Firm launches investment fund focused on investing in over-the-counter carbon credits
After the recent launch of Canada’s first two futures-based carbon credit investment funds, another firm has announced its own strategy focused on the carbon trading space.
Durum Capital has launched Durum Carbon LP, an investment vehicle developed to give financial exposure to global climate change policies while meeting the aspirations of today's environmentally concerned investors.
Canada's transition to a low-carbon economy, combined with stricter environmental rules, has created a one-of-a-kind market opportunity for the acquisition and selling of carbon credits. Durum Carbon LP hopes to eventually engage in this market by strategically acquiring and managing a carbon credit portfolio.
Many investors throughout the world are becoming increasingly concerned about climate change. Many countries throughout the globe have enacted policies to encourage heavy emitters to cut greenhouse gas (GHG) emissions to limit the rate of climate change.
Carbon pricing is widely acknowledged as one of the most effective ways to reduce GHG emissions while simultaneously stimulating innovation. A carbon credit system is a market-based mechanism that encourages businesses to reduce total emissions by allowing them to buy and sell "carbon credits."
One of two methods is used to produce a carbon credit.
Carbon credits equivalent to the quantity of carbon dioxide decreased or removed can be generated by creative enterprises that reduce or remove GHG from the atmosphere. Alternatively, carbon credits are awarded to regulated firms that release less GHG than the threshold set by government agencies. Carbon credits are awarded in an amount equal to the net amount of the emissions reduction.
These carbon credits can subsequently be sold to and used by emitters who exceed their allowed emissions limits in the marketplace. Carbon credits are traded over the counter at a discount to the government-mandated carbon price, which is presently fixed at $50/tonne of CO2 emitted.
In a market known for its opaqueness and complexity, Durum Carbon LP's strategy is a novelty in that it is both transparent and simple.
Durum Carbon LP will buy and retain over-the-counter carbon credits, then sell them at a higher price when the price of carbon rises and return criteria are satisfied. As global carbon markets develop, management will continuously monitor international compliance and voluntary markets to determine arbitrage possibilities and/or rebalance the carbon credit portfolio.
Investors may receive unique exposure to the rapidly developing asset class of carbon credits through Durum Carbon LP.
