The hedge fund industry has no shortage of aggressive, in-your-face players, but few are as tough as Chris Hohn. The British billionaire takes the typical playbook to new levels—scuttling deals, pushing to remove bosses, and battering companies with litigation and threats. One opponent was so peeved after losing a boardroom battle with Hohn that he titled a book about the experience Invasion of the Locusts. That approach made Hohn’s TCI Fund Management the world’s best-performing, large hedge fund last year.
Now Hohn is bringing his hardball tactics to the fight against global warming. The money manager, with $30 billion in assets, is pushing portfolio companies to dramatically reduce greenhouse gas emissions and disclose their carbon footprint. If they don’t, he says he’ll oust their boards or dump their shares. Just in case anyone doubts his commitment, last fall Hohn and his charity donated £200,000 ($260,000) to Extinction Rebellion, the radical climate change movement whose members have blocked traffic in London and glued themselves to jetliners.
“In the war against fossil fuels, you can’t be super-picky about your allies,” says Jeremy Grantham, co-founder of Boston money manager GMO, a legendary investor who has long warned of climate catastrophe. Hohn “has shown you can make a big impact on companies with a lot of arm-twisting.”
For Hohn, 53, a cerebral and deeply private financier who’s worth $2 billion, his campaign is just a first step in shaking up an asset management industry he says has ignored a planetary crisis. He’s calling on investors to fire money managers who don’t press companies to reduce their carbon footprint, and he wants banks to stop lending to companies that ignore climate change.
Still, for all of Hohn’s zeal, his crusade is fraught with the inconsistencies of green investing. TCI once held a big stake in an Indian coal producer; even now, it owns shares in three railroads that burn tons of diesel and ship fossil fuels, including from oil sands, one of the worst sources of greenhouse gases. Another key holding: Ferrovial SA, the Madrid-based conglomerate that runs airports that include London’s Heathrow.
“On the one hand, he’s trying to be green—and on the other, he makes money out of polluters,” says Jacob Schmidt, chief executive officer of Schmidt Research Partners, a London investment firm. “The question is, how committed are you in actually following your principles?”
Hohn says it’s far more productive to engage with carbon-heavy companies than to ignore them. On Nov. 30, TCI sent letters to the CEOs of the 17 companies in his portfolio with specific instructions on shortcomings that must be fixed. TCI said it will vote against directors of companies that don’t hit its targets, as well as auditors who fail to report “material climate risks,” and it may even sell all its shares in a company.
In a letter to Ferrovial, Hohn acknowledged that “de-carbonizing” airports is a massive challenge and lauded the company’s A grade for disclosing its greenhouse gas emissions. Yet TCI said Ferrovial’s target of cutting emissions almost a third by 2030 could be increased, and he called on the company to support measures such as a carbon tax and a mandate that airlines shift to greener jet fuel.
He told Canadian Pacific Railway Ltd. that its method of disclosing emissions got a C grade by the nonprofit Carbon Disclosure Project, and that its plan to boost that to a B would still be “unsatisfactory.” TCI, the railroad’s No. 1 stockholder, with an 8% stake, said it requires the company to have a “credible, publicly-disclosed plan” to reduce emissions that meets seven objectives, including offsetting emissions from corporate travel and making facilities more energy efficient. Canadian Pacific says it engages in dialogue with stockholders on topics including sustainability, and that it has long reported its emissions to improve its practices. Hohn declined to be interviewed for this story.