Age of greener capitalism
Tuesday, 10 November 2009 12:50pm
Natural Capital joins a nascent group of fund managers hell-bent on saving the planet by backing companies that put the environment first, profits second.
Sustainable investing, called by any other name, has been around for decades. But Angus Forbes, co-founder of new "green" boutique Natural Capital Funds Management, said there's a new branch emerging right under the skeptics' noses.
"Ethical investing or clean-tech investing, these are very fringe sports. They've been involved with very low returns or negative returns. But there's a new wave of sustainable investing and, probably, the most visible component of that is Generation Investment [run by Al Gore and David Blood]," he said.
Unlike other fund managers, which run traditional products and have one or two sustainable investment options, Generation Investment is a pure green fund, with a philosophy that cuts across all its strategies. Forbes noted that Generation's Global Equity portfolio has beaten the MSCI by 900bp p.a. since its 2004 launch, and he said it is Generation's formula of being a specialist investment house that will be the next industry template.
Forbes, who carved his career as a top hedge fund manager at GLG, one of the largest hedge funds in Europe, recalls his early days at Merrill Lynch when absolute return investing was a new area.
"There were only two hedge fund managers in London at the time...and because they just focused on absolute returns, they created a new energy and a new way of doing things that became world-leading. And they pumped out 20 to 30 per cent gains," Forbes recalled.
"That's exactly what's going to happen to the integrated [100 per cent] sustainable houses that are built on this single purpose...they are going to punch the lights out because everyone in the firm is committed to one thing," he said.
Sustainable capitalism
Forbes turned into a green advocate in 2007 after coming across research on how capitalism, as it is today, is slowly killing the planet.
He left his job and joined forces with fellow Australian ex-pat Marcus Burns, an award-winning stock analyst in London (and a former colleague), who was equally disillusioned with how the City worked.
"I didn't want to die and [for my epitaph to read] ‘Marcus Burns was a bloody good trader'," said Burns.
This year they formed Natural Capital, a firm that would only invest in companies that understood the biophysical limits of the world and have made progressive steps to reduce the environmental impact of their day-to-day operations.
Forbes said that there's a lot of greenwash out there so they've set up their own investment approach that will separate the companies that pretend to be green and those that actually are.
They run a Global Equity fund, which Burns said sifts through 4,400 ‘eligible' stocks around the world ("that's 4.5 times the size of the Australian market," he said) to find the 25 or so stocks that make it to the portfolio.
To date, the fund has $10 million in it, largely Forbes and Burns' money and those of other wholesale investors.
That's small fry compared to Forbes' big predictions on the sector - but he said their goal is not to build an empire but to find like-minded investors who believe efficient use of capital equates to efficient use of the world's limited resources. Forbes quoted statistics that revealed some companies would waste 99 per cent of raw materials to manufacture one product, which is clearly not sustainable.
"If we can find 20 or so investors with half a million each invested in the fund, that would be enough," said Forbes.
Michelle Baltazar
This story was found at: http://www.financialstandard.com.au/news/view/27276
Printed: Wednesday, 8 September 2010 7:16am