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Dustyn Lanz, Senior Advisor with ESG Global Advisors Inc., was interviewed by Wealth Professional Canada to discuss the rise of carbon credit exchange-traded funds (ETFs) and whether they should count as ESG investment funds. An excerpt is provided below, and the full article is available here.
Should carbon credit ETFs count as ESG funds? (Excerpt)
“These ETFs are linked to carbon credit futures, which means they are a bet on the future growth of the carbon credit market,” says Dustyn Lanz, the former CEO of the Responsible Investment Association, who is now a Senior Advisor with ESG Global Advisors.
According to Lanz, the carbon credit market is worth approximately US$850 billion today, and some analysts predict it could exceed US$22 trillion in the next 30 years. That rise, he says, will come on the back of a projected increase in both mandated and voluntary carbon markets, with the former being a venue for polluters to buy and trade the right to emit carbon into the atmosphere.
“So, do these ETFs provide investors with exposure to companies or entities that are driving down emissions? No,” Lanz says. “Does investing in these products actually reduce emissions in any way? No.”
However, the question of whether the ETFs fall under the broader umbrella of responsible or ESG investing is less straightforward.
Because they provide investors with exposure to a climate-related theme expected to undergo substantial growth in the coming years, Lanz says they arguably represent a thematic investment in a climate-related theme. However, he adds, the fact that the ETFs invest in carbon credit futures rather than in companies actively involved in driving down emissions means their impact should not be overstated.