He sees red when banks extend non-green loans

(BLOOMBERG) – Mr Ulf Erlandsson is not your typical climate campaigner: He prefers the trading desk to the picket line.

He pushed Amundi, Europe’s largest asset manager, into divesting bonds in an Indian bank that was financing a coal mine, shamed HSBC Holdings for failing to hold that same bank to account, and pressured a Japanese lender to stop funding coal power.

He sees his brand of activism, shaped by almost two decades working in debt markets, as a new form of bond vigilantism.

He now spends his time pushing fixed-income investors and bankers to face up to their role in underwriting a warmer planet.

He wants them to use their financial heft to increase the cost of capital for polluters and pressure companies to reinvent themselves for a low-carbon future.

After setting up a non-profit entity last year backed by Rockefeller money, the former credit derivatives strategist at Barclays and bond fund manager has become an outspoken critic of the financial establishment, lambasting companies for failing to do enough to fight global warming.

His methods involve a combination of public shaming, typically on social media, and back-door diplomacy. Using contacts built up over years of trading bonds, he persuades investors or lenders to exit planet-warming positions.

And he is not bashful in enlisting lawyers, other non-profit groups or journalists in his campaigns.

He knows people see him as a troublemaker.

Late last year, Mr Erlandsson, 45, learnt that India’s largest bank, State Bank of India, planned to lend about US$650 million (S$863 million) to help Adani Enterprises fund a controversial coal mine in northern Australia.

As an early investor in green bonds – debt raised to fund environmentally friendly projects – he recalled that the bank had sold such notes in 2018. He knew that one of the most high-profile funds investing in green bonds, Amundi’s Planet Emerging Green One (EGO) fund, held the bonds.

He jumped at the contradiction that a bank issuing bonds to finance wind and solar projects in India was also funding the high-polluting Carmichael mine in Australia. He called investors in the EGO fund to flag the impending loan and remind them of the reputational risk for a green investor to be associated with the deal.

Mr Erlandsson said: “When people are saying they’re doing the right thing and they’re not, then it really irks me.”

By the time he called Amundi, several of the investors he spoke to had already raised the issue with the money manager and threatened to sell their shares in the EGO fund unless Amundi divested its State Bank of India green bonds or persuaded the company to withdraw its planned loan.

Within weeks, Amundi sold its roughly US$20 million holding.

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Mr Joakim Blomqvist, head of fixed income and foreign exchange at Swedish pension fund AP3, was one of the EGO fund investors contacted by Mr Erlandsson. He said the call triggered a number of events that ultimately led to Amundi’s divestment and that his lobbying of investors probably was instrumental in the French fund manager’s decision.

Separately, Mr Erlandsson slammed London-based HSBC in an open letter that was published by ESG (environmental, social and governance) news site Responsible Investor for “failing to engage” with the State Bank of India over the Carmichael financing, since it was one of the lead underwriters of the lender’s green bond.

In another instance, he called out state-owned Japan Bank for International Cooperation for financing a coal plant in Vietnam.

He criticised the bank’s lenders, HSBC and Barclays, for not disclosing the obvious climate risks to bond investors.

Just two months after he suggested investors blacklist it, the Japanese bank said last month that it had no plans to finance any new coal power projects.

Mr Erlandsson got his first taste of how financial markets can impact climate change while working as a portfolio manager at Swedish pension fund AP4, where he was an early investor in green bonds.

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He had spent the last several years trying to launch a climate-focused credit hedge fund.

With that plan on ice due to the pandemic, he launched a research and advocacy firm with financial backing from the Growald Family Fund, a foundation set up by Rockefeller family members focused on climate change. His Anthropocene Fixed Income Institute is like a climate activist that speaks the language of financial markets.

It publishes everything from technical research on relative value climate trades using credit derivatives to opinions on how the European Central Bank should structure its bond purchases to avoid financing carbon emissions.

It is also his soapbox to expose anything that smells of greenwashing.

While he loves to expose hypocrisy, such as a company selling bonds to fund green projects while also lending to planet-destroying projects, he understands that being too confrontational could undermine his efforts to encourage fixed-income managers to support the climate transition.

“At some point, you become too much of a troublemaker that people don’t even listen to you: You become some sort of a Cassandra or a Boy Who Cried Wolf,” he said.

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