Carbon Growth Partners seeks US$200 million for carbon credit fund targeting 20% annual return
Wong Pei Ting
CARBON Growth Partners (CGP), which touts itself as one of the world’s first investment managers in the voluntary carbon market, is seeking to raise US$200 million for one of its three investment funds by mid-2024.
This comes as the fund targets a 20 per cent annual return.
If successful, the Australia-based company will double its assets under management in the international carbon market. As at Dec 31, 2022, CGP has a spot and near-term forward portfolio of around 24 million credits and US$200 million assets under management.
The capital raise for its Carbon Growth Fund No 2, which includes an initial US$20 million before the end of this month, comes as CGP announced on Tuesday (Jun 6) that its first fund, the Carbon Growth Opportunities Fund, significantly outperformed major asset classes.
The fund generated a 16.6 per cent return on investments between its inception in July 2021 and May 2023, beating major asset classes including gold (10 per cent), the S&P 500 (-3.4 per cent), and the S&P 10-year treasury index (-14.1 per cent).
It also outperformed the KraneShares Global Carbon exchange-traded fund, which fell -0.1 per cent over the same period, and Bitcoin, which lost 18.8 per cent of its value in the period.
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CGP chief executive Rich Gilmore expects more upsides that will benefit new investors in its Carbon Growth Fund No 2, saying carbon remains “one of the most under-priced asset classes”. Its thesis is that carbon markets are mispriced, offering uncorrelated returns.
“We anticipate significant price rises as companies meet their commitments to reduce net emissions,” he added.
While the carbon markets are facing a fresh round of increased scrutiny of project quality, CGP chief impact officer Charles Bedford separately told The Business Times that this is a “source of alpha” as it had led to a quality spread in credit pricing.
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This helps when CGP actively sources carbon assets of the “highest integrity”, evaluated based on the credentials of the project developers, owners and advisers they work with, and whether the project seeks to ensure equitable benefits sharing with local communities, among other attributes, Bedford said.
CGP’s priority investments include nature-based climate solutions, renewable energy and efficient household devices.
While skeptics still believe that carbon-offset programmes are schemes enabling affluent states and corporations to greenwash, CGP, in its latest release, cited recent studies by ratings agency Sylvera and analytics firm Trove Research which attempt to debunk that.
The studies found that companies which offset their emissions achieve up to 100 per cent more internal decarbonisation, compared to those that don’t use offsets, it noted.
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