Carbon credit returns are a ‘moving target’, says AXA IM Alts’s Martin-Min

AXA's natural capital strategy will monetise carbon credits and aims to generate returns of 10-12%, according to a market source.

AXA IM Alts’s $500 million natural capital strategy has made its first investments. It is the latest step of the plan announced by AXA Group in October 2021 to channel €1.5 billion to support sustainable forest management.

The strategy is seeking to generate €100 million in verified carbon units and financial returns of between 10 and 12 percent, according to a market source. AXA IM Alts declined to comment on the returns.

Rather than viewing VCUs as a return directly, the Parisian manager intends to sell the credits. “Today, we don’t deliver VCU in kind,” head of impact private equity and natural capital Alexandre Martin-Min told NPM. “We monetise the VCU we receive. That’s why we fully own a carbon broker dealer [ClimateSeed].”

The €10 million debut investment sees the veteran impact manager partner with The Shared Wood Company and Alliance Forêts Bois. The project seeks to restore 1,800 hectares of degraded land and sequester 500,000 tonnes of CO2 over a 35-year period.

Martin-Min stressed the difficulty in predicting the number of VCUs that will be generated in such projects. “It’s a moving target,” he explained. “If I look at the market, you have two very different kinds of projects: afforestation and reforestation on the one side, conservation and restoration on the other side.

“The amount of carbon you get if you put 50 million in afforestation and 50 million in REDD+ [Reducing Emissions from Deforestation and forest Degradation] is very different.”

The strategy has also invested $2 million into nature tech company Chloris Geospatial’s latest funding round. Martin-Min clarified that the focus will remain on projects; the tech investment was an “enabler” to help with measuring biodiversity.

It is the first time the manager has dipped into the €500 million collected from AXA Group companies for the strategy in September last year. Martin-Min explained that, as the strategy develops, external investors will be offered the chance to join. “Now we start to have a track record. We’ve done projects, we have actual investments. We will open up the strategy to third-party clients.”