US equity giant Blackstone invested $400 million funding to carbon offset commodity exchange Xpansiv.
The investment is part of Xpansiv’s long term financing arrangement with Blackstone.
Xpansiv is the leading market platform that allows firms to trade carbon offsets so that they can meet their climate goals. The exchange connects buyers and sellers of ESG-focused commodities like carbon. It also provides market data for voluntary carbon offsets and renewable energy credits.
Xpansiv’s software provides the underlying data backing up the assets linked to green projects. Investors can then use the corresponding credits to offset their carbon emissions. Thus, it supports companies that seek to meet their emissions reduction goals.
For Blackstone’s Managing Director, Bilal Khan:
“We believe environmental commodities are a critical new asset class that must scale exponentially to meet climate change mitigation targets… Xpansiv is a leader in this space, and we are delighted to provide the capital and resources to help them further expand their offerings and accelerate their growth…”
Blackstone is the world’s largest private-equity firm. Its funding with Xpansiv is through its energy-focused equity business Blackstone Energy Partners. It’s a leading energy investor with a proven track record in the global energy industry.
Blackstone’s $400 equity investment will help Xpansiv pursue its strategic growth.
Blackstone Funding Arrangement with Xpansiv
Xpansiv’s CEO Joe Madden said that Blackstone’s support is a major milestone for the exchange’s vision for commodity markets that value ESG. He also added that:
“This partnership will help us solidify our leading position in carbon and leverage our platform to scale markets and products… to speed up the energy transition across renewable energy, digital fuels, and beyond.”
In 2021, Xpansiv acquired SRECTrade, HVB, and OTX. The present funding from Blackstone is for acquiring 100% of APX.
APX is a registry provider for commodities markets. Acquiring it will enable Xpansiv to further expand its market and product offerings.
Trading carbon credit offsets
Xpansiv’s trading platform is hosting over 90% of all voluntary carbon credit transactions.
- In 2021, Xpansiv recorded $305 million in revenue (~300% higher than 2020). And carbon trading volume was 4x more than 2020 levels (over 120 million tons of carbon).
The carbon exchange provides the tools vital for standardizing prices of carbon in the financial system. Experts say that is crucial to spur emissions reductions by big companies.
Xpansiv’s partnership with CME Group, in particular, was for its carbon offset futures contracts. They allow traders to wager on what a ton of carbon will cost years from now. Entities use carbon offsets to mitigate their carbon emissions.
The exchange says that carbon trading is growing in a fast pace. In fact, Xpansiv reported that they got about 150 more customers in the 1st quarter of this year.
As more companies make net zero pledges, there is a growing need to connect them with the developers of CO2 reduction projects.
Xpansiv works with carbon offset programs such as Verra and Gold Standard that register projects and verify their climate impact. Their oversight is expanding.
Meanwhile, Xpansiv helps address market issues by centralizing data about those projects.
Other backers of Xpansiv include S&P Global and venture funds from large firms. These include the BP PLC and Occidental Petroleum Corp.
As per David Foley, Global Head of Blackstone Energy Partners:
“Xpansiv has a first-mover advantage, and Blackstone’s investment will enable them to capitalize upon that lead… creating a uniquely positioned company with ownership of technology and a scalable exchange for trading voluntary carbon offsets…”
Foley, along with many others, believe that the offset market will witness huge growth over the next decade.
The partnership continues Blackstone’s thematic investments in climate solutions space. The investor said it will pour money into firms that limit fossil fuel investments. It’s raising energy funding that’s not allowed to invest in oil, coal, or gas exploration.
Blackstone believes that the demand for energy transition is exploding and Xpansiv is in a sweet spot for it.
The funding arrangement has an initial 6-year term and may grant Blackstone certain governance rights. That will be decided upon during Xpansiv’s shareholder’s meeting next month.