LONDON (Reuters) - Carbon traders on Wednesday launched a fund targeting markets in carbon credits and renewable energy aiming to exploit market turbulence and government incentives respectively.
Carbon markets allow industrial companies to buy rights to pollute, and appear more risky after the United States last year failed to launch a federal scheme and as U.N. climate talks remain deadlocked on a new round of national carbon caps.
Industrialized countries or companies which face emissions limits can finance carbon cuts in the developing world, earning a pipeline of tradable offsets in return.
The Euro Carbon Macro Fund (ECMF) will comprise two funds: one would aim to buy or refinance pipelines of carbon credits held by large financial institutions.
The other will seek opportunities in the European Union renewable energy and power generation sectors, including spreads between different electricity contracts with and without the costs of carbon included.
The funds would provide relatively short-term liquidity, at two years and three months respectively, as investors respond to regulatory uncertainty in particular in carbon markets, said Laurent Segalen, chief executive of ECMF and formerly a carbon trader at Nomura.
“Discussing with investors I’ve seen the past year that there’s very limited appetite for private equity, long-term products on carbon,” Segalen told Reuters.
“On the other hand, we’re starting to see more interest from the alternative asset management world which requires more liquidity.”
Broadly, the EU regulatory environment to 2020 provided a clear, overall backing to de-carbonize the economy, he said.
Segalen will manage the fund alongside Coos Battjes, formerly at Credit Suisse and Nuon.
They aim to raise 50 million euros ($70.47 million) initially with an objective of ultimately reaching 150 million euros.
They forecast a net return per year above 15 percent for each strategy, but with a different risk profile.