Guy Oppenheim Climate Change & Megatrends
By Toby Birch, Guy Oppenheim and Vladimir Lekovski
Oppenheim & Co. Limited
As human beings our brains are hard-wired to pigeonhole data for ease of storage and
subsequent recall. Perhaps this compartmentalisation is why many find it hard to see the big
picture and seem shocked by black swan events. Free-thinking entrepreneurs are different
because they observe opportunities and connections that others fail to appreciate (known as
‘joining the dots’). It may also explain why academics are so specialised and focused on narrow
remits, albeit hidebound by budget constraints and pressure to publish their research quota. As
someone from an academic family I am often struck by the seemingly irreconcilable differences
between the likes of financiers and scientists. This is especially the case where environmental
issues are concerned. For many sharp-suited City types, any mention of climate change
conjures up images of killjoy bearded lefties; just another impediment to endless earnings
growth from an unlimited money supply. To be fair to financial folk no ‘green’ solution ever
seems to satisfy the scientific community, apparently beset by internal turmoil and point-
scoring counter-claims that confuse rather than clarify.
As someone with sympathies in both camps allow me to put these issues into perspective in
five simple, empirical points: the climate is changing, the population is growing, resource
scarcity is escalating, currencies are devaluing and prices are rising. It would be terribly neat
and in the finest traditions of silo thinking to treat these topics as separate, discreet entities.
Instead, we believe that unbridled credit creation, environmental degradation and population
growth are tightly coupled and correlated. Many investors do not yet appreciate the necessity
for protection against this wide range of natural and man-made threats. The typical reaction is
to (a) deny there’s a problem (b) hope for the best or (c) ignore it altogether. We are witnessing
an unprecedented confluence of factors contributing to climate change and commodity
scarcity, exacerbated by currency devaluation. Investors face severe inflationary pressures from
diminishing supplies of raw materials combined with the dilution of mainstream currencies.
Worse still, rampant price rises are increasing the speed and scale of resource extraction and
subsequent destruction of the environment. In one-dimensional economist models the supply
should eventually increase to match demand courtesy of the pricing mechanism. This is the
ultimate clash between theory and reality; where infinite money creation meets finite supplies
of natural resources.
While impossible to prove, it seems more than coincidental that concentrations of atmospheric
carbon dioxide began to intensify when the Gold Exchange Standard unravelled in the early
1970’s. In other words there appears to be a link between the freedom to fuel false growth
through deficits and the escalation of greenhouse gases. Statisticians will no doubt jump on this
comment as being a classic case of correlation without causation. Nevertheless it is a striking
pattern, especially when population growth has been exhibiting similar exponential behaviour.
Politicians and portfolio managers love these seemingly positive charts that feed directly into
the tax-take and corporate profitability, creating apparent prosperity for all concerned. By now
we should have all realised that this path has led to technical bankruptcy for many western
countries and penury for the public through loss of purchasing power. For anyone with a
scientific bent, exponential or parabolic charts induce fear rather than fervour. Be they yeast
cells or cancer cells, pandemics or populations, high growth rates carry the seeds of their own
destruction by over-consumption of the host’s supplies and substrates followed by terminal
It is typical for those with revolutionary resolve to overturn ‘the system’ little knowing how to
replace it with any viable alternative. A far more subtle and successful method is to utilise what
we already have and modify it. This is not the cue for yet more pointless and unworkable
legislation. If anything it is the rise of endless procedures that has exacerbated risk through
greater complexity, creating a financial and legal industry hell-bent on wriggling around the
rules. We must first address the philosophy from which the mechanisms follow. A Biblical
phrase springs to mind which encapsulates this approach with the quote ‘swords to
ploughshares’. In other words we can convert our existing infrastructure for constructive rather
than destructive use. This is all well and good in theory and noble-sounding. One can be
accused by both sides of hypocrisy or deception but this is a small price to pay to benefit future
generations who will no doubt judge us with disgust in decades to come, should we choose the
default option of doing nothing. The trick here is to emphasise that climate change is a way to
make money for those from the agnostic or sceptical school of thought. So for those in the
latter camp this is the sales pitch for investing in the interconnecting themes related to climate
change and inflation, catered for by the forthcoming launch of the Gaia Opportunities Fund,
managed by Oppenheim & Co.
Natural Resources: commodities, rare earth metals, forestry, water
Food Chain Disruption: fertiliser, agriculture, soft commodities, infrastructure
Population Growth: healthcare, biotech, waste management, emerging markets
Currency Devaluation: precious metals & mining stocks to offset currency dilution
Green Revolution: clean technology, renewable energy and strategic assets
If, like us, you believe that climate change has a financial element within the cause and effect
then one can propose that the problem is also the solution. What we need across this range of
industries is long-term capital investment. This will not come from governments (other than
China) but from financial markets. After all, this used to be the whole point of stock markets; to
match entrepreneurs with money. This ‘wisdom of crowds’ generates the most efficient form of
pricing and allocation of resources. In the past speculators were a necessary evil for liquidity.
Now that volume is dominated by High Frequency Trading it is clear that markets have mutated
with their decade-long lame performance. Nevertheless they are not beyond repair. In an
environment of sound money backed by precious metals, equities became dividend machines
and show their worth through compounding, like the fable of the tortoise and the hare. It is still
possible, even preferable, to aim for stability over growth as equity investment offers
transparency and sustainability over the falsehood of interest-bearing credit.
There still remains a credibility problem when investing in these areas as one could potentially
be ramping up prices, albeit indirectly. There are three aspects to this (a) investors have to hold
real assets including food and fuel to protect their capital from inflation (b) in the field of
renewable energy with limitless supplies the price mechanism still has a role to play as spiralling
oil prices foster innovation (c) one needs to show leadership by backing the right companies.
One could still be accused of profiteering so we have decided to act as a role model. Instead of
hoarding profits we will recycle capital by investing a significant portion of the management fee
into sustainable communities, especially in those countries that will suffer further from climate
change in future. At the risk of sounding naïve, this is no marketing ploy but a genuine attempt
to prove that financiers can be positive contributors and not simply profiteers.
Guy Oppenheim is the Chairman of the Oppenheim Group with over 25 years experience as a
portfolio manager, investing globally in all asset classes. Guy Oppenheim has managed assets
well in excess of $1 billion for institutional clients, sovereign wealth funds, and private families.
Guy Oppenheim has been registered and authorized by Financial Services Authorities and
served also as Compliance and MLRO Officer.
Guy Oppenheim was educated in Geneva and holds a BA in Business Administration majoring in
Finance from the University of Geneva.