NY firm sees investment opportunity in garment factories

Outdated, poorly managed factories can be fixed in ways that help workers, the environment and socially conscious investors willing to provide the funding, according to a new firm that plans to invest in Bangladesh and elsewhere.

Oliver Niedermaier, the founder and chief executive of New York-based Tau Investment Management LLC, said he saw a need for equity-style investments in rundown factories including those in the garment industry well before the April collapse of the Rana Plaza factory and the November fire at a Tazreen Fashions factory in Bangladesh.

However those events, along with worker protests and plans by retail and apparel groups to push for factory improvements in Bangladesh, have brought the issues to the spotlight.

"When we started setting up Tau as a firm, one of the first areas we were looking at was the garment manufacturing industry because we view it as one of the biggest turnaround opportunities in history," Niedermaier told Reuters on Friday. "Unfortunately, it is now a lot easier to explain our investment thesis after Rana Plaza."

Speaking before a panel at the Clinton Global Initiative event in New York on Thursday, he said that Tau plans to raise $1 billion to invest in factories in the garment industry and other sectors such as toys, furniture and consumer electronics.

Tau will target garment makers with about $100 million to $1 billion in annual revenue. It wants to invest in countries such as Bangladesh, China, Vietnam and Cambodia, Niedermaier said.

Tau aims to make investments as "a very active minority shareholder," providing equity, expertise, capital and access to Western buyers, he said. The firm wants to see factories improve labor conditions for garment workers, including better compensation and training.

It also wants to see updates made to old machinery and energy sources such as diesel generators, moves that would help reduce factory costs and should lead to a reduction of roughly 24 million metric tons of greenhouse gases and 2.5 billion kilowatt hours of energy, the firm said.

The plan was announced days after Bangladeshi garment factory workers protested to demand a $100 per month minimum wage. The monthly minimum wage in Bangladesh is $38, half what Cambodian garment workers earn. The government is in talks with unions and factory owners on a new minimum wage.

Niedermaier said he would like to see wages rise, but declined to comment on the appropriate level.

Tau's advisory board includes Terry Mollner, the co-founder of Calvert Funds, a group of social responsible mutual funds; Bruce Klatsky, a former CEO of apparel company Phillips-Van Heusen Corp, which is now known as PVH Corp ; Brett House, a macroeconomist and former principal advisor in the office of United Nations Secretary General Ban Ki Moon; and Diana Propper, a clean technology investor.

Niedermaier declined to name Tau's investors or say how much growth it expects to see from its investment strategy.

(Reporting by Jessica Wohl in Chicago; Editing by Richard Chang)