1.
The Race of Our Lives
A summary of Jeremy Grantham’s note to investors,
in pictures and charts, supplemented with content from
Future Today
Jeremy Leggett

2.
Preface
The original paper is 35 pages and a read of >1 hour.
These 50 pictures and charts are a scan of <10 minutes.
I am hoping, therefore, that they are a useful supplement
…and importantly an inducement to read the original paper.
The supplementary slides are from the Future Today chronology
of selected developments in climate, energy, tech and
the future of civilization: www.jeremyleggett.net

3.
Style, content, and sources
Extracts from the Grantham paper are within quotation marks.
All other passages are my understanding of the main points.
The powerpoint version of this summary includes source urls
as notes, and is available free for any use, by anybody, at
https://drive.google.com/drive/folders/1pJlLMT57QZbUP0ZjWf5RMrexzDuanaC2
The original Jeremy Grantham paper can be downloaded at
https://www.gmo.com/docs/default-source/research-and-commentary/strategies/asset-
allocation/the-race-of-our-lives-revisited.pdf

4.
Carbon dioxide, derived mainly from fossil-fuel burning, is the main
problem. Concentrations are >2x highest level in past 400k years.
7th Jan
2016
The reasons we are in a race-against-time begin with
rapid build up of greenhouse gases in the atmosphere
Source:NOAA,summarizingdatafromicecores

5.
“Please explain to me, if anyone knows, why these people say stuff like
that. I have no idea. Perhaps they hate their grandchildren.”
7th Jan
2016
Rising GHGs are driving accelerating global warming: a
provable fact, yet some still say there is no warming
Global Surface Temperature Compared to 1951-1980 Average
Source:Asof8/31/16Source:NASA
GoddardInstituteforSpaceStudies,GMO

6.
Michael Mann et al’s temperature reconstruction from 1999 in blue.
PAGES2K temperature reconstruction 2013 in green. Data record in red.
A “hockey stick” of global average temperature rise
was first published 20 years ago
7th Jan
2016
20th Apr
2018

7.
“Jeremy Leggett is one of those prominent establishment climate
activists who has made a tidy living from the renewables scam.”
7th Jan
2016
28th Jul
2018
Today, even tabloids worry about global heatwaves,
…but some columnists keep pumping out denial

8.
One of the worst is increase in downpours ( & soil erosion). In the USA,
annual 3 inch rainfall days compared to average are up 20% since 1975.
7th Jan
2016
9th Aug
2018
Dire impacts are becoming clear, and these will
increase unless we decarbonize our economies
Source:EM-DATdatabase

9.
e.g.: “This event is unprecedented & all impacts are
unknown & beyond anything experienced”
7th Jan
2016
27th Aug
2017
Hurricane Harvey
forecast rainfall
Houston city officials: “Head to your
roofs, not your attics”
So says the US National
Weather Service

10.
7th Jan
2016
28th Jun
2017
The Paris Agreement pledges emissions will fall
enough to keep warming < 2˚C & 1.5˚C if we can
Decarbonisation
by 2040
As a long list of climate experts summarise in Nature, that means total
decarbonization - retreat from burning fossil fuels - by c. 2040.
Source:C.Figueresetal

11.
As global energy demand grew 2.1% in 2017, CO2
emissions rose 1.4% to a historic high of 32.5 Gt
7th Jan
2016
21st Mar
2018
“We are far from being in line with the climate targets set in Paris”:
Fatih Birol, IEA Executive Director.
Flat
Global energy-related CO2 emissions 2000 - 2017
Source: IEA

12.
7th Jan
2016
13th Feb
2018
Leak of the forthcoming IPCC report concludes 66%
chance of 1.5˚C target is “already out of reach”

13.
“Wind and solar are going to be cheaper than the operating costs of
coal and nuclear, even the best coal and the best nuclear.”
7th Jan
2016
“Our one material advantage is in the accelerating
burst of green technologies”
Unsubsidized Levelized Cost of Renewable Energy over Time
Source:Lazard,asofend2016
“….better than anyone
expected 10 or even
5 years ago”

14.
7th Jan
2016
13th Jan
2018
Renewable electricity will be consistently in lower
range of undercutting fossil fuels by 2020: IRENA
e.g. Expect global weighted cost of utility-scale solar PV to fall from
$0.10/kWh in 2017 to $0.03 in 2018, and to average $0.06.

15.
BNEF estimates the 2nd TW will arrive by mid-2023, costing 46% less
than the c. $1.3 tn required for the first. 54% wind, 46% solar.
7th Jan
2016
2nd Aug
2018
World passes 1,000 GW of wind and solar, on a
rising exponential curve, in the last days of June

16.
7th Jan
2016
1st Dec
2017
US coal-fired power plant to be shut down
and replaced by solar
Wisconsin utility WEC Energy’s 1,190MW Pleasant Prairie
plant to be replaced by a 350 MW solar farm

17.
Nuclear is “ridiculously expensive”, “utterly uncompetitive”, says the
longstanding nuclear advocate: $9bn now to build one reactor.
7th Jan
2016
24th July
2018
Nuclear power can’t compete with solar power:
former IEA boss Nobuaki Tanaka

18.
Exponential rise of electric vehicles will likely halve today’s cost by 2025,
and halve it again with the next generation of solid-state batteries.
7th Jan
2016
9th Aug
2018
Battery cost “has dropped 85% in 8 years, faster than
solar panels, wind or anything else. Quite remarkable”
Lithium-ion Battery Pack Prices and Annual Decline
Source:BloombergNewEnergyFinance,GMO
Lowendof2025estimaterange,at$40/kWh,assumes
adoptionofnext-generationsolid-statebatterytechnology.

19.
BYD’s first electric bus, just seven years ago, was seen as a joke. Now
China’s e-buses are displacing 233,000 barrels of oil a day.
Every five weeks, Chinese cities are adding 9,500
electric buses – the size of the London bus fleet
7th Jan
2016
23rd Apr
2018
Honda’s Asimo

20.
7th Jan
2016
12th Feb
2018
“A Powerful Mix of Solar and Batteries Is Beating
Natural Gas”
e.g. Arizona PS Co. opts for a solar-battery project cheaper than gas.
California PURC requires PG&E to use batteries over gas.
The Way Humans Get Electricity Is About To Change Forever

21.
Case for coal and gas plants is “crumbling” as wind,
solar and battery costs plunge
7th Jan
2016
28th Mar
2018
Bloomberg New Energy Finance says its latest conclusions
have “chilling” implications for fossil generators.
• Global LCOE falls 18% YOY for
both onshore wind and PV in
first six months of 2018
…to $55/MWh and $70MWh
respectively
• Offshore wind down 5% to
$118/MWh
• 79% fall in lithium-ion battery
costs since 2010

22.
We will pass 2˚C of global warming around then, and “will be fighting
tooth and nail …to keep below 3˚C by 2100.”
7th Jan
2016
9th Aug
2018
The bad news is that on current trends climate change
will “barely be slowing down” by 2050
Source: OurWorldinData.org, Vaclav Smil, Carbon Dioxide Information Analysis Centre,
GMO Data from 2015-2050 is estimated or forecast.
Annual Energy Supplied by Fossil Fuels, and Cumulative CO2 Emissions

23.
“We will need luck, in technology and above all in political leadership:
the need to stand up to the influence of the fossil fuel industry.”
7th Jan
2016
9th Aug
2018
A major barrier is that the fossil fuel industries dislike
the regulation that is the only hope of fixing climate
Picture from Future Today: routine flaring of gas in oil operations. If the the gas burnt in flares
were captured and used for power generation, it could supply 90% of Africa’s electricity.

24.
7th Jan
2016
26th Oct
2017
Potential emissions from reserves of the Carbon
Underground 200 are > 6 times their carbon budget
The CU 200 are the top 200 publicly-quoted companies as measured
in size of fossil-fuel reserves.
2017 -2050
The Carbon Underground 200TM
allocated carbon budget
i.e. their pro-rata share of
IPCC’s 80% chance of 2˚C
(598 GtCO2)
80.4 GtCO2
2017
The Carbon Underground 200TM
potential emissions in reserves
491.9 GtCO2
Coal reserves
341.2 GtCO2
Gas reserves
79.3 GtCO2
Oil reserves
71.4 GtCO2

25.
7th Jan
2016
5th July
2018
Ben van Beurden: “You have to believe us that setting an ambition,
sticking my neck out, my personal reputation, the reputation of the
company, is a big enough incentive for me to get it right.”
Shell CEO says firm carbon emissions targets are
“superfluous”, and society should simply trust him

26.
7th Jan
2016
12th Dec
2017
Funds managing $26 trillion pledge to pressure the
worst 100 companies on emissions
These 100 = 2/3rds global total emissions. 225 institutions are signed up
to pressure them, incl. HSBC Global Asset Management, Calpers, Axa ++,

27.
“Stop reasoning with the oil majors and sell their
shares instead”: Tom Sanzillo writing in the FT
7th Jan
2016
8th Mar
2018
“The shareholder engagement process increasingly
looks like a cynical exercise” where they just talk to buy time.
Tom Sanzillo, former first deputy
comptroller of New York State

28.
“$300 bn is less than the amount of losses in the United States alone
from weather and climate disasters in the single year of 2017.”
7th Jan
2016
9th Aug
2018
We spend c. $300 bn a year on clean energy today, &
need c. $2tn p.a. for 100% decarbonisation by 2050
Annual Global Renewable Energy Capex
Source:DNVGL.Asof9/30/18.
Datafrom2015-2050isestimatedorforecast.

29.
An update report by CERES sees realistic opportunities in the tens of
trillions across an array of asset classes in multiple sectors.
The “clean trillion” - the extra c. $1 tn p.a. needed
through 2050 for Paris 2˚C - is “eminently feasible”
7th Jan
2016
10th May
2018
Summary of conclusion in the original 2014 CERES report
on closing the clean energy investment gap

30.
The conclusion of an international group of scientists systematically
working through the counter-arguments of a pro-nuclear group.
“There are no roadblocks on the way to a 100%
renewable future”: all issues solvable at low cost
7th Jan
2016
17th May
2018
Future Today

31.
So estimates a Stanford University economic study published in Nature.
Cost of action to hit the target: $0.5 tn globally in next 30 years.
Hitting 1.5˚C Paris target vs 2˚ will save the world c.
$30 trillion in climate-related damages by 2030
7th Jan
2016
23rd May
2018
Future Today

32.
“In my lifetime, the global population has tripled.” (And if you see an
exponential chart like this in investing, “you know what to do: go short”).
7th Jan
2016
9th Aug
2018
“It is time now for the terrible news …the issue is food
sufficiency” and it begins with global population
World Population and Projections to 2100
Source:UNWorldPopulationProspects.
Asof1/25/18.

33.
Poll data show many millions of Africans hope to migrate to the US and
Europe. As climate stresses descend on economies, so numbers will rise.
7th Jan
2016
9th Aug
2018
“The real problem with population.
In a word, Africa.”
World Population to 2100 – Medium UN Estimate
Source:UNWorldPopulationProspects.
Asof1/25/18.

34.
“How the Populist Right Is Redrawing the Map
of Europe”
7th Jan
2016
11th Dec
2017
“A rising tide of anti-immigrant and populist sentiment that is sweeping
aside or weakening mainstream party politics across the continent”.

35.
Our 2010-2030 estimate: “productivity per acre would still continue to
grow, other things being even, but at a slowly diminishing rate.”
7th Jan
2016
9th Aug
2018
Average Annual Agricultural Productivity Growth in the United States
Average of yield growth for corn, wheat, and rice
Source:USDANASS
*GMOprojectionexcludingfutureeffectsof
erosionandclimatechange.Asof1/31/18
.
US & Europe are under food stress as is: productivity
of grains per acre is falling as natural limits approach

36.
7th Jan
2016
9th Aug
2018
“It is the one or two great downpours every few years that cause the
trouble. We’re losing perhaps 1% of our collective global soil a year. We
are losing about a half a percent of our arable land a year.”
But other things are not even. We have soil erosion
and climate change impacts to contend with…
Gullying after heavy rain Soil Depth in Iowa Has Halved
Since Intensive Cultivation Began

37.
“The scary thing is that our crude attempt to put all these factors
together is the first that you, dear reader, have ever seen!”
7th Jan
2016
And when we combine the effects of grain
productivity limits, climate change, and soil erosion….
US grain yields, historical and projected
Index averaging corn, soy and rice yields 2017 =1
.
Source:USDANASS,Rhodes2014,Liangetal
2017,GMO.AsofendApril2018.
“It is calculated that
there are only 30 to 70
good harvest years left,
depending on your
location”

38.
75% of all reserves are there and Western Sahara (controlled by
Morocco). “And phosphate is more important even than oil.”
7th Jan
2016
9th Aug
2018
Then there is the issue of phosphate - we depend on
that for fertilizer, and therefore depend on Morocco
Source: USGS. As of end 2012.
.

39.
“They have just gone missing. Why isn’t this a dramatic item in our
news? One-third of all the food plants that we eat need pollination,
every flower needs a pollinator. What we’ve done is created a toxic
world, which is apparently not conducive to life as we know it.”
7th Jan
2016
9th Aug
2018
“The next piece of very bad news: the 75% loss of
flying insects …These are our pollinators”

40.
Flying insects numbers have plunged by 76% over the past 25 years,
according to a comprehensive German study.
Scientists warn of “ecological Armageddon” after
discovering a dramatic plunge in insect numbers
7th Jan
2016
18th Oct
2017

41.
So an international group of scientists warn, after the most
comprehensive study yet: geographic ranges of 31,000 insect species.
Climate change will cause “major insect wipeout”
with “far-reaching disruption to life on Earth”
7th Jan
2016
17th May
2018
Future Today
Image:GuardianGraphic
basedonWarrenetal,Science
Percentage of species losing more than half their range by 2100

42.
With bees scarce, a drone pollinates an apple
orchard for the first time ….results yet to be seen
7th Jan
2016
7th Jun
2018
Dan Robitzski of Wired: It is “like putting a bandage over a big,
gruesome cut that we didn’t even clean first.”
New York state

43.
“Investors are sinking hundreds of millions into a
technology that could revolutionize the way we eat”
7th Jan
2016
3rd Aug
2017
Indoor vertical farming: food grown on trays or hanging modules in a
climate-controlled, indoor facility, without pesticides, and much else.

44.
“We deforest the land, we degrade our soils, we pollute and overuse our
water, and we treat our air like an open sewer. All of this is off the
balance sheet and off the income statement.”
7th Jan
2016
9th Aug
2018
Capitalism and economics, as currently configured,
fuel the problems we are talking about

45.
7th Jan
2016
9th Aug
2018
How GMO invests in
the face of all this
In the portfolio of climate change
opportunities “what we’re trying
to do is understand, a little ahead
of the market, these powerful and
complicated new crosswinds as
we decarbonize”
“….I can say that I have a very
high-confidence belief that these
industries collectively will have
higher top-line revenue growth
than the balance of the economy”

46.
7th Jan
2016
As for producers of fossil fuels and toxic chemicals,
the data show you can divest without loss
Annualized Absolute Returns (Nominal Terms): 1989.2017
Range: 50 bps
Source:S&P,GMO.AsofendSept.2017
“These are the facts – not the hearsay of investment committees that
have managed to maintain an erroneous, but perhaps convenient,
consistency over decades on this issue.”
The effect of dropping one sector
out of 10 over the last 18 years

47.
Global movement divesting from fossil fuels has
reached $5.5 trillion across multiple sectors
7th Jan
2016
3rd Oct
2017
Catholic church makes record faith-based divestment from fossil fuels
on birthday of St Francis of Assisi: 40 institutions, 4x previous record.

48.
7th Jan
2016
16th Nov
2017
Norwegian Central Bank, manager of the oil fund,
tells government it should divest from oil and gas
Biggest holding end 2016:
$5.3 bn in Shell

49.
“Oil must face its future as a declining industry”:
Legal & General Investment Management in the FT
7th Jan
2016
13th Jun
2018
LGIM’s CIO and a commodities specialist suggest that rather than
transition to renewables, oil companies stop investing and return cash.

50.
“Big Oil must pay for climate change. Now we can
calculate how much”: leading climate scientists.
7th Jan
2016
7th Sep
2017
“Nearly 30% of the rise in global sea level between 1880 and 2010
resulted from emissions traced to the 90 largest carbon producers.”
Myles Allen, Oxford University, et al

51.
7th Jan
2016
9th Aug
2018 What should we do? Some recommendations
• Vote for green politicians …& that can include some
Republicans.
• Lobby investment firms to be greener and to lean on their
portfolio companies to do the same.
• Do not grant the oil companies immunity – they have been
complicit in a global cover up of data, funded propaganda,
delayed decarbonization, and “recklessly endangered us.”
• Consume with decarbonization in the front of mind.
“We’re racing to protect not just our portfolios, not just our
grandchildren, but our species. So get to it.”

52.
30th Sep
2015
18th Sep
2015
UNGA agrees Sustainable Development Goals
Aim: to eradicate poverty via sustainable development
Governments are aware of most of the problems in Jeremy Grantham’s
paper, and have pledged to tackle them. But progress so far falls short.