2014: How does climate change affect Berkshire's investments?

ANDREW ROSS SORKIN: Question comes from Rory Holscher in Galena, Illinois. This question is about Berkshire’s investments in climate change.

“On one hand, Berkshire’s utilities have large commitments to wind and solar power. Berkshire also has an investment in BYD, an innovative transportation company that may be comparable in some ways to Tesla.

“On the other hand, Burlington Northern hauls a lot of coal. You point out in the 2013 annual report that its profits could shrink if coal burning was curtailed.

And then there’s the reinsurance business.

How do these and other Berkshire investments align with your understanding of the risks and opportunities posed by climate change? How should we think about this as investors?”

WARREN BUFFETT: Well, I think that you’ve stated the facts on a whole bunch of businesses. And, I mean, if you own a railroad that’s carrying a lot of coal, it’ll carry a lot of coal for a long period. A very long period. But it’ll probably carry less at some point. I don’t think —I think that’s very likely, too.

But, I get all these questions from people who tell me they want me to fill out lots of forms and everything about how it’ll affect our insurance business. It doesn’t — it just doesn’t operate in that — in that time period.

I mean, we are not making — when Ajit and I talk about what we’ll charge for catastrophe insurance, you know, whether it’s hurricanes in Florida, or whether it’s earthquakes in New Zealand, or whatever it may be, the year-to-year change in probabilities on that are, at least in our view, extremely low.

I mean, it doesn’t come close to being anything that affects your prices in any material way in any given year.

And, you know, we will continue to develop alternative sources of energy. We’ll continue to use coal in our coal generation plants until the utility commissions under which we operate tell us that we should do something different. We have no choice about that.

We, incidentally, have no — I mean, we’re happy to carry the coal, but beyond that, we are a common carrier. I mean, we might love to turn away chlorine or ammonia or something like that because of the dangers in carrying it. And we can’t get compensated adequately for that.

But we are a common carrier. So, we — by law, we’re required to carry the freight that is offered to us.

So I — I don’t think in making an investment decision on Berkshire Hathaway, or most companies, virtually all of the companies I can think of, that climate change should be a factor in the decision- making process. Charlie?

CHARLIE MUNGER: Yeah, I think a lot of the people who think they know how climate change is going to change weather patterns and hurricanes are overclaiming. (Applause)

We’re sort of agnostic. It isn’t that there isn’t some global warming, because there plainly is.

But the people who think they know exactly what’s going to happen and how many people are going to die from tropical diseases and so forth are mostly talking through their hats.

I think there’s a class of people who like the idea they’ve got a calamity to worry about. And —

WARREN BUFFETT: Well, but — and when you say it, I mean, just in terms of being an economic variable in making a decision, this —

CHARLIE MUNGER: No. We’re not saying, “How can we structure our whole investment program to take into account what we think we know about climate change?”

But I think we’re very well located long term, no matter what happens.

I think that transmission lines and more or — we’re going to have to produce a lot more electricity directly from the sun or indirectly through things like wind. And, we’re beautifully positioned.

It’s just like GEICO made a lot of money when the internet came along, that they didn’t really plan on, I think we’ll make a lot of money as more and more electricity is produced more directly from the sun.

So I think we’re in a very good shape. But I don’t think we deserve any great credit for it. We just stumbled into it.