Jochen Wermuth, Wermuth Asset Management
Jochen Wermuth has emerged as one of the leading forces promoting sustainable investing for family offices through his firm, Wermuth Asset Management, a Germany-based family office and advisory firm dedicated to climate impact investing. In the early 1990s, Wermuth became an adviser to Boris Yeltsin as part of an effort to transition Russia from a planned economy to a market economy. After a stint at Deutsche Bank in 1997 and 1998, during which he and his team raised $8.8 billion in financing for Russia, Wermuth left amid a dispute over a multimillion-dollar bonus that was later amicably settled out of court. Since then, Wermuth has donated generously to the Green Party in Germany, co-founded the DivestInvest association and served on the steering committee of the 100% Impact family-office network.
How did you first get involved with environmentally conscious investing?
I was born in Boston, because my parents were Fulbright Scholars. But I grew up in Mainz, on the Rhine, the largest river in Germany. Officially, the Chernobyl [nuclear plant] cloud had stopped on one side of the river; supposedly it didn’t pass over the river, just like it stopped on the French border. That meant that people on the one side of the river were allowed to play in the grass and in the sandpits; and on the other side of the river, they weren’t — because of different government decisions. Then five of my mother’s best friends on the no-cloud side of the river developed cancer. One of those friends, who was dying of cancer and asking for euthanasia, is what got me interested in environmental issues at the time.
Demonstrations against nuclear power and nuclear weapons didn’t seem to change much, so I decided to study math, economics and finance, aim to become wealthy and to do good with it. I studied at Brown University, then went on to Oxford, where I met a woman who said, “Do you want to donate 1% of your income to Greenpeace, or 10 pounds a month?” Because I was chopping potatoes at food services, the cheaper option was 1% of my income. As a result, I became one of the biggest donors of Greenpeace because I stuck to that 1% of my income.
I became independently wealthy around 2000 and decided to invest in climate solutions. I quickly found out it’s very difficult to do that on one’s own. And so I raised a number of funds, raised a billion total in funds — mainly in Eastern Europe; long, short equities; and some small private equity in venture investments in clean tech.
Then I met Charly Kleissner, the founder of the Toniic impact-investing network. And Charly said, you’re one of the biggest donors to Greenpeace, but you invest in oil, gas and coal companies. Don’t you see that as an issue? So I started building a network called the global DivestInvest movement.
What is the investment approach of the DivestInvest movement?
We are a finance-first, return-first and then an impact fund. That means that we don’t do anything unless it has a net positive impact. But we believe we actually get higher returns.
We are now in a third industrial revolution where the fossil fuels are being replaced by wind, solar and geothermal and hydro. Again, 90% of the index is going to disappear, 90% of the jobs are going to disappear. It’s a hugely disruptive period. And the question is whether you want to be invested.
For an established family office that wants to make the shift to a more climate-conscious approach, what steps do you recommend?
The way that the DivestInvest movement pledge works is, you pledge that “within five years I will divest from all fossil fuels in my portfolio.” You look up the list that’s called Carbon Underground 200, which is provided by fossilfreefunds.org and identifies the top publicly traded coal and oil and gas reserve holders globally. As a risk manager, I would remove the Carbon Underground 200 from my portfolio. I would then go to my fund managers and ask them to do the same.
For family offices and other investors, what’s the tipping point for climate-conscious investing?
There’s this climate finance gap. We need something like $3 trillion more in capital to move quickly to a climate solution. That it doesn’t exist already means I could make a lot of money individually [through investments in clean tech and other solutions]. The more laggards there are, the more time I have to make money. But then I – along with the rest of us — won’t survive as a species. So I want to move as much capital as possible. To do that, we need to get to a situation where the emissions of CO2, currently valued at only €7 or €8 a ton, is finally priced properly and taxed. I think there's an opportunity in the U.S. Congress now that the Republicans are open to a carbon tax on dividends, subject to getting a wave of benefits for the fossil fuel companies.
Interview conducted by Alec Foege