Carbon Trader

Asset managers Sterling Waterford Securities, the first advisory firm internationally to have listed a carbon credit product on an exchange — which realised a return of almost 250% for initial investors – will release its second Carbon Credit Note onto the JSE
on Monday, September 8.

The Sterling Waterford Carbon Credit Note 2, which will be listed on the JSE Securities Exchange, has a maturity date of December 2012, said Sterling Waterford director, Gregor Paterson-Jones.

He said the Note pays out the value of the Carbon Credit at the maturity date.

The first Note significantly outperformed nearly all asset classes from date of issue in early 2005 to maturity in mid 2008. Initial investors realised a return of almost 250% over this period in rands and investors on listing realised around 135%.

Paterson-Jones said all indicators for the second note were bullish as the carbon credit market was the fastest growing financial market in the world, with estimated growth in trade globally predicted to exceed US$20 trillion a year by 2020 (according to Richard Sandor, Chairman and CEO of the Chicago Climate Exchange and co-owner of the European Climate Exchange). It is also the only market not to have been affected by the global economic downturn.

The new Carbon Credit Note would offer exposure to this growing market which was becoming increasingly liquid. The note was tradable like a share on the JSE, was a rand hedge and was issued at a discount to exchange-traded carbon prices, Paterson-Jones added.

“All analyst forecasts are consistently bullish for the Carbon Credit Market to 2012. This market therefore offers investors an opportunity for a big upside. The growing interest in this market globally has generated a bull cycle which has not been affected by the global downturn brought about by the sub-prime woes of the US mortgage market.

“This is because carbon assets are uncorrelated to both equities and bonds, having shown robust price growth in the face of falling prices in nearly every other investment category,” he added.

Paterson-Jones said Carbon Credit Note 2 was aimed at both retail individuals and fund investors. Retail investors, companies and trusts can invest in Rands without having to use their offshore allowance, he added.
 
The second Carbon Credit Note is backed by a project portfolio owned and managed by BNP Paribas, a global bank with over 170 000 employees in over 85 countries. It is the largest company in France and the World’s 6th largest bank. The Note offers capital protection for any portion of non-delivery of the portfolio, Paterson-Jones added.
*** The market for carbon credits arose in 1997 as part of the international Kyoto Protocol on the reduction of environmentally harmful emissions.
The Carbon Credit market allows companies in developed countries which are struggling to meet stringent emission reduction targets in the first commitment period of Kyoto (2008-2012) to buy credits from developing countries which have reduced emissions through a particular project.
Failure of governments and companies to meet these binding targets will result in penalties. If demand for Carbon Credits increases as predicted, participants in the second carbon credit note stand to benefit.
• Sterling Waterford Securities is an established boutique South African asset management company, specialising in managing innovative, structured products in the Carbon Emissions Market and in clean energy private equity investment. Visit www.sterlingwaterford.com.

(Sponsor Link: assetant.co.za)

Filed under: Uncategorized and tagged Carbon Credit, Carbon Note, South Africa, Sterling Waterford, Trading