"Our planet will truly be toast"July 12, 2012: 2:52 PM ET
Investor and environmentalist Jeremy Grantham isn't known for his cheerful disposition. But these day's he's sounding particularly despondent.
By Mina Kimes, writer
FORTUNE -- Jeremy Grantham, one of the world's most famous investors and environmentalists, is known for his blunt, often less-than-cheery views on the global economy. Speaking at a conference in Oxford, England on Thursday, he wasn't just pessimistic -- he was downright apocalyptic.
"In 200 years, with the limited gains we're getting from business and government, our planet will truly be toast," said the investor, who introduced himself as a "glasses three-quarters empty person."
Grantham spoke at the ReSource 2012 conference, a forum focused on the rising scarcity of natural resources such as food, water, and energy. The founder of Boston's GMO, a money management firm with more than $100 billion in assets, Grantham writes quarterly letters to shareholders that are widely read on Wall Street. His letters, which expand on issues ranging from politics to philosophy, frequently reference his concerns about the world's declining supply of natural resources.
Before Grantham spoke on Thursday, he was preceded by several business leaders, many of whom offered solutions for the looming shortage in commodities. GMO's founder was less optimistic. "Yes, on paper we can do everything... but we won't," he said. "I'm bearish on human resources -- and, unfortunately, bullish on resources investments."
Grantham said that investors should allocate approximately 30% of their portfolios to natural resources-related assets, with 15% invested in forestry and farmland, 10% in ground-based resources (but never futures, he said), and 5% in companies working to improve efficiency. He also advised investors to consider the risks of investing in companies that heavily rely on commodities.
He quickly ran through his rationale. The population in China, he said, is surging, spurring growth in the global consumption of commodities. Chinese citizens now use 59% of every bag of cement and 48% of every ton of coal, he added. Grantham pointed to a chart that showed that commodity prices, which declined for decades, abruptly reversed course in the early 2000's -- a moment he calls "the great paradigm shift." "In the long run, you can't afford to miss this opportunity," he said.
After giving his speech, Grantham sat on a panel with Rear Admiral Neil Morisetti of the United Kingdom Ministry of Defense and John Brock, the Chairman and CEO of Coca Cola Enterprises (CCE). When asked by an audience member whether he would invest in Brock's company, Grantham, glancing sheepishly at his co-panelist, said that, while GMO favors "great franchise companies," he didn't like the fact that the company sells a "rather unhealthy beverage."
Another audience member asked Grantham how the government should address the issue of resource scarcity. "In the U.S., its obvious that large corporate blocks control Congress to a degree that they havent in many recent decades," he replied. "The financial industry controls most of finance, and the hydrocarbon industry controls most of their regulations."
The investor's comments weren't entirely gloomy; he did note that his nonprofit, the Grantham Foundation for the Protection of the Environment, is working to fight problems such as a food shortages. When asked whether he felt conflicted about profiting from the same issues that he is trying to combat, Grantham addressed the question head-on.
"It's a good point," he said. "My attitude is, I'm in the investment business and I have to deliver good ten-year advice and good five-year advice. Honestly, I think resources will make people money."