HSBC offers passive investment alternative

Environmentalism has come a long way in a short space of time. The cause that was once the preserve of a radical minority has now burst onto the mainstream: bankers and traders have joined the dreadlocked hippies in the belief that the world needs to move to a low-carbon economy. This change has seen a steady increase in the number of environmental projects being undertaken, from windmills to landfill methane plants. And while there is still little consensus on what proportion of energy consumption can realistically be generated from...

For those on the inside, the carbon market is functioning pretty well. Lionel Fretz, chief executive of broker and fund manager Carbon Capital Markets, likens the growth of the market – in terms of liquidity and the emergence of risk management products – to the early growth of the electricity market. The EU ETS was divided into three chronological phases, allowing the project to be expanded over time and giving the Commission the opportunity to modify regulations between phases where appropriate. Since the onset of phase II of the EU ETS on...

Increasing interest in the carbon market is unlikely to come at the expense of the equity or fixed income markets, according to Martin Schulte, director carbon investment advisory at First Climate, a carbon asset manager. Institutional investors have entered the market as an asset allocation decision, in recognition of the growing importance of the market, while private investors see it as an alternative investment, and come looking for high returns. For both sets of investors it is still seen as a niche investment. Carbon investment vehicles...

In 2004, when Tom Whitehouse, CEO of London-based Carbon International, first launched his environmental investor relations/public relations consultancy, most private sector investors had little or no interest in committing money to environmental projects or renewable energy undertakings. “They viewed the entire field of environmental finance as ethical, and therefore not profitable for them,” Whitehouse said. “Private sector investors – venture capital, hedge funds, institutional investors and even private wealth – have dropped their prejudice...

Deal pipelines are looking pallid but the renewable energy sector is regarded as a niche where ECM transactions are still possible in certain conditions. With Frankfurt as the world's hub for renewable energy listings and its companies dominating the sector, Germany could emerge as a rare ECM bright spot amid the gloom that has descended over the rest of Europe. German companies are world leaders in renewable energy; there is little doubt that its renewable energy infrastructure is better developed than anywhere else in the world. The...