.com/article/only-60-years-of-...

Ridiculous claim made by "UN official". Sad state of modern journalism. Are we 6 cm away from discovering Roman artifacts in any of the fields across Europe? Or we have to dig a bit deeper?

Does anyone really believe that?

Not anyone who ever had a large compost pile in the backyard...

>Well, that's definitely a scary framing. Does anyone have sources for this specific prediction?

I read somewhere that the energy required to produce a unit of basic food products (say, wheat) has been multiplied multiple times over the last centuries because of overuse and pollution - despite the high efficiency of current machines and chemical fertilizers. I can't find the source but would be glad to find it or a refutal.

I don't believe that study was regarding climate change but rather the unsustainable nature of modern agriculture. I am a hobby farmer and have done some study into the nature of fertilizer, problem is that our fertilizers destroy the soil and so each year it requires more ferts than the prior year. I believe that the study was referring to this trend.

I agree. The more I read about climate change, the more I realize it's only one part of the anthropocene - so I often end up mixing the two. Anyway, if you do have a source for the diminishing returns of energy use to produce food, please share!

I have reread this article as some of the comments made me question whether or not I understood it or not. I had assumed that Jeremy Grantham was investing his wealth to save the planet, this was the conclusion that the author presents at the end of the article under the title "Bottom Line". But this is not necessarily the case, Mr. Grantham is investing in technology that will show a profit because of climate change, it is a subtle difference but an important one to consider, sort of the grain of salt that should be taken with reading of the article.

> Mr. Grantham is investing in technology that will show a profit because of climate change, it is a subtle difference but an important one to consider, sort of the grain of salt that should be taken with reading of the article.

I bookmarked this NY Times article years ago:

"Can Jeremy Grantham Profit From Ecological Mayhem?"


That title puts his position in a bit different light. I haven't read this one yet but it would be interesting I guess to diff the two articles to see what has changed over the past 7-8 years.

It's definitely the case that Capital will profit--in the short term, of course--from climate change, and there's a good argument to be made that Capital is perpetuating the cataclysmic destruction of our system for such profits.

Check out [This Changes Everything](https://www.goodreads.com/book/show/21913812-this-changes-ev...).

Well I'm going to recommend not checking that book out because it is of exceedingly low quality and not worth your time. Unless you're looking for something to reaffirm your existing leftist biases and dogma and not make you think uncomfortable thoughts, then it's pretty good.

Yeah, reading books written by people whose politics you disagree with is bad!

While many will disagree with the take that capitalism & prosperity is incompatible with counteracting climate change, she does identify some real problems with cap & trade schemes. It is inconvenient that meeting global emissions targets will require significant lifestyle change in developed countries.

The alternative to lifestyle change is massive ecological damage. Therefore, this is what will happen, as we're not about to give up pickup trucks and rapid growth just because someone will have to pay big interest on it later. So the real deficiency of the book is the idea that we will somehow have a revolution of equality.

The style is also a bit over rich. There is a failure to even mention, let alone examine, renewable energy growth.

That's somewhat ad hominem. (Well, ad librem. Tomatoe, tomatoh)

I'm not asking for a detailed critique, but what, in your opinion, is a good book discussing the intersection between capitalism and climate change?

Can Life Prevail? by Pentti Linkola.

I'm confused at all the comments focusing on the fact that he intends to make money from this because... so what? Making money is not a bad thing, and he still intends to accomplish good things. One doesn't need to be a martyr to be virtuous.

While giving away $1 billion, Grantham’s planning to make even more money, and he’s hoping climate change offers the opportunity.

The key sentence, buried halfway through the article...

Not sure why this is getting downvoted. That quote does come from the article and it's is a very real concern. This article seems to be about Grantham's new investment strategy disguised as philanthropy.

Not really new for him. He's discussing and working on climate change for a long time, go check some of his prior letters to investors.

It's not new, however, it is an investment strategy. Investors at this level are very good at "talking their book." Because doing so helps their investment. I am not suggesting that giving away $1 billion won't help climate change. I'm merely suggesting that Grantham may have other motives for giving money away.

Hmmm. I think that aiming the power of capitalism at real problems is a good way to go (the cap and trade system of SO2 in the NE being the canonical example: https://en.wikipedia.org/wiki/Acid_Rain_Program ).

I agree the lede was buried, but don't have any trouble with Grantham making a boatload of money helping solve big problems.

I'm pretty sure this is the ultimate dream of "woke capital" -make a ton of loot while appearing to be virtuous. Probably others who are doing the same dislike the veil being lifted.

Just as vast fortunes were made during the financial crisis of 2008 by selling the markets short ( see the film "The Big Short") I would expect there are people betting on climate change continuing down its current tragectory, and these people now have a vested interest in making this happen. I don't know how many other billionaires are putting their money on the pro climate change side but wouldn't a smart investor diversify their portfolio by betting on both the pro and con sides of climate change?

I don't know what the form of such investments would take but can think of a simple one being investing in real estate northern regions where temperatures are currently too cold to support agriculture. Possibly an investment in water desalination plants would also see a gain from climate change. I'm sure there are many more better examples, my concern is that for every billionaire looking to save the world, there is another looking to make a buck off its collapse. So what happens when more of these profateers decide to use their vast fortunes to tip the scales further towards the collapse rather than salvation?

Logically speaking this amounts to betting that the Titanic will sink on its maiden voyage, while you’re stuck on the Titanic.

No, it’s betting the titanic will sink while you know you’ll be dead before it starts sinking.

Haha, man, would that be a terrible way for the human race to go. Driven to extinction just because a few men really only cared about their own lifetimes. It would be highly amusing.

You're supposed to diversify your portfolio by betting on uncorrelated things. Betting both that something will go up and down is like placing money on both red and black, it doesn't make you any richer.

Can’t you construct a bet that a price will either go up or down, but not remain steady? I believe that’s called a long straddle but I’m not super knowledgeable here.

yes, but that severely limits your upside, and it’s harder to thread the needle (in both timing and pricing).

In a straddle/strangle you have unlimited upside on both legs (up and down/call and put). It’s a matter of determining if the long gamma+long volatility position is worth the price you pay in option premium up front and decay thereafter (theta).

that's true, and a more complete explanation.

i was taking the practical view that in most cases, the underlying options are reasonably priced and volatility is not highly unusual, so the practical upside is small at best. it's easy for the non-professional investor to lose money on these because you really need some extraodinary non-public information to exploit them.

Doesn't make you any poorer either, if your rich you want to protect your wealth. I believe it is called arbitrage.


It doesn't seem intuitive but there it is.

Incorrect. Arbitrage is risklessly taking advantage of contemporaneous price differences by buying in one place and selling in another at the same time.

OK, but I still stand behind my premise. Bookies make money regardless by which team wins. Casinos show profits betting on red and black simultaneously because of the zeros. And it happens all the time in much more complex way in markets.

Also the financial term I was thinking of I believe is called "Futures" and it is used to protect against large swings in currency values between countries. Inverters exploit this through arbitrage.

I think this is wishful thinking. It'd be neat if there was incentive on both sides of the debate, to bet both against and for the idea that climate change will happen. Unfortunately that's not how it is: the real direction of the change in climate will be the most profitable option, and that's where investors will flood. And yeah, that might cause a self-fulfilling prophecy (incentivizing and accelerating climate change), but that's just how it is, that's where we are. Maybe we can try to spread false ideas like yours to make investors think it's good to invest on both sides, but I don't have much faith in its potency to make real impact.

Could you clarify your statement? Are you of the opinion that the money is already invested on the side that climate change can not be stopped? Or the opposite?

I think you’re specifically thinking of covered interest rate arbitrage, in which a trader borrows in one currency at a cheap rate, lends in another currency at a more expensive rate and uses a currency forward to hedge out the exchange rate risk, netting the rate differential in the process. It’s not truly ‘arbitrage’ in the formal sense;there are still some notable risks in such a trade.

futures originated from commodities trading, where you wanted to lock in the price of a ton of corn or wool or whatever because you fear the price will go up.

you don’t need them for currency arbitrage. you just need very fast connections to multiple currency markets, low transaction costs, and mispriced exchange rates.

it’s riskless because the money itself is mispriced and you can buy it for one price (in your own currency) and sell it for another all in one transaction. you get the difference for free. that’s what makes it riskless and that’s what makes it arbitrage.

keep reading those investopedia articles, it’s all in there somewhere!

Bookies and casinos are set up so thatvit is mathematically impossible not to win.

Bookies make money because they run the game.

Even shorters need to make their gains from someone else. You are assuming that there are many people betting that climate change will not happen ? I think it’s safe to assume that climate change has been priced into the market.

I often wonder how much climate change is priced in. If climate change is a given, wouldn’t we see it reflected e.g. in the implied vols of super long-dated options or real estate in Miami? VCs would be placing bets like crazy on solutions. Markets just don’t seem to be assimilating this info to me. Wonder if there have been any formal studies on this.

I'm sorry I must have misread the article we are all commenting on, I thought "investing prophet Jeremy Grantham" wast investing the majority of his wealth in trying to stop climate change, maybe I'll read the article again. From your comment I'm way off, or maybe you didn't read it?

>he gives a talk titled “Race of Our Lives”—the one between the Earth’s rapidly warming temperature and the human beings coming up with ways to fight and adapt to climate change.

Or, the race between the cause coming up with ways to fight and adapt to the effect.

It's possible that human beings are the problem and climate change is the "solution".

"Prophet" who makes one horrifically awful market call after another. He was bullish in February of 2018 (right before implosion), after years of being bearish. What a clown.

Even a broken clock shows the correct time twice a day :)

As a former fund manager, I found his description of current capitalism quite close to my own. Particularly the bit where he says markets are good at a lot of stuff, but not everything.

Has anyone else had that sort of intellectual journey, where you discover libertarianism, you learn all the tropes, you feel very confident, and then after a while you pull back a bit after finding a few issues? And I suppose on the other side of the spectrum as well?

Well, Mother Nature did not read the US constitution. We will realize it sooner or later in life.

My philosophy is that one can still hold a mostly libertarian perspective regarding markets (particularly as tools) but with minor stipulations.

I hold that the government's primary role with regulating markets is to aid in the pricing of positive and negative externalities. In particular, a focus on pricing in and intervening for "harms" seems to be philosophically consistent (enough) for me.

Absolutely, contemplating some issues with Rothbards writings led me to something more resembling geolibertarianism.[1]

Reading the Wealth of Networks[2] probably helped to.

I guess I’m even more left now. But really I think it’s time for a synthesis of the left/right ideologies.

[1] https://en.m.wikipedia.org/wiki/Geolibertarianism

[2] https://en.m.wikipedia.org/wiki/The_Wealth_of_Networks

> Has anyone else had that sort of intellectual journey, where you discover libertarianism, you learn all the tropes, you feel very confident, and then after a while you pull back a bit after finding a few issues? And I suppose on the other side of the spectrum as well?

For most people, that transition happens between the teenage years and adulthood.

How many people know even the basic facts of political or economic history as young adults?

> For most people, that transition happens between the teenage years and adulthood.

No, I don't think it does. Certainly, you'll often encounter people going through the first phase of it (the discovery of and infatuation with libertarianism) in, say, the first couple years of college, but I don't think most people go through the whole arc (or even the first part) at all, much less most people going through it in the age window you describe.

Whenever I hear about "investing prophets" I call bullshit and stop reading.

If he is so prophetic why does he only have a billion instead of a trillion dollars? Why must we use such a click-baity word in our headlines? Bloomberg could just say "Investor Jeremy Grantham..."

> why does he only have a billion instead of a trillion dollars?


Going to get downvoted harshly for this, and I deserve some of it.

But let me say, is anyone else just slightly suspicious (don’t have to change your minds though and I agree with the science here) that investing billionaires, people who give truth to the saying “behind every great fortune is a great crime”, would actually be interested in the best possible thing for the world? Doesn’t that sound a little bit suspicious, like a hint from a life that something is afoot?

I think it might be healthy to introduce some doubt into the claims of billionaires no matter what they might be.

Of course you should be suspicious.

However. He just turned 80 and realized there's only so much he can do before he dies and that seems to have focused his priorities. A couple of quotes from the article:

> Grantham turned 80 on Oct. 6. Asked how this milestone shifted his perspective, he pauses. “There’s no quick one-liner on aging,” he says. “We know this is an urgent topic, and I know I don’t have that long to do it.”

And Grantham would probably even agree with you that we should be suspicious of capitalist interests:

> Climate change, politics, and capitalism became frequent topics of Grantham’s quarterly letters. In his view, the U.S. has been pushed into the grip of an unhealthy version of capitalism, one in which corporations put profits way ahead of all other considerations. “The social contract of 1964, when I arrived here, has been totally torn up,” he says. “Anything that happens to a corporation over 25 years out doesn’t exist for them. Therefore, grandchildren have no value.”

But even more important, your comment hints at the conflict between profit and ecological health, and I think it's the role of government to realign things so that they aren't in conflict — set up regulation so that if you follow them, what you do is genuinely good. From the article:

> While capitalism “does a million things better than any other system,” he says, it fails completely on long-term threats such as climate change. “You must not expect unnecessary good behavior from capitalists,” he says. The answer, he adds, is strong regulations: “I’m sorry, libertarians, it is the only way.”

Do you have any specifics on what you doubt about this? Your comment came across as vague to me

Everybody had "predicted" 2000 and 2008 in the financial industry. That statement means nothing at this point.

"While giving away $1 billion, Grantham’s planning to make even more money, and he’s hoping climate change offers the opportunity. "

I think that you might be on to something...

I got the impression from the article that this was more about framing it to appeal to investors. "We'll use your money to support green tech, and you'll also make a profit."

Grantham seems pretty personally committed to environmental sustainability for its own sake.

Bad/neutral people can still do good things if they take action on things that reward good deeds (with money).

That's why non-profits hire people to help reach their goals.

It's in Grantham's interest to encourage regulation that minimizes carbon emissions (because of his investment company's "Climate Change Fund").

Is it good or bad to set yourself up to profit from that?

Many non-profits are tax write-offs and money-laundering schemes, which I didn't want to get into too deeply as it is off-topic; but it is definitely related and not surprisingly, Grantham is involved in that, too...

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