Karyn West
Apostle Funds Management (Apostle) has announced the launch of its Global Carbon Credit Fund (the Fund).
The Fund offers exposure to global carbon markets for sophisticated and institutional investors and will seek to outperform a global carbon benchmark by at least 2% p.a. net of fees over rolling 5-year periods.
Apostle’s Partner, Global Carbon Markets Luke Donovan explained, “Apostle’s Global Carbon Credit Fund offers sophisticated investors the opportunity to take an active role in the global decarbonisation, now. We are pleased to bring this solution to the market amid extensive investor demand.”
“Compliance Carbon markets have a strong outlook and are an essential component of a low-emission economy. These markets are regulated and mandated by governments worldwide, with oversight and control mechanisms in place to ensure integrity and scalability. Our fund provides a robust return outlook and diversification with other asset classes while also serving as a hedge against climate risk and inflation,” said Mr Donovan.
Taking an institutional approach to carbon markets
The wholesale unregistered Fund is actively managed with diversification across major markets – California, Europe, UK, New Zealand and Australia. This approach offers investors holistic exposure to the carbon price and helps reduce volatility through jurisdictional diversification.
The Apostle Carbon Credit Fund benchmark provides investors with beta carbon price exposure to both established and emerging carbon markets. This is combined with an active management component that delivers greater opportunity for alpha and provides superior returns at a lower risk. The Fund is constructed using a mixture of physical credits and futures.
“We believe a ton of carbon is a ton of carbon – regardless of the country it is from. This is why we’ve chosen the breadth of markets and why the benchmark is constructed with even distribution across each market.
It’s clear that in order to incentivise the type of transition needed in our economy the price of carbon needs to be higher. Institutional investors have an important role to play in this process, by participating in compliance carbon markets they increase liquidity and sophistication which ultimately drives greater price discovery. High functioning compliance carbon markets are a key pillar to the efficient and timely allocation of capital in the race to reduce emissions in our economy. This is what we are offering.”
Mr Donovan has over 15 years of deep expertise within the energy finance sector and carbon trading. He was most recently Executive Director of Carbon and Power Markets at Commonwealth Bank of Australia (CBA) where he was responsible for CBA’s Carbon Emissions trading globally and pivotal to establishing its presence in the Australian Carbon Market. Prior to his time with the bank he experienced a decade tenure at Origin Energy, building Australia’s largest industrial customer portfolio in energy and carbon trading.
Not all credits are created equal
Voluntary carbon offsets are unregulated which means transparency and scale is likely to take much longer to develop, unlike compliance markets which are regulated by governments.
Regulators use control mechanisms to increase this price over time, which disincentivises emissions in line with their climate goals. Each country operates its own mechanism, but it is expected that carbon prices will converge over time to create a global cost of carbon.
Developing an agreed infrastructure and pricing in Australia will set the investment guidelines for the highest emitters and deliver confidence to investors. By establishing markets and setting a price on carbon like a commodity it will incentivise large polluters to make the changes to their business.
Commenting on Australia’s fledgling carbon market Mr Donovan explained, “The safeguard mechanism offers a clear signal to market to deploy capital to smooth the transition. Most corporates understand a carbon tax is coming, the most efficient way forward is to establish a robust price for carbon to enable investors to make informed decisions to deploy capital.
Climate change is a global problem and over time it would make sense for fungibility between carbon markets to increase which will ultimately lead to price convergence and the lowest cost of abatement occurring.”
“We are not putting money into increasing the profitability of these high emitters, we are participating in the mechanism that permits these businesses to change how they operate to decarbonise. But we must start deploying capital now to create integrity in the market, liquidity, price transparency, and price discovery.”
Apostle’s Managing Director Karyn West commented on the launch, “This fund has been a long time in the making and complements our other ethical investment strategies. Connecting pools of capital with the problems that face our economy is critical to progress and is core to our business, which is why we are pleased to bring this Fund to market.”