This week Al Gores Generation Investment Management LLP, which invests in socially responsible companies, has plans to invest $500 million in economic, social and environmental sustainability in Asia, according to people briefed on the plan.
Last week the UK Coalition government also proposed a Green Investment Bank reliant on low-carbon technologies, and a new UK Equity Index fund investing in carbon credits claims to reduce the CO2 footprint of a portfolio by up to 20 per cent by investing in companies with carbon-efficient operations. While this new fund has yet to provide statistics on real returns, another Social Responsible Investment (SRI) such as that of Emerald Knight has realised 30% fixed returns on an investment in a particular carbon-offsetting project.
Research estimates by financial consultancy Celent predict that the Socially Responsible Investments (SRIs) market in the US will reach $3 trillion this year. The European SRI market grew from 1 trillion in 2005 to 1.6 trillion in 2007.
The attention on carbon-cutting investments leads to questions on how carbon-cutting investments actually work.
Rob Hague, Sales Director at Emerald Knight, an investment management consulting firm that specializes in SRI, says:
Companies around the world are trying to proactively and voluntarily reduce their carbon footprints through offsetting. A voluntary emission reduction (VER) is a unit earned by someone who has implemented a project according to international standards that generates a reduction, removal or storage in greenhouse emissions. This unit is then issued by an authority or a Board and bought by someone to offset their own emissions.
Hague continues: In the offsetting process, businesses wishing to become carbon neutral pay to outsource emissions reductions because it is more cost-effective or technologically feasible than in-house. This market is growing rapidly as global carbon markets almost doubled in size in 2009. Investors are even branching out to include private individuals, organizations and entire industries, such as those in the automotive and transportation sector.
D.C.