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Investing in the currency of decarbonisation

Investing in the currency of decarbonisation
Ruben Lubowski, PhD - Chief Carbon & Environmental Markets Strategist

Ruben Lubowski, PhD

Chief Carbon & Environmental Markets Strategist
Lorenzo Bernasconi - Head of Climate and Environmental Solutions

Lorenzo Bernasconi

Head of Climate and Environmental Solutions
Callum Lee - Portfolio Manager, Global Carbon Opportunity Strategy

Callum Lee

Portfolio Manager, Global Carbon Opportunity Strategy

At Lombard Odier, a core investment conviction is that carbon markets will play a central role in accelerating the global economic transformations as part of a sustainability transition towards a Circular, Lean, Inclusive and Clean model (the CLIC® economy).

 

Need to know

  • Mandatory (compliance) and voluntary carbon markets have matured into an investable opportunity with traded volume of over USD 900 billion annually that covers over 17% of global emissions. Carbon is on its way towards becoming a mainstream asset that could even rival the size of major commodity markets
  • There is broad consensus that the price of carbon needs to increase substantially over the next decade to meet stated emission reduction goals and that carbon markets must play a crucial role in achieving net zero carbon emissions globally by 2050
  • An allocation to carbon markets offers attractive portfolio construction benefits, including as a natural hedge against climate transition risks to corporate earnings

 

Enabling the climate transition

In this research paper, we argue there is no path towards limiting global warming and achieving the necessary transitions across the energy, materials, and food and land-use systems without the use of carbon pricing further expanding and intensifying globally. In particular, we expect that both regulated and voluntary markets will play an increasingly central role in enabling the climate transition by creating value for emissions reductions globally, akin to a currency of decarbonisation.

Carbon markets are poised for continued growth offering attractive investment opportunities across global markets. Nevertheless, in order to tap the economic opportunity and support the climate transition, investors will require an active strategy with access to high quality carbon instruments, as well as the expertise to properly assess them.

 

To read our paper, please use the download button provided.

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