Stockholm (HedgeNordic) – BNP Paribas Asset Management is launching BNP Paribas Environmental Absolute Return Thematic (EARTH), a long/short equity fund that seeks to identify opportunities among companies facing or addressing significant environmental challenges. EARTH is jointly managed by Edward Lees (pictured right) and Ulrik Fugmann (pictured left), a Dane who started his career as a research analyst at Alfred Berg in Copenhagen in the late 1990s and spent most of his career in London. The duo is supported by a dedicated quantitative analyst.
BNP Paribas Environmental Absolute Return Thematic (EARTH) combines thematic, top-down macro, industry and regulatory research with fundamental company analysis, supplemented by proprietary quantitative models for portfolio construction, risk management and alpha screening. The portfolio is built based on a thematic, relative-value or catalyst-driven basis from a proprietary database maintained by Lees and Fugmann. The fund’s investment universe includes companies with a market capitalization typically above $1 billion from both developed and emerging markets, with each holding mapped to one or more of eight environment-related Sustainable Development Goals (SDGs).
EARTH’s portfolio of long positions includes the most promising and innovative companies within the energy, materials, agriculture and industrials markets that are providing solutions to environmental challenges. These challenges arise due to the increased demand for food, water and energy resulting from an estimated global population growth of two billion by 2050. The long positions are paired with short positions in companies with unsustainable or technologically inferior business models vulnerable to transition risk. The basket of shorts acts both as a hedge for long positions and as a source of alpha, aiming to increase the cost of capital for companies failing to address environmental challenges.
“We believe that companies positioned to help address the significant environmental challenges we face will outperform those that either take no action or indeed contribute to these issues.”
“We believe that companies positioned to help address the significant environmental challenges we face will outperform those that either take no action or indeed contribute to these issues,” says Edward Lees, joint manager of EARTH, in a press release. “The latter will increasingly be at risk of having stranded assets and will be forced to take write-downs,” he continues. “Meanwhile, as population growth boosts demand for food, water and energy, causing increasing CO₂ emissions, waste production and unsustainable consumption, the market for solutions to meet these needs could amount to trillions of dollars and will be increasingly encouraged by governments.”
“EARTH builds on our long-standing experience as an investment team and BNPP AM’s well-established capabilities.”
Edward Lees and Ulrik Fugmann have worked together since 2002 and joined BNP Paribas Asset Management in June 2019. The duo also manages long-only fund BNP Paribas Energy Transition. According to Fugmann, “EARTH builds on our long-standing experience as an investment team and BNPP AM’s well-established capabilities.” Fugmann goes on to say that “EARTH offers our investors access to the sustainable investment theme within an innovative long/short framework, enabling them to benefit from positive change in both high and low carbon-intensive sectors, with the aim of delivering long-term absolute returns while reducing risk during periods of market drawdown.”