Hedge fund goes climate radical

Activism: An Extinction Rebellion protest against air pollution in London last year. TCI Fund Management donates big to the movement. — Reuters

LONDON: The hedge fund industry’s British billionaire Chris Hohn is bringing his hardball tactics to the fight against global warming.

The money manager of last year’s best-performing large hedge fund TCI Fund Management, with US$30bil in assets, is pushing portfolio companies to dramatically reduce greenhouse gas emissions and disclose their carbon footprint. If they don’t, he said he’d oust their boards or dump their shares.

Just in case anyone doubts his commitment, last fall Hohn and his charity donated £200,000 (US$260,000) to Extinction Rebellion, the radical climate change movement whose members have blocked traffic in London and glued themselves to jetliners.

For Hohn, 53, a cerebral and deeply private financier who’s worth US$2bil, his campaign is just a first step in shaking up an asset management industry, he said, that has ignored a planetary crisis.

He’s calling on investors to fire money managers who don’t press companies to reduce their carbon footprint, and he wants banks to stop lending to companies that ignore climate change.

Still, for all of Hohn’s zeal, his crusade is fraught with the inconsistencies of green investing. TCI once held a big stake in an Indian coal producer; even now, it owns shares in three railroads that burn tonnes of diesel and ship fossil fuels, including from oil sands, one of the worst sources of greenhouse gases. Another key holding: Ferrovial SA, the Madrid-based conglomerate that runs airports that include London’s Heathrow.

Hohn, however, has said it’s far more productive to engage with carbon-heavy companies than to ignore them.

On Nov 30, TCI sent letters to the CEOs of the 17 companies in his portfolio with specific instructions on shortcomings that must be fixed. TCI said it would vote against directors of companies that don’t hit its targets, as well as auditors who fail to report “material climate risks, ” and it may even sell all its shares in a company.

Hohn declined to be interviewed for this story.

Hohn is rolling out his green efforts as the asset management industry struggles to find a way to address climate change while delivering the kind of returns investors demand.

Tackling global warming will test Hohn’s approach as never before.

First, he’s betting that companies would heed his demands, and then that he won’t dampen returns by destabilising companies that reject them.

In tying TCI’s fortunes to a climate change agenda, Hohn is wagering that the economic risks from the mounting crisis are so great that it would be foolish not to spur companies to get real on emissions.

While it might be odd to look to hedge funds for support in the fight against climate change, that’s where the story is going, said Catherine Howarth, CEO of ShareAction.

“The whole asset management field is finally waking up, ” Howarth said. “Now we need activist investors like Hohn to push like crazy for what they want.” — Bloomberg