Société Générale Index and Orbeo have launched the SGI – Orbeo Carbon Credit Index, designed to offer institutional investors, asset managers and private banks
Société Générale Index and Orbeo have launched the SGI – Orbeo Carbon Credit Index, designed to offer institutional investors, asset managers and private banks direct access to carbon credits. Orbeo is a carbon emissions broker and market-maker established as a joint venture between Société Générale and chemicals firm Rhodia.
The index is the first of its kind to be designed with dynamic allocation that aims to maximise the performance over time of two underlying carbon credits, European Emission Allowances allotted by the European Commission under the European Union Emission Trading Scheme, and Certified Emission Reductions, issued under the Clean Development Mechanism governed by the Kyoto Protocol, which seeks to promote emission reduction projects in emerging countries.
Under the EU scheme, emission reductions can be used for compliance (as well as EUAs) up to a proportion of the allocation of each installation. This percentage varies from country to country and averages 13.7 per cent, representing 1.4 gigatonnes over the period between 2008 and 2012.
The index will initially be based on 50 per cent EUAs and 50 per cent CERs. The significant share of CERs compared with the import limits is intended to capture future benefits from the current undervaluation of CERs relative to EUAs.
The SGI – Orbeo Carbon Credit Index will be overseen by a six-strong independent review committee appointed by Société Générale, Orbeo and Standard & Poor’s, the index calculation agent. Its members, who will be chosen ito bring expertise from a variety of backgrounds, will assess the opportunity to adapt the index structure to optimise performance. The Index will be calculated and published daily by Standard & Poor’s.
