Evolution Environmental Asset Management (EEAM), a new environmental asset management firm, aims to raise $1 billion for its Premium Carbon Offset Fund. This voluntary offset fund aims to generate risk-adjusted returns while improving the environment through emissions reductions.
Based in New York, EEAM was started by a team lead by Andrew Ertel, the CEO and Founder of Evolution Markets.
EEAM’s Premium Offset Fund is seeking an 8% rate of return with a 10-year investment horizon (five-year investment period followed by a five-year harvest period). The minimum investment amount is $1 million.
EEAM said it would use its proprietary Intelligent Carbon Offset System (ICOS) to assess existing projects based on integrity and compliance eligibility. The fund will only purchase offsets that obtain a “premium” rating based on their in-house system.
Through the use of ICOS, EEAM has evaluated more than 5,500 offset projects – and is committed to only invest in those that meet their strict guidelines. The goal is to initially focus on offset projects that avoid emissions and offer low-cost alternatives to emissions, then gradually expand into carbon removal projects. The fund will favor projects that support biodiversity and gender equality.
EEAM has also expressed interest in direct air capture projects and bio-energy initiatives with carbon capture and storage as those technologies become available.
In addition to their ICOS, EEAM plans to utilize tools from existing registries such as SD VISta from Verra and SDG Impact Tool from Gold Standard.
In a statement, EEAM said, “As corporates are more closely scrutinized on their ESG commitments, the reputational appeal should drive these offsets to trade at a premium. Our conviction is that offsets with environmental integrity that have been screened for these long-term criteria will appreciate significantly in value as the voluntary market matures.”
With the global offset industry anticipated to be worth nearly $22T by 2050, it’s no wonder that EEAM is feeling confident.
Saudi Arabia announced on Friday a plan to establish an exchange for carbon credits and carbon offsets. The exchange is called the Riyadh Voluntary Exchange Platform and will trade carbon credits for countries throughout the Middle East and North Africa.
As a result, companies in the regions mentioned above will be able to reduce carbon emissions by exchanging carbon credits.
This move comes as Saudi Arabia plans to keep within the Paris agreement’s temperate goal of 1.5 degrees Celsius above pre-industrial levels. As well, the COP26 climate conference is coming up in November.
In March, Saudi Arabia announced it would plant 50 billion trees across the Middle East. 10 billion trees are to be planted directly in Saudi Arabia while the remaining 40 billion trees will be planted in neighboring countries. In addition, the Saudi plan to reduce carbon emissions includes increasing biodiversity on land and in the sea. Also, half of the country’s power will come from renewable energy sources by 2030.
As a major exporter of oil, the Saudi Arabians are under pressure to conform to renewable sources. Oil is one power source that could be phased out in the future. The Saudi Arabians must be prepared for when that day comes.
Tribeca Investment Partners, which manages $3.2 billion in assets, has purchased $100 million worth of carbon credits. Portfolio Manager and Partner Ben Clearly says, “We are seeing a major demand from Asian corporates for offsets, above and beyond their organic carbon reduction programs.”
He expects the price of carbon credits in the Asia-Pacific to increase substantially.
Microsoft, Walt Disney Co, and Royal Dutch Shell plc are currently purchasing offsets to draw their own emissions. Countless other corporations are following their lead, viewing offsets as a tangible way to help remove carbon dioxide from the atmosphere.
Tribeca’s focus is on carbon credits that qualify for programs such as the Australian Carbon Credit Units or the United Nations’ REDD+ framework. These credits are expected to top $100 a ton over the next few years. Currently, they average about $8-$10 for high-quality projects.
Another goal for Tribeca is to raise $500 million for a new decarbonization-focused fund invested in climate-friendly plastics, chemicals, and food.
Though the global carbon market can hit $22T by 2050, critics are not so sure.
Some question whether carbon offsetting is effective enough to meet aggressive reduction goals. They also ask whether it is possible to prove carbon was removed from the atmosphere, especially for projects tied to cheaper credits.
According to Eli Mitchell-Larson, a researcher at the University of Oxford, “We need to ensure that these credits are having actual, high-certainty climate impacts before we rejoice in this growth. Otherwise, we’re going to have another boom-and-bust where buyer confidence is shattered.”
His concerns are valid – which is why the carbon offset industry needs additional verifications in place to ensure it is achieving all it promises to deliver.
The Accelerate Carbon Negative Bitcoin ETF (TSX:ABTC) has been announced by the Canadian Company Accelerate Financial Technologies. The ETF is pledging to be carbon negative. Meaning for every $1,000,000 CAD invested into the ETF, Accelerate will plant 3,450 trees. According to Accelerate, this will remove an estimated 1,000 tons of carbon dioxide from the atmosphere for each collection of trees planted.
Accelerate plans to remove “over 100% of the estimated carbon dioxide emissions attributable to bitcoin transactions that ABTC is indirectly exposed to”. It would be a forward move to have a carbon-negative bitcoin ETF, as Bitcoin is responsible for 0.5% of the world’s total electrical output.
ABTC is an attractive ETF due to the direct removal of carbon resulting from investments. Most ETFs that aspire for carbon neutrality do so with carbon credits. However, ABTC will be directly buying trees to offset their carbon emissions. The Fund will also not hold Bitcoin directly. Instead, it will focus on bitcoin futures trading on the Chicago Mercantile Exchange.
The ETF will trade on the Toronto Stock Exchange. As well, it will offer denominated units in Canadian and American dollars. A management fee of 0.70% is also listed. The fund will be managed by Accelerate CEO and Founder Julian Klymochko.
AT&T has created a Connect Climate Initiative to reduce its carbon emissions. This means bringing together researchers and business partners to look at ways of curbing carbon emissions. AT&T is looking to eventually reduce total emissions in the US by 1 gigaton, equivalent to 1 billion tons. Currently, a gigaton is around 15% of the U.S.’s total carbon output. As well, AT&T plans to be carbon neutral before 2035.
Right now, AT&T has announced companies such as Microsoft (MSFT) and Equinix (EQIX) as partners in this project. Universities such as Texas A&M and The University of Missouri are included in the research section of the initiative.
The initiative aims to encourage IT companies to rely on systems that produce fewer carbon emissions. As well, further cloud work is another major component. Reducing the number of computers and servers working will produce fewer emissions. Moving these systems to the cloud is a possible way to reduce carbon emissions.
Equinix is letting customers use AT&T services to connect directly to serves and datacentres. Therefore, less infrastructure is used and fewer carbon emissions are created. Equinix has mentioned that the 10,000 customers have been shifted to AT&T networks. The technology is there to upscale, it just requires further support and research.
Governments across the globe are looking to expand carbon markets – with the potential value reaching $22 trillion by 2050. This means carbon markets could exceed the oil market’s value as early as 2025. Big energy trading houses have noticed, which is why they are switching focus from oil and natural gas to carbon-trading operations.
This summer, the EU unveiled plans to expand its market, and China has started its own limited trading system. The Biden administration is interested and supportive of pricing carbon, but it is still far behind the EU and China. Right now, in the U.S., the price of carbon is market-led.
Big traders, such as Vitol Group and Glencore PLC, aren’t waiting for the U.S. Neither are Trafigura Group Pte. Ltd, and Mercuria Energy Ltd. All are working to increase trading capabilities, prepping for a shift in the marketplace as new regulations are implemented. They have even built up teams in anticipation.
BP, recognizing that competition will be fierce, has reportedly increased the salaries of key staff. Currently, carbon makes up 5-10% of their activities, contributing $50-$100M to trading profits annually.
Shell is also interested. A representative stated that the company was looking to build their participation in the carbon market as they work towards being a net-zero-emissions energy business.
Although interest is hot, some banks have decided to proceed with caution without a global framework in place. Chris Leeds, Head of Carbon-Markets Development at Standard Chartered, said, “There is huge interest in participating in carbon markets from banks, but they are extremely concerned about the reputational risk… The problem is defining what are high-quality carbon credits.”
Their position is understandable.
Still, with carbon markets at the forefront of consumer, business, and government minds and a $22T global value in play, carbon markets may very well be the opportunity of a lifetime for many.
It will be interesting to see how the U.S. responds and how the markets react.
One thing is for sure: the carbon marketplace is here to stay. And, while it may not be perfect – yet – all eyes are on making it better. A positive for big traders and the environment alike.
The sustainability boom has resulted in trillions of dollars through environmental, social, and governance funds. Now, the Big Four firms – PwC, Deloitte, EY, and KPMG – are hoping ESG is key to rebuilding consumer trust after numerous scandals and multi-million-dollar payouts.
Though some say the Big Four’s rush to reinvent their image through ESG is a survival ploy, their efforts are noteworthy.
ESG advice is central to PwC’s $12B investment plan, adding 100,000 employees that will work through their “trust institute” to train clients in ethics. The objective, according to PwC Global Chair Bob Moritz, is “to make sure we’re valuable for what our clients need and what the world needs.”
Deloitte announced their own “climate learning program” for 330,000 employees – their largest climate-related initiative to date. Upon announcing, Global Chief Executive Punit Renjen re-tweeted an article about “the links between trust and economic prosperity.”
KPMG’s most recent work includes helping Ikea analyze social and environmental risks associated with raw materials and advising on India’s first-ever green bond issues.
All three groups, alongside EY, are working to help build and implement international standards for measuring sustainability.
If the Big Four fail to live up to the standards they promote, there could be negative backlash. In fact, much of the Big Four investments are not related to climate change or diversity but rather technology and international markets. Plus, if activists begin scrutinizing each firm’s records – they may start calling out clients not meeting environmental or diversity goals, which could be a PR nightmare.
PwC Chair and Senior Partner in the U.S. Tim Ryan is not concerned. “There’s always a risk in leading. We’re not perfect, but we’re massively investing to make sure everything we do is with improvement.”
The EU’s Carbon Border Adjustment Mechanism (CBAM) proposal would force EU businesses to pay a carbon tax for goods imported from places with less stringent emissions rules.
Intending to cut carbon and greenhouse gas emissions by 55% by 2030, the EU is further along than most other countries regarding environmental initiatives.
Believe it or not, the U.S. and China are behind the EU. But, with more resources at their disposal and much support for the passage of this new CBAM within the EU, the U.S. and China will likely start taking aggressive measures themselves to get there.
Many nations, such as India, South Africa, and Brazil, feel discriminated against by this new tax. Their counties are not quite at the same level as the EU – though they are working on it.
The Institute for European Environmental Policy feels that this type of competition between countries to achieve solutions that will combat climate change is precisely what the world needs.
Any country that wants a place within the world economy will have to take the steps necessary to advance towards carbon neutrality.
Policies, such as CBAM, are simply providing the push needed to get there.
Environmental initiatives have increased over the past decade alone, with the carbon offsetting industry booming and numerous investment funds in place to further technological advances.
Regardless of concerns, The European Commission – which serves as the executive arm of the EU – seems to be set on pushing forward CBAM.
They feel that enforcing such a strict policy is crucial since it will prevent EU companies from moving overseas to locations with fewer environmental restrictions.
If companies were to move production operations abroad, it would undermine the aggressive policies the EU has put in place, resulting in more carbon emissions.
Once assessed by the 27 member EU states, it could take two years before this proposal is finally implemented and placed into law.
It will be interesting to see what impact this potential new tax will have within the global marketplace. Still, with the EU, U.S., and China working towards carbon neutrality, it’s safe to hope that positive change is in store.
The UN has released a report on the latest findings about climate change. The report was created by The Intergovernmental Panel on Climate Change, a UN body responsible for the science associated with climate change. The report drew from over 14,000 previous studies to come up with a detailed analysis.
Breaking the Carbon Budget
One major finding of the report is that humans will have a carbon budget to keep temperature levels 1.5 degrees Celsius below pre-industrial levels. The carbon budgest is the amount of carbon emissions that can be released before 1.5 degrees Celsius is not reachable. Currently, humans are on track to burn through that budget in 10 years.
Extreme Weather
The report also mentions a drastic increase of extreme weather. Heatwaves are becoming increasingly more common as are intense snow or rainfall. As well, forest fires are becoming greater and greater, especially as forest fire season grows longer and longer.
Placed Blame
In previous UN reports, humans were likely to blame for climate change and global warming. However, this report has placed the blame solely on humans by stating “It is unequivocal that human influence has warmed the atmosphere, ocean and land. Widespread and rapid changes in the atmosphere, ocean, cryosphere and biosphere have occurred.”
Fueled by climate change and the now unstoppable global trend of decarbonization, carbon credits are gaining a momentum that will carry them into every area of human life in the coming years.
If you’re looking at this market for the first time, let’s cover some basics. Every person has a carbon footprint. While the numbers vary dramatically from country to country, a person in Canada or the U.S. is responsible for around 15.5 tonnes of carbon dioxide emitted each yeari. That means, should you live to 90 years of age, you’ll have been responsible for generating around 1,395 tonnes of carbon dioxide, or the equivalent emissions from 300 passenger vehicles in one year.
Obviously not every activity emits an equal amount of carbon dioxide and some activities, like planting a tree, actually have the opposite effect by absorbing carbon dioxide from the atmosphere. And thus we enter the world of carbon taxes, carbon pricing and carbon credits.
Carbon credits (also known as carbon offsets), which have been around for over fifteen years, have a straightforward goal: penalize polluters and, by doing so, apply pressure for change. The approach is even more simple: make carbon emissions more expensive so that companies find ways to reduce or eliminate their emissions.
Of course, not every industry can move to a carbon neutral business model at the flick of a switch. Think, for example, of companies still reliant on fossil fuel for electricity. This is where the carbon markets step in by enabling companies to purchase carbon credits to offset those emissions that they cannot yet eliminate.
Reducing their carbon footprint in this way helps some companies avoid penalties or fines. Critically, it also appeases shareholders and consumers.
The Compliance and Voluntary Markets
There are two types of carbon markets: Compliance and Voluntary. In 2020, the Compliance carbon markets grew by 21%, with transactions totaling over US$260 billionii. The Voluntary carbon markets, estimated at US$320 million in 2019iii, need to grow by 15x by 2030 to support the investment required to meet the goals of the Paris Agreement.
So how do they differ? The Compliance markets, like those operated by the European Union and the State of California are very much a government-created cap and trade scheme. While speculation is allowed, these are carbon markets for companies in industries where governments are actively trying to reduce emissions, such as power generation or transportation.
The Voluntary markets are where you, as an individual, or a company can offset your carbon footprint without reserve pricing or fines waiting to punish non-compliance. These markets are for companies that want to voluntarily reduce their carbon footprint for a few critical reasons.
One: Shareholders are demanding it. Climate change is the #1 issue for ESG asset managers in the U.S., and large asset managers like BlackRock and Vanguard have pledged net-zero emissions across their portfolio holdings by 2050 and are holding companies accountable to climate goals. Recently, shareholders replaced three Exxon Mobil directors seen as insufficiently addressing climate change, while Chevron shareholders approved a proposal for the company to reduce emissions from customers use of its fuel.
Two: Consumers are demanding it. People have begun to think about how their personal consumption impacts climate change. A growing number of people are willing to pay a higher price for a carbon neutral product or service or pay directly at check-out to offset the carbon footprint of their purchase. In doing so, they are supporting the carbon markets as they demand climate action from the companies that they use.
Three: Regulators are requiring it. Legislation has already been introduced in a number of countries that require companies to disclose climate risk. Following a meeting earlier this month, the leaders of the G7 – a group of advanced economies, including the United States, the United Kingdom, Canada, France, Germany, Italy, and Japan – all agreed that “mandatory climate-related financial disclosures” should be implemented. Many companies will soon be faced with mandatory climate disclosures and will look to the voluntary carbon markets to purchase carbon credits to offset their emissions or face reputational risk.
Putting a price on carbon credits
Prices for carbon credits vary depending on several factors. For instance, while a tonne of carbon dioxide remains a tonne the world over, depending on where it originates, what the nature of the project is, and other factors, price can vary significantly. Many carbon credits also have co-benefits, such as preservation of biodiversity or job creation, which can attract premium pricing.
There are also different certification bodies that validate the quantity and quality of carbon credits. Vintage, which refers to the year the emission reduction occurred, also influences the price. Carbon credits are listed on a registry and can be held or sold more than once, however, once it is used to offset an emission, it is retired and cannot be resold.
Investing in carbon credits
Carbon Streaming Corporation (NETZ:Canada, OFSTF:OTC) aims to give investors exposure to both the voluntary and compliance carbon markets.
We are investing in high quality, high profile projects that will generate a strong flow of carbon credits over multiple decades. Our investments will deliver a “stream” of carbon credits that we will then be able to sell in the voluntary carbon markets or hold on to for long term price appreciation.
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The Voluntary markets are where you, as an individual, or a company can offset your carbon footprint without reserve pricing or fines waiting to punish non-compliance. These markets are for companies that want to voluntarily reduce their carbon footprint for a few critical reasons.