INVESTORS SHOULD BUY CARBON CREDITS THROUGH A FSA REGULATED CUSTODIAN by Green Market Opportunities

Statements such as “Carbon will be the world’s biggest commodity market and it could become the world’s biggest market overall” by the likes of Barclays Capital and with the voluntary carbon market forecasted to grow 8 times from 2011 to 2020, meaning the global carbon market could reach $2 to $3 trillion by 2020, a valid reason one may consider investing into the market, especially when taking into consideration the current high volatility in the global stock markets, coupled with some of the lowest savers rates we’ve ever seen.
GMO acknowledges that the carbon market looks great, the potential upside is very attractive, the problem is that many unscrupulous, rogue companies out there with some clever sales people who are very adept at drawing clients in, based partly on the fact that the market is so new and utilising this to their advantage, we’ve seen an increase in carbon investment scams over the last 12 months, so how can you as an investor protect yourself as a novice carbon investor. (click here to view our “how to avoid carbon credit scams”)
LETS PUT THIS INTO CONTEXT
If you take purchasing a property for investment.
Your first port of call would probably be to find a local estate agent who knows and understands the market, one you feel you can trust. You would then appoint a registered property conveyancer who would carry out all the necessary checks on the property including land registry and title deeds, etc. you may also have the property surveyed at some level. If purchasing a buy-to-rent property you’d probably research the rental market, including a lettings company to manage the property and lastly you’d take into consideration the market for when you want to sell and exit your property.
Well buying carbon credits should follow the same principles and some basic homework can result in the difference between missing out on a great opportunity and losing your investment completely.
To start with GMO recommend buying fully verified and validated credits, these should be available to view on the public registry before you consider purchasing, they will likely be VCS or GS credits. (Verified Carbon Standard, Gold Standard). All the project due diligence documents are available to download prior to purchasing, these range from the issuance certificate to the updated monitoring reports, be warned some documents can be 80+ pages long.
It is also important to remember that carbon credits are spot trades so there are no fixed or guaranteed returns. If what you are being told sounds too good to be true, it more than likely will be, if you are considering buying into or talking to companies offering forward buys, (Forward buys are purchasing credits that have not been awarded on the project at the point of sale, a promise of credits to be awarded later) you need to ensure that the company offering this is FSA regulated and know that there is a much higher risk if the project is delayed or doesn’t complete. If that happens, it is possible that you could lose your investment.
By purchasing VCU spot trade carbon credits through a transparent company like Green Market Opportunities you will have access to one of the most secure, transparent, end to end service providers in the industry with no hidden costs, importantly you’re not paying an escrow agent or overseas company but a UK company through a UK high street bank, this is important because if you are asked to send your money offshore or to a 3rd party agent or escrow company there may be an issue. Funds should always go to the owner of the credits and not to intermediary entities.
The difficult next step for most, assuming any projects under consideration are fully completed, publicly registered and properly priced, is how safely they can purchase these credits and what sort of service can they expect during and after the purchase? All our credits are UK HMRC SIPP compliant with a number of well known UK providers, this means you can purchase and hold credits in a tax friendly structure.
Every investor will have their credits held under the custodianship of an FSA regulated company on one of the major registries, commonly the NYSE APX registry, this is at no additional cost and you will be able to view your holding, importantly each tranche of credits have a unique serial number that relate specifically to their credits meaning credits cannot be sold twice and once retired, they cannot be used again.
This process and holding environment provides 100% transparency and trackability of the credits at all times and gives the purchaser total peace of mind and full control over their investment. At GMO we believe that, although the voluntary carbon market is currently unregulated, it will most likely become regulated at some point in the future. Therefore, everything has been put in place to accommodate this and we are now able to offer the most secure environment for all carbon credits clients.
Watch out for our blog next week, which covers potential exit strategies to consider when trading carbon credits.
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