Launched back in October, the London Stock Exchange’s voluntary carbon market has listed its first fund.
Foresight Sustainable Forestry, an investment trust, became eligible to trade on the voluntary carbon market based on its investments in UK forestry and afforestation assets. The firm originally IPOed on the main market in 2021.
“[The] VCM designation means that the ever-growing number of climate-minded investors can easily and confidently identify sustainable solutions,” said Richard Davidson, chair of FSF.
“By connecting investors with net-zero ambitions to entities such as FSF that generate voluntary carbon credits, the launch of the VCM is a major milestone in the UK’s fight against climate change.”
The LSE said funds listing on the VCM will be subject to the same rules and oversight that govern its equity markets. On top of that, funds would also need to provide disclosures on which projects there are financing either directly or indirectly, the expected carbon credit yield and how they would meet Sustainable Development Goals set out by the UN. Mitigation projects would need to be accredited by recognised industry bodies such as Verra.
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“The public markets are uniquely positioned to help scale the voluntary carbon market, whilst driving greater transparency and providing access to a wider range of investors,” said Julia Hoggett, chief executive of the LSE.
Compared to other VCMs, which were valued at around $2bn at the end of 2021, the LSE said its VCM utilises an equity market framework. Carbon markets have worked akin to commodities where investors buy and sell carbon credits. Within the LSE’s VCM marketplace, investment into a fund would not ‘buy’ a carbon credit, instead the credit would be issued as a dividend in specie.
Hoggett said the exchange was seeing a strong pipeline of additional listings for the VCM for next year.
The carbon market is expected to grow rapidly over the coming years as firms race to achieve net-zero goals. The market could be valued at $30bn by 2030 and $200bn by 2050, according to McKinsey.
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