How Emerald Knight’s sales pitch duped the Financial Times blog FT Adviser

This is the first in a series of posts looking at the activities of Emerald Knight, yet another London-based scam company. From London the story takes us to Panama, Costa Rica, Papua New Guinea, Switzerland, Cambodia, Gibraltar, the Cayman Islands and quite possibly a few more countries along the way.

The so-called investments that Emerald Knight was offering included carbon credits, bamboo plantations, biofuel bonds, social housing in Brazil, forestry, renewable energy and a REDD project.

Here’s an example of Emerald Knight’s sales pitch:

By now, I hope, most readers of REDD-Monitor’s boiler room series of posts will realise that the words “30% fixed return” are a synonym for “transparently obvious scam”. Especially when the investment on offer is in carbon credits generated from a “prestigious project in the Amazon”.

The screenshot above comes from a post on the Financial Times blog, FT Alphaville, in March 2012. FT Alphaville journalist Paul Murphy suggested that, “maybe this is something the FSA [Financial Services Authority] could take a look at, just to set our minds at rest…”

Murphy pointed out that “30% seems pretty heroic in the ZIRP [Zero interest-rate policy] age”. No one from Emerald Knight got back to FT Alphaville to explain how the company could offer such a high return.

Before Murphy’s post on FT Alphaville about Emerald Knight, the company had appeared several times on FT Adviser, another Financial Times blog. Even more worrying, the company continued to feature on FT Adviser after FT Alphaville had raised the alarm.

Here’s Julie Bradshaw, writing in March 2011:

Rob Hague, director of investment consultancy Emerald Knight which specialises in socially responsible investment, said businesses that offset their emissions were gaining “rapid attention” from investors because they offer stability and growth. He added that the trend towards cutting carbon levels offered opportunities for investors.

Four days later, Robert Hague got his own spot on FT Adviser with a 750-word advertorial for his company. Under the headline, “Marriage of profit and principles drives SRI [socially responsible investment] growth”, Hague told us that,

Carbon offsetting is one of the most popular forms of SRI. In the offsetting process, businesses wishing to become carbon neutral pay to outsource emission reduction because it is more cost effective or technologically feasible than at home. The market is growing rapidly, with global carbon markets almost doubling in size during 2009. Investors are even branching out to include private individuals, organisations and entire industries, such as those in the automotive and transportation sector.

On 18 January 2012, FT Adviser ran a “Guide to ethical investments“. FT Adviser’s Emma Ann Hughes reported on the answers to six questions from Mark Robertson, head of communications at the Ethical Investment Research Service (a non-profit sustainable investment research firm) and (yes, you guessed it) Robert Hague of Emerald Knight.

In response to the question, “What types of ethical investment are available?” Hague told us that carbon offsetting “is a very popular form of SRI”, the market is “growing rapidly”, and “investors are branching out to include private individuals”.

FT Adviser allows Hague to give another sales pitch for his company’s products:

In addition, Mr Hague said there are many other opportunities across the globe, from forestry investments in Brazil that aim to eradicate illegal logging in environmentally-sensitive areas, to farmland investments in Australia that will produce food to help ease global shortages.

More on the “forestry investments in Brazil” in a moment.

Funnily enough, one of FT Adviser’s “>questions is “How do I research ethical investments?” Unfortunately, FT Adviser did not pass on the advice to ignore cold callers, no matter how good the deal on offer might sound.

Hague goes to town on FT Adviser’s question, “What should I ask ethical investment managers?” Here’s how FT Adviser reported his answers:

“Exactly what ethical investment services do they provide, and what kind of screening do they employ?

“Of paramount importance is their track record and previous results. And it is important to ask if there are any independent sources providing proven success of their investments.”

For specific projects, Mr Hague said you should ask whether they have carried out robust due diligence checks, and in what way clients’ capital will be protected.

Are there defined exit strategies?

Of course Emerald Knight’s sales team was working from a script with answers to precisely this type of question.

There’s more. Hague had advice for financial advisers, who “should ask their clients about income versus capital growth, attitude to risk and desired timeframes”. FT Adviser reports Hague as saying that, “It is most certainly possible to invest with a conscience and still make money.” Then again, he would say that, wouldn’t he?

Hague was back on FT Adviser in March 2012 in a “Special Report” on Timber Investing. This “Special Report” came out almost two weeks after FT Alphaville had questioned Emerald Knight’s investments.

FT Adviser asked Hague about investments in teak plantations, and Hague, as usual, gave his sales pitch:

“The teak investment is unlike any other commodity. It yields more stable returns than the stockmarket, outperforms other commodities in high and low inflation environments, and unlike real estate, timber land is limited and can’t be overbuilt. Essentially, it’s a long-term, low-risk investment.”

FT Adviser kindly added the rest of Emerald Knight’s sales pitch (not as a quotation from Hague):

Emerald Knight’s Teak investment involves semi-mature trees and offers a fixed 10 per cent annual return, increasing to 12.5 per cent depending on the size of the initial investment. There’s an additional bonus from the ‘thinning’ years, which is given after the first year of investment, then every four years thereafter.

Emerald Knight sold plots in the Belem Sky Plantation in Brazil, a scheme set up by Andrew Skeene and Omari Bowers, through their company Global Forestry Investments. Earlier this year, the Serious Fraud Office announced that it had opened a criminal investigation into “alleged fraud concerning Global Forestry Investments”.

Robert Hague’s most recent appearance on FT Adviser was in May 2012, when he wrote another advertorial titled “The UK must wise up to SRI”. A better headline might have featured the need for the UK authorities to wise up to scam companies like Emerald Knight. Perhaps a copy editor could have reflected on the need for FT Adviser to carry out a little more due diligence on the companies it chooses to promote.