Hedge fund giant Man Investments has released a new report revealing carbon trading markets as the next frontier for the hedge fund sector.
According to the World Bank, the international carbon market is trading more than $30 billion ($US 25 million) a year with emissions trading quadrupling over the past year.
“Carbon trading is emerging as one of the most significant new sectors for hedge funds and we can expect continued rapid growth, particularly if the US and China in due course join in and establish their own carbon markets, as is widely anticipated,†said Thomas Della Casa, head of research for Man Investments.
He said that hedge funds have either introduced or are already working on new investment strategies including trading emissions, financing carbon projects, trading electric power, cross-commodity trading, long/short listed equity and even private equity.
In Australia, the industry is still waiting for the results of the Federal Government’s task force exploring the possibility of a national carbon trading scheme. New Zealand is a few steps ahead with the New Zealand Stock Exchange working with a group of companies to develop a carbon trading platform, broadly similar to the exchange trading scheme of the Chicago Climate Exchange.
In the meantime, some Australian investment managers are already designing models on carbon emission costs and their impact on company valuations.
