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The ‘Warren Buffett of bonds’ tells us why he’s ‘obsessed’ with climate change investing — and where he sees the biggest opportunities

The 'Warren Buffett of bonds' tells us why he's 'obsessed' with climate change investing — and where he sees the biggest opportunities thumbnail
  • Dan Fuss, the vice chairman of Loomis Sayles and the lead portfolio manager of its flagship bond fund, is preoccupied with climate-change solutions, in addition to delivering market-beating returns.   
  • In an exclusive interview with Business Insider, he discussed his concerns about the climate and shared his recommendations to investors who want to profit from the solutions.
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Climate change was not front and center in Dan Fuss’ mind when he started out as an investor more than 60 years ago. 

For one, the world he lived in back in the late 50s was not as warm as it is today.

But the dire warnings about rising temperatures are the reasons why Fuss, the vice chairman of Loomis Sayles and longtime manager of its flagship bond fund, is worried about the climate these days. 

Fuss turned 86 in September. And five children, six grandchildren, and three great grandchildren into his life, he is concerned that climate change will affect their futures “without exception.” That’s partly why he is consumed by what can be done about it on both a personal and professional level.

“It’s a big worry, but it’s also a very, very big investment opportunity,” Fuss told Business Insider during a recent interview. He added, “to be honest with you, I’m obsessed with it.”

Read more: Dan Fuss is revered as ‘the Warren Buffett of bonds.’ He walked us through the investing approach that’s delivered market-beating returns and turbocharged his 61-year career.

Fuss could be focused on many other things besides the climate. He actually is, judging from his flagship fund’s market-beating performance since 1996 — a 7% annual rate of return versus 5% for his Bloomberg-Barclays benchmark.

However, there is no shortage of warnings about the future that compel him to think about climate change, on top of his responsibilities as a fund manager.

Two recent reports illustrate what he’s worried about and why he sees an investing opportunity. 

In September, a sweeping report from the United Nations’ Intergovernmental Panel on Climate Change warned that a three-foot rise in sea levels could displace hundreds of millions of people in coastal areas by the end of the century.

Additionally, a note from Goldman Sachs’ Global Market Institute said that half of the world’s population would reside in “water-stressed areas” as soon as 2025. It added that cities from New York to Shanghai are at risk of flooding, fires, storms, and other destructive weather events

In terms of interim solutions — and opportunities for investors — Fuss declined to discuss specific company recommendations. But he highlighted a few ways investors could defensively reduce the pollution in their portfolios. 

One commodity that can fuel a cleaner planet and give investors an inroad stands out to him: natural gas

While it’s not as clean a technology as solar energy, it’s a greener substitute for coal and other fuels that have dominated industry for centuries. Fuss also raised the possibility that more cars would be powered by natural gas in the future. 

There’s also the opportunity to invest in oil companies that also produce natural gas, while avoiding those that continue to lean heavily on high-carbon energy fuels, Fuss said. 

The largest energy company in his Loomis Sayles Bond Fund portfolio is Chesapeake Energy. It is a $2.5 billion producer of oil and natural gas and was Fuss’ fourth-largest holding as of August 31.

Additionally, the US Natural Gas Fund is an exchange-traded security that tracks the percentage movements of natural-gas prices. 

Read more: The world’s most accurate economic forecaster sees a ‘prolonged global slowdown’ on the horizon — and warns it can only be narrowly avoided

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