Published on January 29th, 2020 | by Andrea Bertoli0
World’s Best Performing Large Hedge Fund, TCI Fund Management, Is Demanding Better Sustainability Metrics
January 29th, 2020 by Andrea Bertoli
If you’re an optimist, you can find signs that the climate emergency is being taken more seriously everyday across sectors and across countries. The good news to share now is that TCI Fund Management, a hedge fund that manages $30 billion in assets under Sir Christopher Hohn, is now considered a “climate radical.”
This is big news because, as Bloomberg Green notes, Hohn is famous for his tough approach in business, which could be good for the green economy. His tough-as-nails approach “made Hohn’s TCI Fund Management the world’s best-performing, large hedge fund last year.”
That high-performing fund will now be significantly cleaner: Hohn is urging his portfolio companies to disclose their carbon footprint and make changes to their fossil fuel companies — from within. According to a report on The Hill, Hohn is threatening to oust boards and kick companies out of his portfolio if they don’t comply with the new green order.
Hohn is a noted philanthropist, and last year donated a large sum of money to Extinction Rebellion, a “radical climate change” group. And yet, interestingly, his hedge fund is also home to a collection of companies that would never be considered as a good option by most sustainable investors. Bloomberg Green does a great job of diving into this issue more deeply, so click over to their site for a thorough analysis. What I find really interesting is that this conundrum of investing in companies that could do better — that is, fighting for positive changes from within — is really an issue that plagues impact investing overall. Is it possible to support companies for making strides towards climate action if the underlying industry is flawed?
TCI has large holdings in airports (which require, you know, airplanes — creating terrible emissions) and railroads (reliant on fossil fuels and tasked with moving them across nations). However, Hohn wants to work more directly with companies from the inside. Edward Robinson and Nishant Kumar explain in their article that, “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 will 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.”
This news comes on the heels of BlackRock’s decision to be more cautious about its investments. Although, as our writer Stephen Hanley points out, “BlackRock is consistently rated poorly for its performance on climate change and sustainability” and that basically its groundbreaking announcement is too little, too late. Is TCI’s announcement too little, too late also?
I have to trust that big shifts like this in traditional markets are going to shake things up in a cool way, though it remains to be seen how much of an impact they will all have. These green efforts coulda-shoulda-woulda been better, maybe … 10 years ago, or even 20 years ago. We’ve known for decades that fossil fuels are terrible for our planet AND that they are running out, so why are any investment managers or fund managers invested in these historically well-performing companies if we know they will go downhill? I look forward to seeing how TCI and BlackRock’s new strategies pay off for their companies, the investors, and eventually, for our planet.