This joint paper from GIC, the EDB and McKinsey discusses how carbon markets are rapidly emerging as a viable asset class. It suggests that institutional investors could play a critical role in helping corporations and nations use these markets to achieve global climate goals whilst also fulfilling their own mandates.
While the paper does not issue an investment recommendation, it aims to shed light on the evolution of market mechanisms and their relevance to investors.
To find out more about carbon markets, listen to this podcast episode with the co-authors of the report.
As the drive to curb global warming gathers pace, carbon markets are becoming increasingly fundamental to the task of achieving net zero greenhouse gas (GHG) emissions.
- Compliance carbon markets (CCMs), in which carbon allowances are traded and regulated by mandatory national, regional or international regimes, are a vital part of emission reduction efforts in a growing number of countries.
- Voluntary carbon markets (VCMs), in which carbon credits are traded by companies and individuals on a voluntary basis, play an important role in driving investment in carbon compensation (avoidance and reduction) and neutralisation (removal) projects.
The total value of global carbon markets grew by more than 20% in 2020, a fourth consecutive year of record growth.