The Carbon Market is Set for Rapid Growth

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Source: Unigestion, Bloomberg as of 17 November 2021.

Carbon has been one of the hottest topics of discussion this year. Climate action is a huge theme that affects both individuals and companies, and governments around the world have been actively addressing this essential topic, as witnessed at the recent COP26 Summit in Glasgow.

Carbon also plays a critical role in the investment world and this focus is only set to grow. In late 2020, the world’s largest pension funds and insurers (representing USD 2.4 trillion in assets) committed to transitioning their portfolios to net-zero emissions (removing all manmade greenhouse gas (GHG) emissions) by 2050.

Carbon credits or offsets are examples of mechanisms used to drive the necessary behavioural changes needed to limit climate change. Europe’s market is the biggest by far and our chart gives some idea of its growth. However, many countries have now adopted their own similar schemes. In the US, we have the California Carbon Allowance and the Regional Greenhouse Gas Initiative (RGGI) allowances, the UK and China launched their own Emission Trading Systems (ETS) this year and, after a pilot study, Mexico will launch theirs next year. Many other countries have also initiated similar programmes. The global market for carbon is on a steep, upward trajectory.

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