NETHERLANDS - The large pension funds ABP and PGGM will invest €275m and €200m respectively in carbon trading and technology to reduce the emissions of greenhouse gases, they have announced.
The €194bn civil service scheme ABP, and the €74bn healthcare scheme PGGM, will invest in the new climate fund Carbon Fund II, established by the British investor Climate Change Capital (CCC), they said.
According to CCC, it has already raised €654m within three months, and it expects the total to top €788m by the second close at the end of the year. Amongst the participants are the UK-based international group Centrica and ‘a global emerging markets banking group'.
"The money raised will be invested in projects, principally in developing countries, that will lead to dramatic reductions in the emissions of greenhouse gases, and specifically carbon," CCC said.
The fund's objective is to generate returns by acquiring a diversified portfolio of carbon assets and derivatives. It can also invest in projects and companies which develop and generate reductions in greenhouse gases, it added.
A CCC spokesman declined to reveal the expected level of returns. "Our first carbon fund performed beyond expectations. That must be one of the reasons why these renowned investors have got involved. Moreover, last spring we managed to increase the fund's net asset value during the period of great volatility by hedging."
"Whilst the initial fund was structured like an open-ended hedge fund, Carbon Fund II is structured like a private equity fund. It will close in 10 years' time," he added.
"We think we could get benefits by being amongst the first investors. The world is getting serious on fighting greenhouse gases," Frank Asselberg, ABP's commodities' fund manager, commented. "We expect attractive long-time returns. Investing in emissions right is also attractive for society."
"We feel that the involvement of financial institutions in this market is essential, if we want to achieved the long-term political measurer, set out to tackle climate change," PGGM's CIO Leo Lueb said. "We believe that the fund is ideally placed to capitalize on the market opportunity created by the Kyoto protocol."
Investment Banking group CCC is focused on companies and financial institutions affected by the policy and capital market responses to climate change. In 2005, it launched its first carbon fund. It is investing in carbon reduction projects around the world, and actively trading in the EU Emissions Trading Scheme.