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Jeremy Grantham, of Investment Management Firm GMO, Says Capitalism Cannot Save Us From Climate Change

By:
Chris Gaetano
Published Date:
Jun 13, 2018
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Jeremy Grantham, the founder and chief investment strategist at investment management firm Grantham, Mayo, Van Otterloo & Co. LLC, said that climate change will be the biggest challenge humanity faces in the coming years, and that the capitalist economic system is unequipped to meet that challenge, according to MarketWatch. During a speech at Morningstar's annual investment conference, Grantham, whose firm has about $16 billion in assets under management, said that fossil fuels will either run out or destroy the planet, and so he called for what he said was a complete de-carbonization of the economy. However, he didn't seem to think that markets by themselves could be relied upon to accomplish this because of the nature of the capitalist economic system (private ownership of value-bearing property). Corporations, he said, are driven to maximize profits (echoing Nobel Prize winner Ronald Coase who said firms exist essentially to minimize costs), and firms will not focus on sustainability if it means sacrificing profit. He also pointed to the short-termism of many firms, saying that capitalism has a problem with long-term value due to what he said was the tyranny of the discount rate, adding that grandchildren don't have a market value. While he said he was encouraged by the growth of the renewable-energy sector, he thought  that much of the damage has already been done. Still, he said, companies must work to prevent the problem from getting any worse.