The opportunity to make a difference
In concept, the nascent environmental market displays intriguing parallels with the hedge fund industry of the early 1990s: the emergence of investment strategies previously unavailable to the wider investor market; an opaque industry characterised by a severe disintermediation of pricing and related information; and idiosyncratic risk offering attractive diversification opportunities.
We believe Man Group can play a significant role in helping transform the carbon market from a cottage industry to one with real institutional appeal. Capitalising on our core strengths in asset management, risk management and risk transfer, and financial structuring, we aim to become a world leading provider of environment-based investment products.
Man has established a department dedicated to Environmental Finance with the declared objective of making strategic acquisitions of and investments in funds and fund managers, and offering fund of fund products in this rapidly developing market. In addition, Man Group’s Corporate Responsibility department has a team dedicated to non-commercial environmental projects involving awareness programmes and support of various charities.
Man Group environmental business opportunitiesLast year Man Investments established a dedicated Environmental Finance unit, based in London. The unit focuses on strategic acquisitions and allocation of proprietary and client funds to investment projects aiming to make a substantial contribution to the improvement of the environment, particularly concerning climate change.
The unit recently made its first significant investment, which is aimed at combating one of the most damaging kinds of greenhouse gases – methane. The investment involves a majority stake in MTM Capital Partners, an asset management business specialising in environmental projects in China. MTM is managing a new fund, called the China Methane Recovery Fund, which will generate revenues from two sources: 1) the sales of electricity produced from methane captured at coal mines and landfill sites, which are two of the largest sources of methane, and 2) from the sales of carbon credits earned through the Kyoto Clean Development Mechanism. China is a logical location for this fund given that it is the world’s largest producer of coal. Man Investments also has allocated some of its own capital to the fund.
In addition, Man Investments’ primary institutional asset management subsidiary, Swiss-based RMF, has addressed climate change via its standard strategy of taking equity stakes and making client allocations to funds and other initiatives. These investments have aimed to control CO2 emissions and also to decrease risks associated with climate change, such as severe changes in weather. In particular, RMF has taken this step with two funds that focus on the trading of carbon credits, taking advantage of the rapidly growing markets for carbon launched in Europe in conjunction with the Kyoto agreement and now expanding around the world.
RMF also has a dedicated unit called the New Alternatives Group, which is researching and developing additional funds that will move beyond carbon trading. A wide variety of new investments is being explored, including those that focus on technologies such as wind, solar, geothermal and hydro power, as well as those that utilise ‘clean’ fuels such as biomass.
Man Investments expects to launch several other funds that focus on environmental finance in the coming months, from both its Environmental Finance unit and from RMF.
MF Global brokes carbon emission credits which improves market efficiency and price discovery.