BNP Paribas Asset Management announced the launch of a new equity long/short alternative UCITS strategy – BNP Paribas Environmental Absolute Return Thematic fund (EARTH) – that will look to identify opportunities among companies that are facing or addressing significant environmental challenges.
Thematically, the new fund is based on the concept that environmental challenges that will continue to evolve over the coming decades will have a disruptive impact on many companies and sectors, while providing opportunities for many as well. According to BNPP AM, these challenges include increased demand for food, water and energy resulting from forecast global population growth of two billion by 2050, and the related increased waste production and carbon dioxide emissions, all while the world is targeting carbon neutrality as described in the Paris Agreement.
The fund will take long positions in companies that it identifies as the most promising and innovative in providing solutions to these environmental challenges within the energy, materials, agriculture and industrials markets. These positions will be paired with short positions in companies deemed to have unsustainable or technologically inferior business models, which will be more vulnerable to the disruptive forces created by these challenges.
EARTH is jointly managed by thematic specialists Edward Lees and Ulrik Fugmann, and supported by a dedicated quantitative analyst. Prior to joining BNPP AM in 2019, Lees and Fugmann co-founded Sustainable Solutions, a global fundamental equity long/short business focused on environmental challenges in energy, materials, agriculture and industrials.
Edward Lees said:
“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. The latter will increasingly be at risk of having stranded assets and will be forced to take write-downs. 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.”
According to BNPP AM, the EARTH fund combines thematic, top-down macro, industry and regulatory research with fundamental company analysis, augmented by proprietary quantitative models for portfolio construction, risk management and alpha screening, with holdings selected on a thematic, relative value or catalyst-driven basis from a proprietary database maintained by the managers.
The fund’s mandate covers both developed and emerging market companies, and will focus on companies with a market cap greater than $1 billion. Investments will be mapped to one or more of eight environment-related Sustainable Development Goals (SDGs).
Ulrik Fugmann said:
“EARTH builds on our long-standing experience as an investment team and BNPP AM’s well-established capabilities. 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.”