THE NEW GREEN: Avocados

Yeh > Avocados! (Photographer: Eduardo Leal/Bloomberg)

FINANCE

Avocados Are the New Coal for Hedge Funds Chasing Sustainable Cash

Clients are increasingly willing to hold their asset managers to account on climate issues—and the managers are beginning to listen.

By Nishant Kumar  ‎February‎ ‎4‎, ‎2020‎ ‎10‎:‎00‎ ‎PM

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"Some of the world’s most cynical investors may finally be coming around to climate change.
As clients prepare to reward and punish managers on their green credentials, more hedge funds are taking note and taking action—from planting avocado trees to dumping coal assets. It’s been a rapid change of heart: just over a year ago, fewer than 4 in 10 hedge funds felt environmental, social and governance factors were becoming more important. . .
As investor demand spurs hedge funds to cobble together ESG plans, that’s also raising the prospect of so-called greenwashing—or using misleading labels or advertising to create an image of environmental responsibility without actually becoming more responsible. . .
S&P Global Inc., Moody’s Investors Service, and Fitch Ratings awarded investment banks AAA ratings, giving them license to gobble up securities backed by subprime mortgages. When that market crashed, the complex debt instruments infected the balance sheets of banks worldwide.
“Greenwashing may soon resemble the scandal of AAA ratings for subprime mortgages,” Serra said.
QuickTake: ‘Greenwashing’
> The race for money managers to go green was turbo-charged by BlackRock Inc. just days into the new decade. The world’s biggest asset manager said climate issues would dictate its investment strategy . . .
> Weeks earlier, Goldman Sachs Group Inc. said it would provide $750 billion for sustainable finance growth areas over the next decade.
The shifts aren’t surprising given the flood of money that’s chasing ESG opportunities. It’s one of the rare corners of the active management industry still pulling investors, with sustainable funds attracting a record 120 billion euros of cash in Europe last year, according to Morningstar.

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