Warren Buffett didn’t plan to back climate action, the markets did it for him
Warren Buffett has long been seen as the epitome of pragmatic capitalism – measured, disciplined, and unimpressed by fads and ideologies. So when the global investment community leaned into climate action and ESG (Environment, Social, Governance) in the past decade, Buffett stood apart. Not defiantly, but dispassionately.
In his 60 annual letters to shareholders since 1965, there are only 5 mentions of climate change. And you can see his reluctantly evolving stance since then to now. Yet, paradoxically, Buffett and Berkshire Hathaway have become some of America's largest investors in renewables and electric mobility. Climate action, it seems, arrived at Berkshire's doorstep anyway. A reckoning of Buffet’s legacy in the shadow of his retirement, must take into account the long arc of Berkshire Hathaway’s stance on climate change.
Early Years: Climate Absent, Profits Present
For decades, climate change was missing from Buffett’s lexicon. His annual letters (spanning from the 1970s to early 2000s) referenced "business climate" more often than atmospheric concerns. Berkshire’s portfolio remained rooted in insurance, railroads, manufacturing, and consumer brands — sectors not known for environmental consciousness. Climate change simply wasn’t part of the value investing equation.
The first ever mention of climate change happened in his 2005 letter. Even in this letter, he questioned if increased storm activity might be linked to climate change. This was in the context of his investments in the insurance sector.
Silence for the next 10 years. "I don't think climate change should be a factor in investment decisions," - Buffet said in the 2014 Berkshire Hathaway Annual Shareholders Meeting.
The next mention of climate change happens in 2015; coerced out of Buffett. The Nebraska Peace Foundation, bought one share of Berkshire and demanded accountability on its insurance investments.
In his 2015 letter, he acknowledged plainly: "It seems highly likely to me that climate change poses a major problem for the planet.”
But this mention was quickly caveated, “I say “highly likely” rather than “certain” because I have no scientific aptitude and remember well the dire predictions of most “experts” about Y2K”.
It must be noted that by this period, there was overwhelming evidence of climate change and its dire consequences. That letter ended on a more sombre note:
“...But when you are thinking only as a shareholder of a major insurer, climate change should not be on your list of worries”.
This stance however was costly, and added fuel to skeptics on climate change, especially within the financial markets. All of this in the shadow of BNSF — Berkshire's prized railroad — hauled coal at scale, and Buffett admitted profits could shrink if coal burning waned.
The Reluctant Climate Capitalist: “Stumbling Into” green
However, if one looked closely, the Berkshire balance sheet had a paradox. Though Buffett was dispassionate about the climate crisis, his investments said otherwise. It showed his pragmatism on business fundamentals. As of 2015, Berkshire had invested $16 billion in renewables and now owned 7% of the country’s wind generation, and 6% of its solar generation.
As of 2024, Berkshire had become one of America’s largest renewable energy players, a fact Buffett himself touted, albeit modestly. "We're beautifully positioned," he said of the energy transition. "But we don't deserve any great credit for it. We just stumbled into it."
Despite his climate ambivalence, he invested in BYD, the Chinese electrical vehicle giant, in 2008. This was prescient, especially as BYD has overtaken Tesla in car sales, as of 2024.
In the last decade of his career, Buffett had emerged as a major investor in the green transition economy. But not because he sought to lead the climate revolution, but because he saw durable cash flows. But just as he retired if you look closely into his shareholder letters, an interesting story emerges.
The Contradictions: Oil, Polluters, and No Net-Zero Pledge
At Berkshire's 2023 annual meeting, Charlie Munger's skepticism was palpable. "People predicting doom are mostly talking through their hats," he remarked. Buffett’s stance was clear: climate change simply doesn't drive Berkshire’s capital allocation.
Charlie Munger passed away in November 2023. 2024 was a tad different, it was the warmest year on record. Buffett noted that storm-related insurance losses were rising: "Climate change may have been announcing its arrival." That’s the only mention, and an almost reluctant one at that. But the mention of Pascal’s Wager points to the final acceptance of the reality of Climate Change’s impact. An epilogous statement to bookend Buffet’s illustrious career– a clarion call for capital markets, financial investors, and innovators.
Meanwhile, Berkshire's clean energy investments now represent tens of billions of dollars.
Buffett’s case is an interesting one. A late comer to the climate cause, who has steered the transition economy through capital allocation, guided by returns, wary of ideology, but open to opportunities that the energy transition inevitably brings, and the disruptions it has started to cause.
He has become, perhaps unintentionally, an accidental climate capitalist. One who did not chase climate action, but who positioned Berkshire to thrive as the world, like markets, inevitably moves. The question remains, could he have done more? Or was his overwhelming success in the renewables/EV market pegged to his inherent skepticism?