Dutch pension fund giants ABP and PGGM are pushing into carbon markets.
The 1997 Kyoto Protocol created a market in trading carbon dioxide emission rights — in short, Western European companies can buy emission rights generated by developing markets. Some experts think the value of the so-called carbon market might reach $30 billion this year, although World Bank researchers view that figure with some skepticism.
Officials at the €194 billion ($248 billion) Stichting Pensioenfonds ABP, Heerlen, and the €74 billion Stichting Pensioenfonds PGGM, Zeist, think carbon markets offer diversification benefits and fit into their commitments to socially responsible investments.
ABP already made a first investment in an unidentified carbon fund as part of its €4.9 billion commodities portfolio, wrote spokesman Michel Meijs in an e-mail to Pensions & Investments. Not only do carbon funds have a low correlation with other commodities, but the asset class still has a "first-mover advantage," he wrote. Plus, ABP officials think emission rights offer attractive returns over a long period of time, Mr. Meijs added.
PGGM officials plan to hire one carbon fund manager this quarter, wrote Leo Lueb, PGGM's chief investment officer, in an e-mail. The initial investment probably won't top $250 million, he added.