In July last year, Carbon Streaming, which applies the tried-and-tested model of royalty-based financing to carbon projects around the world, made its debut on the NEO Exchange.
“We’ve seen just a tremendous response to the public listing in Canada,” Justin Cochrane, founder and CEO of Carbon Streaming, told Wealth Professional.
While climate change is steadily and surely taking its place among the top priorities of ESG-oriented mainstream investors, their awareness of carbon credits, a financial instrument used to control industries’ carbon emissions and support projects that have a positive direct or indirect impact on climate, is still very limited.
“Carbon credits are a new asset class for many investors, and they tend to be uncorrelated with a number of other commodities and lines of business,” he says.
In that context, the 15% internal rate of return targeted by Carbon Streaming – which can go north of 20% and even 30% in some scenarios, should carbon prices rise – may seem very tame.
As with any form of investment, participating in the carbon credits markets entails a certain degree of risk.
At Carbon Streaming, we do a lot of due diligence and spend a lot of time with our own team and consultants to ensure that we’re investing in the right projects.
While the idea of investing outside regulated markets might cause more than a little unease in investors of any stripe, Cochrane emphasized that efforts to stem the impact of climate change are mushrooming across the world.
And while compliance markets often lend themselves to higher pricing than voluntary markets, the voluntary market for carbon credits crossed the billion-dollar mark last year.
“We see lots of fascinating new projects that are being developed to meet demand from corporate entities and governments looking to offset their carbon emissions.