How hedge funds make millions with fossil energy

Sustainability, environmental protection, climate change? No, thank you. Many hedge funds have made considerable returns in recent months by investing in some of the dirtiest corners of the global economy.

Hedge fund honcho Chris Hohn would probably like to be a shining role model for his industry. As the founder of the investment company The Children's Investment Fund Management (TCI), whose proceeds largely benefit children living in poverty, Hohn is a kind of do-gooder in financial business. These days, the activist investor wrote to the Bank of England, the European Central Bank (ECB) and various other institutions of the banking industry worldwide. His demand: Money houses should pay more attention to climate protection when lending - and, if in doubt, forced to do so by regulators.

Hohn has already appeared successfully as a climate fighter before. And his concern about the monetary industry seems justified: According to the Financial Times, banks worldwide granted loans totalling $750 billion to companies in the coal, oil or gas industry last year.

Hohn is also by no means the only representative of the hedge fund industry who is committed to the good - green - purpose. In the summer of this year, the comparatively small US investment company Engine No. 1 made headlines when it managed to get three seats on the board of directors of the US oil giant Exxon Mobil. The declared goal of the engine activists: Exxon should address the global climate problem and reduce its carbon footprint.

Last autumn, the activist hedge fund Bluebell Capital Partners also began a campaign aimed at encouraging the chemical group Solvay to no longer dispose of chemical waste from a factory in Italy into the sea there. A year later, Bluebell does not let up - and demanded the departure of Solvay boss Ilham Kadri a few weeks ago because she still did not solve the problem.

These are just a few examples, and more and more hedge funds are emerging that explicitly advocate sustainable investing along so-called ESG criteria ("ESG" stands for "Environmental, Social and Governance" and has established itself as an abbreviation for sustainability in the investment industry). The sustainability trend, which has been affecting the entire investment market for some time, has therefore apparently also arrived in possibly the toughest part of the financial industry, hedge funds.

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However, this is only part of the truth. The other is: Hedge funds have apparently collected as much money since the beginning of the corona crisis as they have not for a long time - and a large part of it has invested investment houses in the industry that contributes most to pollution and climate change: global oil and gas companies.

The total capital of hedge funds worldwide has grown by more than one trillion US dollars to almost four trillion US dollars since the outbreak of the corona crisis, the investment company Bantleon has calculated with reference to data from the analysis company Hedgefonds Research. At the same time, the funds performed strongly during the pandemic: According to data from LCH Investments, the 20 best hedge funds in the corona year 2020 brought it to income of 63.5 billion dollars together - the highest value in ten years.