Sustainable Investing 3: Bob Litterman – Pricing Climate Risk (Capital Allocators, EP.141)

Bob Litterman is a founding partner and Chairman of the Risk Committee at Kepos Capital. Prior to Kepos, he spent 23 years at Goldman Sachs, where his roles included heading the firm-wide risk function and the Quantitative Investment Strategies Group at GSAM. Bob was one of the original inductees into Risk Magazine’s Risk Management Hall of Fame and is well known for co-developing the Black-Litterman Global Asset Allocation model with the late Fisher Black. After leaving Goldman in 2009, he became fascinated by the risk management problem posed by climate change, and that is the focus of this 3rd episode in Sustainable Investing, the Next Frontier. Our conversation covers Bob’s background in quantitative research, applying risk management principles to address climate change, modeling the price of carbon emissions, and concluding that we must slam on the brakes immediately to address global warming. We then turn to his work on policy to implement his conviction and his activity in the public markets across the World Wildlife Fund’s stranded asset swap and research at Kepos to play a rapid adoption theme from the lens of a quant investor.