London, July 22nd 2020: The Alternative Investment Management Association (AIMA) and international law firm Simmons & Simmons have worked with some of the world’s leading alternative investment managers to examine how short selling can be used in the context of responsible investment.

The paper, published today, describes how hedge fund firms can use their unique investment abilities to accomplish an important goal of responsible investment: protecting against undesired key risks such as climate risk. The example of ‘carbon footprinting’ is used. By properly accounting for the carbon exposure of both their long and their short portfolios, alternative investment managers and their investors can gain crucial insights into how exposed their investments are to climate change and the attendant policy changes. Short selling can thus be used to accomplish a crucial goal of responsible investment: protecting investors from ESG risks.

Short selling can also be used to create positive impacts for the broader markets. Short selling campaigns are often triggered by ESG concerns such as questionable issuer governance, poor employee safety practices, environmental issues and even alleged human rights abuses. Alternative investment managers have a long and successful track record of discovering governance failures, as witnessed by the recent Wirecard scandal. They use this same expertise to expose environmental and social failings of issuers, creating more transparent, safer markets for investors around the world.

AIMA CEO Jack Inglis commented: “Alternative investment managers have always been at the forefront of investment innovation. Today, they are using one of their defining abilities—short selling—to protect their investors from novel risks, and to make markets as a whole safer. We are happy to see this fact gain increasing recognition from investors and leading organisations such as the PRI, and we have no doubt that short selling will soon be seen not just as valuable for responsible investment, but essential.”

Darren Fox, Partner, Simmons & Simmons

“We’re delighted to have been able to assist AIMA in producing the Guide.  To dismiss short selling as not having a role to play in the context of ESG would be naïve.  One only has to look at the recent events relating to Wirecard to realise that short selling has an important role to play within the ESG framework.  AIMA has a vital role to play in fostering the debate on this very important issue and the new Guide should help to stimulate and move forward that debate.”

The full paper is available here

ENDS

Notes to editors

For media information:

Laura Morrissey, Hume Brophy, e: [email protected], t: +44 (0)20 7862 6383

Tom Kehoe, Global Head of Research & Communications, AIMA, e: [email protected]  

About AIMA

The Alternative Investment Management Association (AIMA) is the global representative of the alternative investment industry, with more than 2,000 corporate members in over 60 countries. AIMA’s fund manager members collectively manage more than $2 trillion in hedge fund or private credit assets. AIMA draws upon the expertise and diversity of its membership to provide leadership in industry initiatives such as advocacy, policy and regulatory engagement, educational programmes, and sound practice guides. AIMA works to raise media and public awareness of the value of the industry. AIMA set up the Alternative Credit Council (ACC) to help firms focused in the private credit and direct lending space. The ACC currently represents over 170 members that manage $400 billion of private credit assets globally.  AIMA is committed to developing skills and education standards and is a co-founder of the Chartered Alternative Investment Analyst designation (CAIA) – the first and only specialised educational standard for alternative investment specialists. AIMA is governed by its Council (Board of Directors). For further information, please visit AIMA’s website, www.aima.org.