Environmentally conscious hedge funds rise

By Lawrence Delevingne

Tue Nov 27, 2012

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A new report says sustainable and responsible investing accounts for $5.3 billion of all hedge fund assets.


 
The assets of hedge funds that use environmental, social and corporate governance (ESG)  criteria in making investment decisions continue to grow, according to a new report from the Forum for Sustainable and Responsible Investment.

At least 39 hedge funds managing $5.3 billion use ESG criteria in their investments. Most of that, $4 billion, is related to environmental investing themes, according to the report. Last year, the group identified 47 funds managing $2.6 billion. It was not immediately clear who the 39 hedge funds were. In 2011, they included such well known firms as  Perella Weinberg Partners, Passport Capital and Highland Capital Management.

So-called sustainable and responsible investing accounted for $3.74 trillion of $33.3 trillion (11.23%) of all assets under professional management in the U.S. at yearend 2011, according to the group. That's a 22% increase since the end of 2009. Alternative investment funds, including hedge funds, managed $132 billion in sustainable investments, a 250% increase from yearend 2009.

"ESG hedge funds have been slower to attract assets among alternative investments," the report said. But it noted that "numerous hedge fund managers are increasingly adopting [social responsible investment] strategies in order to respond to demand, particularly from faith-based institutional investors." It also explained that the limited transparency of the industry makes tracking such funds difficult and the numbers in the report are conservative.

The report ranked the investment criteria guiding hedge fund investments:

Leading ESG Criteria for Hedge Funds (USSIF)

Assets in billions

Number of funds

Climate Change/Carbon

$2.61

18

SocialOther

$1.92

7

EnvironmentOther

$1.76

15

Sustainable Natural Resources/Agriculture

$1.75

16

Pollution/Toxics

$1.59

9

General Governance

$1.28

6

Board Issues

$1.20

7

Community Relations/Philanthropy

$1.11

5

EEO/Diversity

$1.08

4

Executive Pay

$1.06

4

Alcohol

$1.00

8

Source: US SIF Foundation

ISSN: 2151-1845 / CDC10004H