Gerry Grimstone: ‘Climate change is the best investment opportunity since the Industrial Revolution’

Former investment minister and chairman of Gemcorp Capital, Gerry Grimstone, speaks to Eliot Wilson about the transformative potential of net zero and why private capital is indispensable to growth

Gerry Grimstone, who turned 75 this summer, is steeped in private enterprise. He was a director of the venerable London investment house Schroders, chairman of Standard Life and Barclays Bank, and group deputy chairman of Barclays plc. He also headed TheCityUK, the financial services industry body.

The man who once called himself an “intellectual mercenary” also knows how government works from the inside. He joined the civil service in 1974, and in the early 1980s was appointed to HM Treasury to oversee the privatisation of nationalised industries like BT and British Leyland’s Jaguar Cars division. In 2020, Boris Johnson tapped him up to become a minister in the House of Lords, shared between the departments for international trade and business, energy and industrial strategy: his brief was investment, both inward and outward, and he served for more than two years.

Lord Grimstone of Boscobel, ennobled to assume his ministerial role, is now chairman of Gemcorp Capital and chair of the climate fund at Bahraini investment managers Investcorp. I spoke to him at the Gateway Gulf 2024 Investment Forum in Manama about the investment ecosystem, Britain’s relations with the Gulf Cooperation Council states and the challenges and opportunities of climate change.

The UK has huge historic relationships with the Gulf states, he says. “It has relationships of many, many different levels… the defence and security relationships, the oil and gas relationship, not just BP and Shell. But what you’re seeing now is a real shift in the kind of behaviours, the kind of investments.”

He stressed that investment by Gulf states is much more sophisticated and complex than when he first worked in finance.

“When I was younger, what was Gulf investment? It was buying five-star trophy hotels in London and occasional deer-stalking estates in Scotland… now they’re not just investing for financial returns. They’re investing for capability returns, some kind of drive back into their own economies.”

Only the private sector can move the needle

As a former investment minister, Grimstone sees private capital’s indispensable role in economic growth. He believes public investment can be a powerful catalyst but the scale required to move the needle can only come from the private sector.

“I used to find that sometimes I could put in state money and get multipliers of 10 or 15 times as much private money coming in. It would be a great mistake if public money started crowding out private investment – I’m a great believer in public money crowding in private investment. So I would like to see a greater emphasis on private investment.”

It is not only private sector investment which is critical, but the particular nature of foreign direct investment.

“We have no better source of economic growth in the UK than foreign investment. We did some research when I was investment minister, and one extraordinary statistic was that those foreign-invested businesses in the UK are 70 per cent more productive than their domestic counterparts, they use capital more efficiently and they of course generate more exports. They often have better labour relations, they generate more IP. So foreign investment is not just the initial financial flows, it’s the whole uplift you get to productivity in the UK.”

Foreign-invested businesses in the UK are 70 per cent more productive than their domestic counterparts, they use capital more efficiently and they of course generate more exports

Grimstone sees climate change, the subject of increasingly polarised ideological debate. The government is relying on declaratory aspirations: the prime minister announced at the United Nations COP29 meeting in Azerbaijan that the UK’s target on cutting emissions will be raised to 81 per cent by 2035. Grimstone prefers to look at the issue of resilience in pragmatic terms, seeing a huge economic opportunity.

“You have to look through the short-term political noise and go back to the science, to the practicalities… I still believe that mitigating climate change presents one of the best investment opportunities the world has had since our industrial revolution back in the 19th century. The ‘Green Revolution’, coupled with the technological revolution of what we’re seeing in AI, what we’re seeing in data capacity: these are revolutionary disruptive matters as far as investors are concerned.”

“Net zero has thrown up some of the biggest investment opportunities we’ve ever seen. What’s happened to wind farms in the North Sea; look at the employment that we’ve created on Humberside, Tyneside or Teesside. I can take you there to see land by the side of the river which has been completely derelict for the last 50 or 60 years, which now has factories turning out wind turbines and components. A lot of these things are very complex and have industrial manufacturing chains associated with them.”

Getting the relationship between government and business right is not easy. Grimstone was the force behind the UK’s first Global Investment Summit in October 2021, where he calculated “we had $10 trillion of capital in the room”, and he is passionate about the need for cooperation between Whitehall and the private sector. But he is also clear-eyed about where the real potential for growth lies.

“In the budget, when the chancellor talked about investment, what she largely means is investment by the state, where I was a great believer, when I was the investment minister, in using investment from the state to create private investment and to catalyse private investments.”

At Bahrain’s Gateway Gulf forum he was preaching to a very different audience. But it is hard to argue with his basic analysis: government has unique abilities to encourage investment, but it is private enterprise, not taxpayers’ hard-earned money, which must be the transformative factor.

Eliot Wilson is a writer