Sustainability Climate Change

The most profitable hedge fund in the world is going green

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TIMOTHY A. CLARY/AFP via Getty Images

Story at a glance

  • Sir Christopher Hohn, a British investment banker and hedge fund manager, has called on his company and others to demand sustainability initiatives from large companies.
  • An investor in Google, Aetna and Moody’s, Hohn runs TCI Fund Management and operates with about $30 billion in capital.
  • A notable philanthropist, he wants to move investor’s priorities to sustainability — or he’ll clean house.

When it comes to whom they vote for and what they buy, more and more people are factoring environmental sustainability into their decisions. And industries are responding. Starbucks is leading the pack with ambitious green initiatives; tech conglomerates are reducing their carbon emissions; and disruptors are making sustainability their company’s entire business model

Now joining these ranks is Sir Christopher Hohn, a hedge fund manager based in New York City. Known for his “hardball tactics,” per a profile in Business Insider, Hohn will be leveraging his $30 billion dollars in assets to urge portfolio companies to reduce fossil fuel and greenhouse gas emissions and disclose their carbon footprint to investors. 

If they can’t meet these stringent conditions, he says, “he’ll oust their boards or dump their shares.”

As a prominent donor to the activist group Extinction Rebellion, Hohn intends to use his large and profitable hedge fund TCI Fund Management to invest in sustainable enterprises.  

Per the company website, “TCI is committed to minimising our environmental impact and reducing our carbon emissions,” and will work to offset its emissions through investment in forestry projects. Specifically, Bloomberg reports that Hohn will call “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.” 

This isn’t to say that TCI’s portfolio is totally clean. In October 2019, it was revealed that Hohn had purchased a stake in Ferrovial, a Spanish company that runs airports such as London’s Heathrow and is one of the largest holders in Aena, another airport operator. Airplanes are one of the largest producers of carbon, contributing about 2 percent of total global emissions. 

For Hohn, however, it seems the preferred method of change is to work with companies emitting fossil fuels rather than divesting outright. 

Speaking with the Independent, TCI stated that it would “typically vote against all directors of companies which do not publicly disclose all of their emissions and do not have a credible plan for their reduction”. 

If TCI’s massive holdings — including Canada Pacific Railway, Charter Communications, Google, Moody’s — refuse to disclose their individual environmental impacts, TCI will “vote against their directors” and would encourage asset managers to fire fund managers who wouldn’t comply with environmental transparency, according to the Financial Times.  

“Asset owners should fire asset managers that do not require such disclosure,” Hohn explained to the Times

This move falls in step with competitor firm BlackRock’s announcement to divest from fossil fuels

In his closing sentiment to the Times, Hohn explained his decision as taking power away from regulators and into the hands of investors.

“[Investors] can use their voting power to force change on companies who refuse to take their environmental emissions seriously,” he said. “Investors have the power, and they have to use it.”