Vaccine Knowledge Project Manager, Oxford University
Investors can influence how companies operate and whether they succeed with their decisions about which ones to back. Edward Lees, a senior portfolio manager at BNP Paribas who co-manages the French banking giant's Environmental Absolute Return Thematic (EARTH) fund with Ulrik Fugmann, is leveraging that clout in a novel way.
Lees backs companies that satisfy environmental, social, and governance (ESG) criteria, and shorts businesses that aren't cleaning up their act. His rationale is that responsible companies, and those willing to update and adapt their business models, will outperform more staid, old-fashioned rivals.
For example, Lees invests in areas such as hydrogen fuel cells, solar rooftops, and electric vehicles for both passengers and deliveries, which are likely to see rising asset values as renewable energy gains traction. In contrast, fossil-fuel companies will probably see their infrastructure decline in worth and even become obsolete.
“Allocating capital thoughtfully in these areas will continue to be good not only for society but also for investors,” he says.
Lees' short positions serve a few purposes. They act as hedges in the event that his long bets don't pan out, they promise to generate solid returns over time, and they punish fossil-fuel companies and other organizations that refuse to change.
By backing sustainable companies and betting against their competitors, Lees is showing how investing can be more than a source of income, and be a force for change.