Jeremy Grantham on divesting from Big Oil

LATE LAST year Jeremy Grantham, an investor routinely described as “legendary”, spoke about ESG (environmental, social and governance) investing at a conference in London. His presentation was slick; his accent floated somewhere in the mid-Atlantic (Mr Grantham is English but has lived in America for ages). “I love S and G,” he began. “But E is about survival.”

Three-letter abbreviations have been a constant in Mr Grantham’s professional life. He is the G in GMO, which stands for Grantham, Mayo and van Otterloo, the fund-management group he co-founded. His firm has a distinctive philosophy: it favours companies with low share prices relative to measures of fundamental worth, such as cash flows or the value of assets. Mr Grantham owes much of his public profile to his decrying of stockmarket bubbles.

This sort of hard-headed, long-termist approach also informs Mr Grantham’s views on environmental policy. And his conclusion is that investors should avoid owning oil stocks.

It is a call that raises hackles. Committees that set investment policies for pension funds fear that if they shun oil stocks it will be harder to reach their financial goals. Mr Grantham checked the data to find out whether, and how much, omitting the stocks of any industry over three decades would have hurt a hypothetical investor. He created...

via The Economist: Finance and economics Business Feeds

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