Facebook LinkedIn

Compliance carbon markets have expanded globally since the mid-2000s. The European Union ETS, the largest scheme, has progressively tightened emission caps and increased the scope of regulated sectors. It will soon be accompanied by a Carbon Border Adjustment Mechanism (CBAM), which to prevent carbon leakage by taxing imports from regions with less stringent emissions regulations.

As a result, carbon pricing initiatives are becoming significant drivers of environmental and economic change. Carbon markets are likely to play a major role in promoting sustainability and innovation, offering new opportunities for investors and policymakers alike.

 

 

Key takeaways:

  • Ongoing developments in Europe, coupled with the expansion of carbon pricing initiatives worldwide, suggest that carbon could become a major commodity market.
  • The low correlation of carbon prices in the EU ETS with all major asset classes highlights the potential benefits of adding carbon to an investment portfolio. Seen over a 5-year horizon, returns have outperformed major asset classes.
  • There are fundamental reasons to expect EU ETS prices to rise over the longer-term, but a range of challenges still have to be addressed with global coordination also important.

'

The CIO Special below is available to download. Please refer to the Important Information at the end of the memo for disclosures and risk warnings.

PDF

Language:

In Europe, Middle East and Africa as well as in Asia Pacific this material is considered marketing material, but this is not the case in the U.S.

The value of an investment can fall as well as rise and you might not get back the amount originally invested at any point in time. Your capital may be at risk.

No assurance can be given that any forecast or target can be achieved. Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Performance refers to a nominal value based on price gains/losses and does not take into account inflation. Inflation will have a negative impact on the purchasing power of this nominal monetary value. Depending on the current level of inflation, this may lead to a real loss in value, even if the nominal performance of the investment is positive.

This web page is not an offer to buy a security or enter into any transaction. The products, services, information and/or materials contained within these web pages may not be available for residents of certain jurisdictions. Please consider the sales restrictions relating to the products or services in question for further information. Deutsche Bank does not give tax or legal advice; prospective investors should seek advice from their own tax advisers and/or lawyers before entering into any investment.

Change of name: As part of Deutsche Bank’s Private Bank, the former International Private Bank also adopted this title on July 20, 2023.