Famed Climatologist Charlie Munger

Money is pouring into exchange-traded funds that bill themselves as socially conscious.

This year investors have put a record $27.4 billion into ETFs traded in U.S. markets that say they focus on environmental, social and corporate governance, or ESG, practices, according to data from FactSet, doubling the size of the sector.

The surge suggests ESG investing has staying power, answering those who had questioned whether investors would give priority to goals such as promoting clean energy over simply picking the best-performing stocks regardless of companies’ principles.

Based on Charlie’s contrary thoughts on climate change, we would like to reiterate the following:

  1. ESG investing and political movement toward stopping climate change should create more scarcity and higher prices for fossil fuels (Peak Oil Theory turned upside down). This is because optimistic climate change politicians and academics will underestimate how many years are left dominated by internal combustion engines. Charlie says, “Successful investing is paying way less for an investment than it is worth.”
  2. We believe, and Charlie confirms, that inflation is likely to rear its ugly head and lead to stock market failure in both nominal and real terms. When asked how the stock market would do the next ten years, Charlie said, “the real returns will be far lower!” He didn’t say returns because he sees the massive fiscal and monetary stimulus as inflationary. He called the current “frenzy” circumstances “uncharted and unprecedented.”
  3. The moat in the energy business is getting wider. The number of energy companies is going down (goodbye Concho, Noble, Anadarko, WPX Energy, etc.). If it gets more restrictive to drill for oil, the proven reserves grow in value.

There were several other terrific takeaways from this interview with our favorite snarky contrarian billionaire. However, his thoughts on climate change were so sensible and shocking that we felt they must be shared.

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Disclosure: This article contains information and opinions based on data obtained from reliable sources, which is current as of the publication date, and does not constitute a recommendation ...

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