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Stanley Fink and veterans launch Earth Capital Partners, to invest in sustainable and renewable asset classes

Posted on 09 December 2008

Benedicte Gravrand, Opalesque London: Sustainable, an adjective that in the 21st century denotes hopes and ways to continue using a maintained environment with minimal negative effect, was often quoted at the official announcement of the launch of a new investment management group in London.

Earth Capital Partners LLP (ECP) is a new business specialising in sustainable and renewable asset classes. It is currently seeking authorisation from the Financial Services Authority (FSA), and so will not launch any of its planned funds until early next year. The group targets AUM of $5bln in 5 years.

“Our objective will be to deliver attractive returns by investing in projects, companies and financial instruments, which address sustainable development challenges, such as climate change, water scarcity and energy security,” said Stanley Fink, Chairman of the new group.

Investments in sustainable and renewable asset classes have become more popular in recent years, as the risks of energy shortages and global warming have been substantiated by scientific reports and have been brought to the fore by governments and media. Barack Obama, for example, wants to increase investments in sustainable technologies and renewable energy sources as part of his economic plan.

The firm is being launched at a time when there is a substantial groundswell of environmental concern. “The next generation is very passionately engaged with environmental concerns,” said ECP’s CEO, Rufus Warner. “We need to plan now for a post hydro-carbon fuel economy, and work on the new challenges.”

“The last months were traumatic,” continued Warner, “as excess leverage and opacity were exposed. But we are seeing a new chapter. There will be a substantial interest in real assets (i.e. physical assets). We are convinced there is investor appetite for them.”

ECP does not want to be labelled as a socially responsible investment (SRI) company; its approach is different in that it relies on public information, and “it is not all about governance.”

ECP’s chairman Stanley Fink – former head of Man Group and now CEO at ISAM - is also one of the group’s financial backers. CEO Rufus Warner brings in 26 years of experience in asset management, and was most recently CEO at Close Investments. Neil Brown, also a veteran, most recently at Credit Suisse and HSBC, is the COO. Ben Cotton, previously at Man Group, and one of the main instigators of the birth of ECP, is responsible for external relations.

There are several other investment managers and experts in sustainable development in the team, including James Stacey, an environmental engineer with 17 years in environment and sustainability experience. ECP is still building up its investment team, and has plans for small offices in both Australia and Brazil, locations which are deemed as “strategic.” Everybody at ECP will have partnership shares, directly or indirectly.

Platform and investment process
ECP’s professional investment advisory platform will support a series of funds, each with a strategy to deliver good risk return characteristics and low correlation to both traditional and alternative investments. The future Guernsey domiciled funds will focus on environmental opportunities, environmental infrastructure or markets, agriculture, sectors and cleantech VC.

ECP has set investment guidelines (including no-go areas, standards and best practices) and has created a management system called the Earth Dividend, a score card which encompasses environment, social and governance issues and a measurable proxy for sustainable development against which all assets are evaluated. The Earth Dividend will be measured on an annual basis and assured by an independent company. All due diligence processes will be tested against the guidelines and the Earth Dividend.

Warner said that ECP aimed to be a more embedded sustainable investment structure than any other asset management companies.

The investment process will be close to that of private equity funds. “But it differs in that the veto goes to the head of risk and the head of sustainability,” said Warner. Initial proposals will be brought to an investment committee and external advisors, and, if approved, will go through a series of investment criteria and due diligence. Then a full report with detailed recommendations to invest will be put forward for final approval.

The geographical area of investment will be global. “The developing world is ahead in terms of renewable energy and sustainable development,” said Warner. “For example, some countries went straight to wireless telecommunication, bypassing landlines. 32% of China’s electricity comes from sustainable resources.”

The liquidity issues will be long term, and the performance is aimed at low to high teens (depending on the asset class) or matching the Earth Dividend. Targeted investors will be institutions, foundations, sovereign wealth funds, HNWIs and corporates.

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