There are many aggressive, in-your-face individuals in the hedge fund sector, but few are as difficult as Chris Hohn. The British millionaire takes the standard playbook to new heights by scuttling agreements, attempting to oust executives, and threatening and suing businesses. After losing a boardroom argument to Hohn, one opponent was so irate that he gave the encounter the moniker "Invasion of the Locusts" in a book he wrote about it. Last year, Hohn's TCI Fund Management had the best performance of any significant hedge fund in the world because to this strategy.
Hohn is now using his tough-talking strategies in the battle against global warming. With $US30 billion ($44 billion) in assets, the money manager is pushing its portfolio businesses to drastically cut greenhouse gas emissions and reveal their carbon footprints. He threatens to remove their boards or sell their shares if they don't. In case anyone had any concerns about his dedication, Hohn and his charity gave $260,000 (£200,000) to Extinction Rebellion last year, an extreme environmental movement whose activists have attached themselves to airplanes and disrupted traffic in London.
Jeremy Grantham, the co-founder of Boston money management GMO and a renowned investor who has long forewarned of global calamity, believes that in the fight against fossil fuels, one cannot be very selective about one's partners. Hohn "has demonstrated that a lot of arm-twistings can have a significant impact on companies."
For Hohn, 53, a brilliant and intensely private financier worth $US2 billion, his effort is merely the beginning of upending an asset management sector that, in his opinion, has chosen to ignore the global crisis. He is urging shareholders to oust investment managers who don't push businesses to lower their carbon footprints, and he expects banks to stop funding those businesses.
Nevertheless, despite Hohn's fervor, the inconsistent nature of green investing makes his cause dangerous. Even today, TCI owned stock in three railroads that combust tonnes of diesel and transport fossil fuels, including those from oil sands, among the worst causes of greenhouse gases. TCI once owned a sizable stake in an Indian coal producer. Ferrovial SA, the conglomerate with headquarters in Madrid that manages airports like London's Heathrow, is another significant holding.
According to Jacob Schmidt, CEO of London-based investment firm Schmidt Research Partners, "On the one side, he's attempting to be sustainable from the other, he earns profit out of polluters." How dedicated are you to genuinely upholding your values, I ask?
He has nonetheless experienced setbacks that highlight the limitations of his activism. TCI aimed to pressure state-controlled coal firm Coal India in 2012 to increase dividends and stop providing dirt-cheap coal to neighboring power stations. However, the government had little desire in seeing energy costs rise; as a result, TCI abandoned and sold its shares in the company in 2014 after they had dropped by 19% during the campaign. The London Stock Exchange Group Plc rejected Hohn's requests to remove its chairman and extend the CEO's contract after four years. When that attempt was unsuccessful, TCI sold the majority of its 5% stake in the business, only to watch its shares nearly double the succeeding year.
Hohn is stepping up his environmental initiatives as the asset management sector tries to balance meeting investor demand for profits with addressing climate change. However, they contend that investment management is ultimately about maximizing wealth, not forcing social "values" on businesses, despite the fact that index fund giants have long adopted an investing methodology known as ESG, focused on environmental, social, and governance factors.
However, Larry Fink, chief executive officer of BlackRock, stated on January 14 that changing climate seems to have become a "determining point" in the lengthy prospects of corporations globally amid rising concern about the record-breaking earth's climate. BlackRock, the largest investment company in the world with assets of $US7.4 trillion, will begin selling its holdings in companies with "high sustainability-related risk" and has plans to incorporate emissions into all of its investing decisions.
Combating global warming will put Hohn's strategy to the test like never before. He is wagering that businesses will first follow his demands and that he won't diminish returns by destabilizing those who do not. Hohn bets that the financial impacts from the escalating issue are so enormous that it would be stupid not to encourage businesses to get serious about emissions by linking TCI's success to a climate change agenda.
Theta Capital Management member Marc de Kloe, an investor in TCI's fund, notes that "green investing and hedge funds are not concepts many investors might put in the same phrase." However, given their lack of restrictions and capacity to use activist strategies, we have long argued that hedge funds are somehow best positioned to enact strong environmental policies.
Chris Hohn, a billionaire, discusses why greater disclosure will compel businesses to reduce their carbon emissions.
In 2020, just a few of investors on the earth outperformed billionaire Christopher Hohn, manager of the $35 billion-asset hedge fund TCI Fund Management. As per research from LCH Investment NV, Hohn's company made $4.2 billion in net gains last year, driven primarily by sizable stakes in successful blue-chip corporations including Google, Charter Communications, Canadian Pacific Railways, Microsoft, and Visa.
Hohn uses a distinctive fusion of corporate activism, focused long-term investing, and both. He used to be one of the most renowned hedge fund investors in the world, prepared to wage war on alleged bad management or governance at big corporations such as ABN Amro, CSX, Volkswagen, and the London Stock Exchange. After filing criminal accusations against the payments processor, Wirecard, last year, Hohn's oversight of the financial markets contributed to the company's demise and led to one of Europe's worst accounting scandals. In particular, Hohn's stock selection has excelled in a time when active investment managers have found it difficult to outperform passive standards like the S&P 500 Index.
As per LCH Investment NV, which releases an annual ranking of the top-2o hedge fund managers as judged from their initial conceptual net gains, Hohn's company produced $8.4 billion in profits in 2019 after yielding over 40%, more than almost any other hedge fund. According to the LCH analysis, Hohn has made investors $27 billion since 2004, ranking thirteenth all-time in gains after producing gains of $12.6 billion during the previous two years.
In an effort to slow down climate change, Hohn has recently used his growing clout to put pressure on businesses to better declare their greenhouse gas emissions. His "Say on Climate" project aims to encourage businesses to compare their performance incentives for reducing carbon production and better reveal their emissions. The $6 billion foundation funded by TCI profits, Hohn's Children's Investment Fund Foundation, is supporting the effort.
Hohn's Say on Climate program was recently criticized by Forbes writer Robert G. Eccles, a professor at the Sad Business School, University of Oxford, and a specialist in sustainability.
Eccles contends that Hohn's proposal is too inclusive, requiring all businesses to boost their carbon reporting. He demands a more focused strategy. Eccles advises traditional shareholder agitation for the worst carbon emitters; removing unproductive board members through proxy fights, and promoting reform from the inside. In response to Eccles' opinion post, which contends that widespread disclosure will aid in exposing the full scope of the emissions problem and start to establish benchmarks and incentives for necessary change, Hohn recently urged Forbes to continue the conversation.
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