Investing in Climate Change During Times of Financial Crisis

Until recently, the carbon market has continued to attract capital and demonstrated steady growth despite the financial turmoil. However, the sharp decline in energy prices leading to a collapse in the price of oil, has hit the carbon markets heavily. Energy prices are now demonstrating continuous decline on fears of a world recession.

Despite the hit against the trading prices for carbon instruments, the future of the carbon market is still viewed with optimism by various actors of the carbon banking industry. Experts argue that the crisis may offer unique opportunities for transitioning to a low-carbon world.

"Investing in Climate Change 2009 - Necessity and Opportunity in Turbulent Times," a paper written by Deutsche Asset Management (DeAM)’s Climate Change Investment Research team, aims to provide a detailed analytical framework for understanding the opportunities for investing in climate-related sectors in the wake of the global financial crisis. The report concludes that, although the shock to the world’s financial system has lead investors to narrow their commitment to provide capital for low-carbon investments in the near-term, the current crisis offers great opportunities for the renewable energy and other climate change sectors to revive strongly.

Thus in the long run, carbon finance is expected to maintain its unique presence in the financial markets. What’s required, however, is for governments to put in place robust regulatory frameworks, particularly carbon pricing and tax incentives, to stimulate investment in carbon finance.

A copy of the report can be found at: http://dbadvisors.com/climatechange

Written by Zeynep Basak 2008. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without the author's permission.