London-based investment firm, Carbon Cap has added several trading and environmental experts to its team in preparation for the launch of a global carbon and environmental markets fund.
The World Carbon Fund, which is set to launch in early 2020, will focus on the international CO2 emissions trading markets.
Founder and CEO, Michael Azlen says: “Carbon markets have been a successful policy tool in the effort to reduce emissions and now carbon is emerging as an attractive and investable global asset class. Carbon markets are expanding quickly around the world and the launch of China’s carbon market next year means that 14 per cent of global emissions will be covered under a “Cap and Trade” carbon market.”
Nigel Felgate PhD is to join as the fund’s portfolio manager. Felgate has previous experience working in the energy and carbon markets. Prior to joining Carbon Cap, Felgate worked as a proprietary trader across energy commodities including carbon emissions at BNP Paribas.
Alex Child joins as head of carbon markets research. He joins from Vivid Economics, where he was employed as a climate change and energy economist. Child has helped designed climate policies and market-based carbon mechanisms around the world, including South Africa’s carbon tax.
Alzen adds: “The World Carbon Fund is unlike other investment funds in that it will be an absolute return fund focused purely on Carbon and environmental markets.”
The fund will have the dual objectives of generation absolute returns while also delivering an observable impact of climate change. The fund’s investment universe is to include carbon markets around the world, incuding Europe’s EU ETS, North America’s WCI and RGGI programs and New Zealand and South Korea markets.
Along with partner Colin Hodges, Carbon Cap’s COO, the team has created a proprietary carbon price database and has written an academic paper “The Carbon Risk Premium”. The paper analyses carbon as a liquid and investable asset class indicating that carbon has generated attractive historical returns with a low correlation to both traditional and alternative asset classes, making it potentially attractive as an addition to diversified portfolios.
“Carbon pricing has proven to be a successful tool to encourage emissions reductions and we believe that carbon prices will continue to rise over the next decade as policy makers increase climate change ambition” adds Azlen.
As part of the fund’s impact credentials, a fixed percentage of its performance fees will be used to cancel and offset carbon allowances and emissions in order to achieve direct climate impact.
The fund will invest into a variety of instrument types including physical carbon allowances, as well as futures and options.
Azlen says: “Carbon Cap’s mission is to raise awareness of climate change and to provide solutions directly related to the capping and reduction of carbon dioxide emissions. The World Carbon Fund aims to be the first in a family of strategies aimed at managing capital for investors in a way that generates positive returns and supports the transition to a low-carbon economy.”
