Now he’s a founding partner and the risk manager at Kepos Capital, a New York-based investment company with $2 billion under management. What excites him these days is a financial instrument he’s conceived that he thinks could help stop climate change. The problem Litterman is trying to solve is that many private investors are unwilling to invest heavily in climate solutions because they lack confidence that there will be a payoff. There’s a term for the problem Litterman is wrestling with: time inconsistency. In the case of climate change, investors understandably worry that the government will back away from its commitment to a high carbon price if there’s a substantial political backlash.

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Persons: Robert Litterman, Goldman Sachs, Fischer Black, Litterman, it’s, Finn Kydland, Edward Prescott Organizations: Wall, University of Minnesota, Kepos, Society Locations: New York, London