Carbon as a new investment asset class

Clear steps forward on global climate actions combined with improvements in market size, accessibility, and liquidity are creating an environment that we believe is ripe for the emergence of big carbon markets.

Carbon already garnered growing interest from investors in 2021, attracting direct (carbon credits and derivatives) and indirect (exchange-traded funds) investments.

This is concurrent with growing interest from the investment community to not only properly price carbon risks in their investment portfolios but also enhance their risk-adjusted returns.

In the short term, carbon allowances could also be viewed as an inflation hedge, as higher demand for fossil fuels results in higher carbon emissions, which in turn leads to more demand and higher prices for carbon credits.

With sustainability now a priority for the over $100 trillion asset management industry, even a small allocation could result in substantial demand relative to the size of carbon markets today.