Hedge funds are purely alpha-driven, so obviously the hedge funds that are doing this see real value in this data, says Darragh Gallant, who runs Jantzi-Sustainalytics, the North American arm of Amsterdam-based Sustainalytics, a research firm that provides analysis on the environmental, social and governance performance (commonly referred to as ESG) of thousands of publicly listed companies. Auriel Capital Management, a $340 million London hedge fund firm, has brought on Adam Seitchik, a former chief global strategist at Deutsche Asset Management, to demonstrate how a built-in consideration of extra-financial factors can punch up performance.
New Yorkbased Marathon Asset Management, a $10.5 billion credit-oriented hedge fund firm, recently introduced a share class that screens investments based on sustainability issues. Lagrange isnt the only alpha-hungry hedge fund manager who has recently begun searching for investment returns in environmental, social and demographic issues, long considered either too soft or too irrelevant to turn the heads of cold, hard capitalists. Since April, Mitchells job at GLG has been to develop an investment strategy that looks to profit from the problems surrounding sustainability, and the worlds responses to them. To try to capture what he called green alpha at the U.N., this spring Lagrange rehired Jason Mitchell, a former long-short portfolio manager who had left the London-based firm in mid-2008 to become chief operating officer of a water treatment company in sub-Saharan Africa. As Lagrange, who owns a Harley-Davidson, told the United Nations General Assembly two years ago when he participated in an informal meeting on investments and climate change, The environment will be as big as the Internet in its impact on companies and consumer behavior. Its that they present an incomparable investment opportunity. In his mind, the most important aspect of problems like greenhouse gases, disappearing natural resources and rising global temperatures is not that they could spell the end of life on earth as we know it. Pierre Lagrange, co-founder of $22 billion hedge fund firm GLG Partners, cares about sustainability, but not in a way that would make anybody confuse him with a tree-hugging hippie (despite his shoulder-length locks). Click through our slideshow of images from the Compass Conference on SRI.Read Imogen Rose-Smiths report on the Compass Conference, the RFK Centers SRI forum.Watch videos of II's Executive Editor, Mike Peltz, and reporters, Imogen Rose-Smith and Katie Gilbert.Institutional Investor looks at Socially Responsible Investing: