When it comes to the voluntary carbon market, the investing community has been urged not to let “perfect be the enemy of good” by Julia Mattox, head of IR at Capricorn Investment Group.
“We’ve chosen to try to take the lead in some of these voluntary carbon market strategies, in terms of making early investments and bringing deep capital to the space,” Mattox said on stage at the Impact Investor Global Summit last week.
“While we work on decarbonizing our portfolios for our family and foundation clients who have made zero commitments, we’re looking at our scope one, two and three emissions. We are actively working on the hard-to-abate sectors,” she said. “We are using voluntary carbon credits to abate the emissions in our portfolios. And we think there’s no way forward without this if we want to hit net zero in the near term.”
EBay billionaire entrepreneur Jeff Skoll established sustainable investing platform Capricorn 23 years ago. It has approximately $9 billion in assets under management, according to the firm’s website. Around two-thirds of this is third party capital managed on an outsourced chief investment officer basis, which it is now looking to grow. It also invests in impact technology and in impact-focused asset managers through a GP stakes investing programme.
The voluntary carbon market is growing at a rapid pace. The sector quadrupled in value during 2021 to reach $2 billion, and it is anticipated to reach between $10 billion and $40 billion by 2030, according to a report from Boston Consulting group. A number of fund managers are now engaging in the space. Some, such as Stafford Capital, are offering carbon credits as a return to LPs. Others are simply selling the credits their projects produce, including AXA IM Alts.
Fellow panellist Steven King credited the development of the carbon market with “unlocking strategies that have been off the table for institutional investors.” King is senior vice-president of timberland management specialists Resource Management Service, and pointed to the work the firm has done on afforestation projects in Brazil as an example.
Despite this, some have expressed concern over the quality of credits being issued. Earlier this year, an investigation into the value of REDD+ avoided deforestation credits generated using the Verra standard, carried out by newspapers the Guardian and Die Zeit and investigative non-profit SourceMaterial, found that more than 90 percent of avoided rainforest deforestation credits – which in turn make up 40 percent of all credits verified by Verra – are essentially worthless.
Concerns about the structure of an offset programme’s ability to deliver additionality go as far back as the Kyoto Protocol’s Clean Development Mechanism, while Australia’s Carbon Credit Units scheme recently underwent an independent review that found the programme is “essentially sound” after the former chair of the Emissions Reduction Fund’s integrity committee labelled the scheme an “environmental and taxpayer fraud”.
“While we think that the groups that we’re working with are working on very high-quality projects and have high standards, we obviously recognize the controversies,” Maddox added.