in carbon prices required for net zero by 20501
risks.
The following risks may be materially relevant but may not always be adequately captured by the summary risk indicator and may cause additional loss: Credit risk, Liquidity risk and Concentration risk. Sustainability risks may lead to a significant deterioration in the financial profile, profitability or reputation of an underlying investment and may therefore have a significant impact on its market price or liquidity. The environmental, social, and governance (“ESG”) considerations discussed herein may affect an investment team’s decision to invest in certain companies or industries from time to time. Results may differ from portfolios that do not apply similar ESG considerations to their investment process.
Global Carbon Opportunity
The alpha potential of a growing market, key to the environmental transition.
Access to actively-managed, long-biased exposure to potentially attractive risk/reward carbon opportunities globally.
17xincrease
USD900billlion
annual traded volume in 20212
0.38
correlation with equities and 0.03 with bonds3
1. Source: Silvercrest Analysis. For illustrative purposes only. Average across the NGFS orderly climate transition scenario estimates for 2030 and 2050. Includes both a net-zero, 1.5° C economy at about 2050 as well as less stringent sub-2°C scenarios.
2. Source: Carbon markets: invest in greenhouse gas emissions. Published by Credit Suisse in April 2022.
3. Correlations measured from July 2014 to June 2022. Source: Silvercrest analysis. Correlations of equities and bonds with carbon measured, respectively, by the MSCI ACWI Net Total Return USD Index and Bloomberg Global-Aggregate Total Return Index-Value Hedged USD with the IHS Markit Global Carbon Index, starting July 2014.
introducing carbon markets.
Carbon markets are now at sufficient scale to become an investment opportunity, with many suggesting carbon is on its way to becoming a mainstream asset class that could even rival the size of major commodity markets, including oil.
There are two types of carbon market:
Compliance markets
which are Government-regulated and focus on decarbonising high-emitting sectors, in which allowances (permits) are the main instruments
Voluntary markets
enabling corporates to achieve climate commitments, primarily through carbon credits linked to reduction or sequestration projects
why carbon now?
We believe carbon is underpriced versus global climate goals and offers unique portfolio construction benefits to investors with its return potential, low correlation with other asset classes and efficient hedge against rising carbon prices.
Price discovery in this market remains somewhat inefficient too, as there are many corporate participants yet relatively few professional investors in this asset class currently.
With carbon markets globalising, ETSs are also being established in many new markets outside the EU.
our strategy.
Alpha generation
Through a wide range of instruments in established and emerging carbon markets
Net-zero alignment
Promote a net-zero, nature-positive economy while hedging climate-transition risks
Carbon expertise
More than 30 years’ combined experience in carbon investment and strategy4
4, Source: Silvercrest as at November 2022.
Our strategy offers an actively managed, long-biased exposure to potentially attractive risk/reward carbon opportunities globally. We look to generate attractive risk-adjusted returns with low correlations to traditional and alternative asset classes. Key benefits include:
- Hard-to-access new and emerging carbon markets that are unavailable to traditional investors - leading to quality alpha-generation potential using a wide range of instruments to take advantage of market inefficiencies in both compliance and voluntary markets.
- Diverse team knowledge across conceptual and market expertise, policy and business insight as well as portfolio management
- Actively-managed tail risk to protect against potential price shocks
- Promotion of a net-zero and nature-positive transition by contributing to the expansion and development of global carbon markets
why us?
With global climate action driving the development and expansion of carbon markets worldwide, we believe an active carbon strategy can help investors capture attractive return opportunities while hedging transition risks in their portfolios. In addition to the team’s combined market, policy and investment acumen, we believe it is our broad universe and active approach that sets us apart from many of our peers.
Source: Silvercrest analysis. For illustrative purposes only. No representation is made that the Manager’s investment process, investment objectives, goals or risk management techniques will or are likely to be achieved or successful or that the Strategy or any underlying investment will make any profit or will not sustain losses. Target performance/risk represents a portfolio construction goal. It does not represent past performance/risk and may not be representative of actual future performance/risk.
our investment process.
Our disciplined investment process, combining bottom-up and top-down analysis aims to maximise risk/return for each opportunity, drawing on substantial carbon-market experience within the team and sustainability expertise across the firm.
