Activist investor Gianluca Ferrari, who has led campaigns against a string of mid-cap firms, is setting up a fund targeting companies lagging on environmental, social and governance (ESG) issues.
Ferrari, who made his name pushing for change at companies including EDP Renovaveis and Retelit as part of Frankfurt-based Shareholder Value Management, said his firm, Clearway Capital, aimed to launch its first fund early in 2021.
The move follows strong growth in assets at traditional money managers, which seek to invest in companies with good performance on issues from carbon emissions and water usage to boardroom diversity.
That, said Ferrari, left a gap for activist managers to agitate for change at weaker companies in order to bring about more sustainable returns and share price gains.
“I’m looking to use the tools we’ve historically used as activists in order to take advantage of … valuation discrepancies between highly rated and poorly rated companies, from an ESG perspective,” Ferrari said.
“If I can go into companies … and push them to clean up their act, I can get rewarded through higher valuations because of all the ESG capital.”
Ferrari said the fund would likely launch with a “high-double-digit to low-triple-digit millions” size but sees potential for it eventually to be a multibillion-euro fund.
He plans to initially target ESG laggards with a market capitalisation of between 500 million euros and 3 billion euros.
“There are a lot of companies that are ripe for this… especially in the mid-cap space,” he said.
“Not only is there a void of stewardship, i.e. there’s very few traditional activist funds in Europe; second of all, these mid-cap companies have not dedicated the resources to get up to date on sustainability metrics.”
Data from industry tracker Eurekahedge showed there were 97 hedge funds globally with an ESG mandate, although only three were activists. Ferrari said Clearway would be the first set up to focus exclusively on ESG-focused activism in Europe.
While activist investors have traditionally focused on governance issues, many are now tilting their campaigns towards other ESG elements, especially climate.
Among the most famous is Chris Hohn, founder of London-based TCI, who recently pushed for a vote on climate plans at Aena. In the United States, former ValueAct investor Jeff Ubben recently set up Inclusive Capital Partners, while Lauren Taylor Wolfe, formerly of Blue Harbour, founded Impactive Capital..
While European activists often work for change behind the scenes, Ferrari said he would also do so publicly, if needed, including putting his concerns to a shareholder vote or using the media.
Joining Ferrari at Clearway as partner is James Dilworth, who has worked at asset manager DWS, Allianz and Morgan Stanley Investment Management. He will focus on capital raising and other operational areas of the business, Ferrari added.
($1 = 0.8378 euros)