Jeremy Grantham is a billionaire investor best known for predicting market bubbles such as the dot-com crash and the U.S. housing bubble.
Perhaps less well known, the co-founder of asset management firm GMO is also a staunch environmentalist. Grantham has committed nearly his entire fortune — close to $1 billion — to environmental causes.
Today, through the Grantham Foundation for the Protection of the Environment, Grantham funds research on the environmental risks he believes pose some of the greatest threats to humanity.
Canadian Affairs reporter Alexandra Keeler spoke with Grantham and Jamie Lee, a macro-analyst who directs environmental research for the foundation, about the links between environmental degradation and financial markets, and the long-term risks posed by modern agriculture and pesticide use.
This interview has been edited and condensed for clarity.
AK: Do you think financial markets are fundamentally underpricing ecological risks?
JG: That’s easy — absolutely. They basically ignore them.
AK: Why are these issues so far off the radar of mainstream economics?
JG: In the current form of profit-maximizing capitalism, the overwhelming responsibility of a corporation is to maximize short-term profits. If you were to spend money on promoting the well-being of your city, or your climate, or your health, then you can be sued by your stockholders.
You have no responsibilities to society — either local or global — or even the human species. You have no responsibilities to keep us alive. You have no responsibility to look after your grandchildren.
If the world changes its mind, then corporations begin to feel the pressure of not wanting to look like a bad guy. If we encourage the pointing out of bad corporate behaviour, then being a bad actor has a cost associated with it.
AK: There has been growing concern about declining fertility rates and declining sperm counts in many developed countries. What role, if any, does the evidence suggest pesticides play alongside other contributing factors?
JG: In 20-30 years, the average young couple will need help conceiving. And in 50-60 years, basically our species will be out of business.
If we can’t get rid of toxics in our food, in the cosmetics that you rub on your skin, and in the food wrapping that leaches into the food, we really go out of business.
One of the things they never test for is sustained exposure to very small amounts of toxins. And it’s only in the last 10 years that they begin to realize that at levels far, far below regulated maximum levels it can have ruinous effects if you get exposed at the wrong time continuously.
With glyphosate in particular, it’s becoming infamous for having more effects on your children and grandchildren than it does on you. With mice, it affects their fertility for several generations.
AK: Atrazine remains widely used in North America but has been banned in the European Union. Glyphosate remains one of the world’s most widely used herbicides, yet its health effects continue to be debated. Why are we risking human health on a global scale when we know these things are harmful?
JG: Because we’re compelled to concentrate on maximizing profit. It’s a very, very simple argument. The only reason we will change behaviour is if the government legislates. And the only way they’ll do that is if pressure and votes are brought to bear against them.
The problem is that the communication channels — the propaganda channels, if you will — are largely controlled by right‑of‑centre forces, who in turn are involved, in many cases, with the oil and chemical interests. And oil and chemical interests are themselves very closely related because something like 98 per cent of all chemicals sold commercially are oil derived.
AK: Investors typically focus on quarterly earnings, while ecological problems unfold over decades. How should financial markets account for long-term environmental risks?
Will a corporation volunteer to really acknowledge the penalties of its products, whether it’s climate change or toxicity, et cetera? The answer is no, it won’t.
However, if its client base insists, of course it will. But that requires a lot of information that is usually lacking.
But increasingly, you can get a toxics score on a lot of products, and as this becomes more appreciated, more critical, people will scan products in the supermarket and pick the ones that are less poisonous and more nutritious and so on.
Markets also react to lawsuits. Monsanto went down very significantly — over 50 per cent — after the lawsuits against Monsanto’s big pesticide Roundup. But that’s a purely financial event and money that needs to be paid out, so it doesn’t necessarily reflect any attitude to anything other than profits.
AK: The European Union has taken a more precautionary approach to regulating many pesticides than Canada and the U.S. In fact, Canada has also recently loosened pesticide regulations. Why do you think these jurisdictions have diverged?
JG: Well, if you can divide every society in the first world into the two components — capitalism and socialism, which are blended in different mixes — it is obvious that Europe has had a bigger dose of socialism in that mix. They run a pretty good capitalist system, but they have, for example, a steeper tax structure, and the principle of looking after neighbours — what I’d call the social contract — is simply a bigger part of your everyday life.
And in the U.S., it’s drill, baby, drill. It’s cowboy economics. Extreme self-interest.
AK: If you were advising the Canadian government, what changes would you recommend? Where do you think our environmental policy is falling short?
JG: Make sure that more money is going into decarbonizing the system. Giving subsidies helps to push science and adoption along.
You could encourage scientific research. Offset the negative propaganda of the oil companies by making some positive government propaganda. Change the hearts and minds of the general public and the corporate world.
AK: Why don’t other wealthy people talk like you?
JG: I have no idea. I’m just interested in the well-being of the species. I’m interested in the well-being of my great grandchildren. But it’s not an active choice that I’m making, you know. I’m just doing what I’m programmed to do. It’s in my cortex, like some ant species.
