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A diversified investment in a low carbon future

“From an investor’s perspective, it is easier to access carbon futures that are publicly traded on exchanges. They are liquid, and they are publicly traded on exchanges, so you understand what the value is at the end of each trading day. is,” Wilson says. “And the perks have to be certified to be included in those exchanges.”

According to Wilson, there are three main reasons why investors might consider investing in carbon credits. First, carbon credits as an asset class are expected to exhibit a negative correlation to traditional stocks and bonds, meaning they have tremendous potential as portfolio diversification.

Perhaps more compelling is the potential for returns. The global carbon credits market is projected to be valued at $22 trillion by 2050, several orders of magnitude larger than the roughly $800 billion that is sitting in its early stages today. Many more jurisdictions are expected to introduce their own carbon trading markets, and the price of carbon credits is expected to rise even more as both companies and investors become better able to assess the true environmental impact of carbon emissions. .

“It had attractive historical returns as an asset class,” Wilson says. “Sure, last year was an incredible year. And I challenge anyone to step back and look at the next five, 10 years and tell me that the future will pay off with more industry tighter regulation and the higher cost of carbon.” are not going to.

Ultimately, he says, investors who invest in carbon allowances effectively drive up the price as they bid for them. By increasing the cost of each allowance, they make it less economically viable for companies to produce carbon, giving them an incentive to change. For an investor with equity investments in carbon-producing industries, Wilson argues, owning a carbon allowance is like having your own individual system of carbon regulation.

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