5 Nov 2018

Carbon fund launched to help lower emissions

From Afternoons with Jesse Mulligan, 1:23 pm on 5 November 2018

This week the NZX listed the country's first ever investment fund for carbon credits. 

Paul Harrison is the managing director of Salt Funds, which is launching the Carbon Fund, he tells Jesse Mulligan that the time is right for a fund where carbon is traded as a commodity. 

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Photo: 123RF

There is already a price on carbon in New Zealand, although it is effectively capped at $25 a tonne here, Harrison says the OECD has said double that is a realistic price if we are to change our behaviour and move to a decarbonised economy.

"Industries that harm the environment are effectively getting an invisible subsidy from the environment", Harrison says.

The carbon fund will work by going into the market and buying units of carbon credits, people can then invest in the fund. He sees two types of investors being interested.  

so we will also enter the market alongside the emitters  and we will purchase those units also from the people that absorb it so 

"People would take an investment in this fund and if they have a cost base that might be impacted by a rise in carbon price the investment would hopefully reflect the price of carbon going up and help them offset that. And there's obviously people who want to speculate on where the carbon price will go."

Harrison believes it is the ability to offset the impacts of a rising carbon price to business that emit CO2 which will be it's main selling point.   

"If you are a company that's emitting CO2 and their cost goes up because the carbon price is going up ... the idea is you put some money in the fund and as that price goes up the value of the fund should reflect that rising price of carbon so you are offsetting that cost with the rise of the value of your investment."

It is the first such listed fund in the world, he says. 

"We found one that does it through derivatives, but this would be the only one that we can find that owns the actual physical units."

The minimum investment in the fund is $5000, Harrison says.

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