Hedge Funds Target ‘Catastrophic’ ESG Cases for Huge Returns (1)

In a corner of finance that rarely generates headlines, investors are busy mapping out paths to huge returns as they contemplate the fallout of new laws in Europe.

The area in question is litigation finance, and the focus is alleged ESG transgressions. Regularly bankrolled by hedge funds and other alternative investors, the lawsuits target supposed corporate misdeeds such as broken environmental pledges, exploited workers or corporate governance failings. A successful case can leave a litigation funder with returns well in excess of 25%.

Last year, citizens in the European Union won access to the kinds of class-action lawsuits that ...