SOME might have called it a strange investment. Just as the worst of the credit crunch was hitting home last year Jeremy Grantham decided to bet £12m that economists could save the world.

The British financier, who founded the Boston-based investment fund GMO, which has £55 billion under its management, gave the money to the London School of Economics (LSE) to fund an institute for researching the economics of climate change. A similar amount went to Imperial College London to study climate science.

Altogether, the £24m is one of the largest donations ever made to climate research. It is an area that has so far been spectacularly ignored by other private philanthropists. So why did Yorkshire-born Grantham do it?

“Because climate change is turning into the biggest problem humanity has ever faced. I wanted to invest my money in places where it might actually help tackle that problem,” said the financier last week, speaking exclusively to The Sunday Times about his donation.

The words sound apocalyptic — but who is he? Most of us have not heard of him but in financial circles Grantham, a British émigré, is known for his investment skills.

What he is renowned for, however, is being one of the few big investors to have publicly predicted the collapse of the American and British property markets, and the global credit crunch that followed.

Not many believed him back in 2006 — and even fewer may want to believe his latest predictions. Because Grantham believes climate change could lead to the collapse of Earth’s ecosystems and even threaten human civilisation.

So concerned is Grantham, 70, over this issue that he has set up the Grantham Foundation for the Protection of the Environment, endowed with £165m of his own money, to fund environmental research and campaigns. From it he is funding the LSE and Imperial donations, and other grants to American groups such as the Environmental Defense Fund.

Grantham sees such donations as an investment in the future. He said: “We are destroying the planet. We are in the middle of one of the greatest extinctions of species Earth has seen. If it continues unchecked, humanity will soon be running out of food and water.

“What it means is that the environment, especially climate change, is going to be the central issue for all society, including business, politics and the economy. Capitalism and business are going to have to remodel themselves and adapt to a rapidly changing and eventually very different world.”

Grantham grew up in Yorkshire and went to university in Sheffield before moving to America in 1968 to take an MBA at Harvard. However, his decision to invest some of his foundation’s money in Britain was not a nostalgic one. It followed the publication of Lord Stern’s report on The Economics of Climate Change and it is now Stern who heads the LSE institute.

Those choices are already paying dividends. The LSE’s research seems likely to play a key role in this December’s UN negotiations in Copenhagen where world leaders will seek agreement on cutting greenhouse gases. The work by Imperial, led by the eminent atmospheric scientist Sir Brian Hoskins, will also be crucial.