I wish Jeremy Grantham had gone to jail

I wish Jeremy Grantham had gone to jail

Jeremy Grantham is the chairman of Boston-based GMO LLC, a global investment firm with more than $100 billion under management. He is not only a hugely successful investor, but also a person of the highest integrity and ethics. I like Grantham. So why would I ever want to see him in jail?

A little background: On Feb. 13 Grantham was with his daughter, Isabel, in front of the White House protesting to stop the Keystone XL pipeline. Isabel was one of the 48 protesters who were arrested for handcuffing themselves to the White House fence. Grantham avoided arrest.

And that’s unfortunate. Imagine if he had been taken into custody. The headline “Jeremy Grantham Goes to Jail” certainly would have grabbed attention. Perhaps those unfamiliar with the situation might have thought that some financial bigwig was finally getting his comeuppance. Yet the real narrative would have been even more shocking  a leading institutional investor behind bars for protesting against climate change, in particular against a pipeline that will tap the Alberta Tar Sands and accelerate the warming of our planet, endangering everyone’s future.

New York Times writer Joe Nocera said approval of Keystone was a “no-brainer” for President Barack Obama and called activists like Bill McKibben and NASA’s James Hansen “utterly boneheaded” for making Keystone a focus. The financial press was even more clued out — they barely covered the story. But if Grantham had gone to jail the financial media would have been forced to look, and this time the person at the center would have been someone very different — not an environmental organizer like McKibben, and not a climate scientist like Hansen, but rather an active and highly successful institutional investor.

In a 2011 newsletter, Grantham wrote to his investors that if industrial development continued with business-as-usual, “the planet's goose is cooked." Over the next 20 years, it is estimated that 2 billion to 3 billion more people will be joining the 1 billion who already enjoy higher living standards. That’s great news and tremendously important. And it will create an ever-growing demand for energy. Yet exploiting resources like the Alberta Tar Sands to meet that demand means a very serious risk of climate catastrophe. It is not that the Alberta Tar Sands are so much dirtier — although they are. The real problem with oil from tar sands is the sheer size of the global fossil fuel reserve. Once the spigot is turned on it will be hard to turn off.

According to the Stanford Research Institute, reserves of easy-to-get oil represent about 35 times the current annual usage — we could burn all that oil before midcentury and if we’re smart still avoid a runaway climate catastrophe. Reserves of oil from shale may be as much as 300 times the current annual global usage of oil — if shale oil becomes easier to use it represents decades if not centuries of potential reserves, which clearly means game over on keeping carbon emissions at safe levels. If we are to avoid dangerous climate change, the great majority of oil from shale and tar sands needs to be left underground. Canada's dirty tar sands seems like a good place to start.

Yet the media — and the financial press in particular — are not very good at discussing the larger issue. The focus is on the short-term, and in the case of Keystone, on three issues in particular: (1) job creation, (2) cheap and stable energy and (3) good relations with Canada. Clearly these make for convincing arguments on business news shows and in editorials. But the arrest of Grantham might have forced many in the media to drill down further: (4) What is the impact of releasing the vast stored carbon from the Tar Sands, (5) What is the value of the stranded asset risk of fossil fuels if we realize we can’t burn them and survive, and (6) What is the risk of a rapidly warming world to the stability and security of the global economy. Perhaps Grantham’s arrest would have helped bring the investment community’s focus to where it needs to be — on the future.

So, as much as I hate to see an innocent person behind bars, I wish Jeremy Grantham had gone to jail — if only for one night.

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