Green finance special section
IF YOU NEED evidence of Man Group’s commitment to combating climate change, try organizing an interview with CEO Peter Clarke. When Euromoney proposes to fly from New York to London to speak to Clarke, it is gently suggested: "How about doing this on a video conference call from our Rockefeller office in mid-town instead? We’ve upgraded our video conferencing capabilities. We’re trying to do as much as we can to reduce the need to fly people around the world. It will save on carbon emissions."
The focus on becoming an environment-friendly organization was championed by Stanley Fink, CEO of Man Group from 2000 until March 2007, when he stepped aside to become non-executive deputy. Thanks to Fink and other trailblazers in the company, says Clarke, "we were early along the curve at seeing the compelling signs of the likely economic impact of global warming as well as the social impact. There are clear adverse GDP consequences of global warming, and the scale of what needs to be done to slow it down is daunting."
Under Fink and Clarke’s tutelage (Clarke was formerly Man’s deputy CEO), the firm has taken several initiatives to make the company greener. In most of Man Group’s offices waste is tracked, refuse is recycled, electrical appliances are energy efficient and there are climate control systems to save energy. At its London headquarters, Man has recently taken steps to make its basic power supply more efficient, thereby reducing fossil fuel use. About two-thirds of its basic power supply now comes via its electricity provider on a green tariff, which supplies electricity primarily from renewable sources, such as hydro, biomass and wind. The other third now derives from a newly installed on-site gas-fired generator, which produces electricity at a hefty 80% efficiency rate. That compares well with the roughly 30% efficiency normally delivered by electricity providers.
Employees are encouraged to reduce their household carbon emissions. Man offers, at a discount, the opportunity for employees to have a carbon emissions expert visit their home and advise on how to reduce carbon emissions. The firm has also rolled out a user-friendly carbon calculator on its intranet that enables staff to work out how much it would cost to offset their personal carbon emissions, with Man meeting half of the cost.
Man Group neutralizes its own carbon emissions through offsets. Its primary offset project is a tyre manufacturing plant in southwestern India that used to run on fossil fuels but has switched to biomass energy. The project is one of the few approved by the Gold Standard methodology, which is managed by a global group of non-governmental organizations and ensures that approved projects have positive social and financial consequences for local economies. Further emissions offsets have been purchased for a project that encourages sustainable agricultural and forestry practices in Mozambique.
Such efforts to reduce and offset Man’s 13,000-tonne annual carbon footprint helped make the group the first (and still sole) carbon-neutral hedge fund in April 2007.
Man Group has also been taking its commitment to reducing the effects of global warming beyond its own corporate measures. It has joined forces with the UK prime minister’s office and a dozen UK household names such as retailer Marks & Spencer and high street bank HSBC to promote products for the home that save on energy consumption or otherwise help the environment. And Man has sponsored the first annual Man Group International Climate Change award, which highlights the efforts of a company or organization from anywhere in the world that demonstrates innovation and leadership in the battle against climate change.
If all this sounds a bit warm and fuzzy, think again. You won’t see Clarke hugging trees. Being green is good for business. "We’re not fanatical," he says. "It’s about being sensible and pragmatic and setting a good corporate example. Further, whenever we speak with investors about environmental investment opportunities there is a very positive reception."
Feedback from Man’s investor base strongly supports the company’s foray into environment-friendly activities, particularly in demonstrating innovation. Man says it cannot definitively claim that this new initiative, or the firm’s overall corporate support for combating climate change, has supported its share price. But Man’s shares, which trade on the London Stock Exchange in the FTSE 100 index, have certainly not been hurt by its green stance, having doubled in price in the past 18 months. Since the company floated in 1994 it has enjoyed a hefty 18-fold rise overall.
With its own house in environmental order, the group is now committing additional resources to the fast-growing environmental finance sector. It is doing so through two routes – first, via a newly formed team in its London-based central investment management (CIM) unit that is focusing on direct investments in environmental projects, and second via a dedicated unit in its primary fund of funds house, Zurich-based RMF. Together the groups at CIM and RMF plan to more than triple their size by the end of the year, to 12 professionals.
Private equity propositions
Man’s CIM team, run by Man veteran and former Schroders M&A banker Nick Wood, launched its first big product in April, targeting institutional investors in most leading markets. Called the China Methane Recovery Fund, the investment supports an ambitious project in China involving the capture of methane gas at coal mines and other locations. Methane, which is more than 20 times more potent than carbon dioxide as a contributor to climate change, is a natural by-product of coal production. Under normal conditions in China, coal miners simply burn off the gas or, worse, vent it into the atmosphere. The fund invests in technology that captures methane and then uses it for efficient production of electricity, which is sold to Chinese utilities. But what really makes the fund economically interesting to clients is the added revenue kicker – carbon credits awarded under the Kyoto Protocol agreement.