ICF International Projects New Opportunities for Carbon Funds
Firm Updates Popular Carbon Fund Investment Guide
January 14, 2009 -
Today, ICF International (NASDAQ:ICFI) released Carbon Funds Outlook 2008, an update to its widely referenced "Carbon Procurement Vehicles: Investor’s Guide 2007." ICF’s white paper provides valuable insights into current evolutions in the carbon fund market by studying 84 operational or actively developing carbon funds and analyzing the key external factors affecting their activities. It arms investors, buyers, and sellers of carbon credits with up-to-date information on the characteristics, purposes, and modalities of carbon purchasing vehicles.
Carbon funds are investment vehicles that focus on the origination and trading of carbon instruments. According to ICF’s white paper, these funds have experienced considerable growth over the past five years in terms of number of vehicles and capital raised. However, with a few exceptions, capital secured by funds created over the last two years appears to be decreasing. Climate policy uncertainties, increasing competition on the buyers’ side, and the exhaustion of large- and low-risk Clean Development Mechanism (CDM) projects create a challenging and uncertain environment for new entrants in the carbon finance community. The current credit crisis only exacerbates the problem by reducing the amount of capital available for investing in carbon credit projects, while increasing costs. As a result, ICF anticipates difficulties for newly created funds in reaching target size, and a potential delay in the launch of new vehicles as investors await clearer market and policy signals.
However, the news is not all negative. The report finds that the same market and policy mechanisms affecting new and smaller funds may create opportunity for established carbon instruments. Alexandre Marty, senior manager for ICF’s energy, climate, and transportation practice in London, states, “In the current market, compliance buyers and financial institutions are less inclined to invest in small projects or deal with low credit-rated developers seeking advance financing. At the same time, opportunities are available for active carbon funds with a certain risk appetite and the ability to provide direct financing or pre-payment to project developers.”
In the end, ICF expects that uncertainties associated with international and domestic climate change policy regimes will compel carbon fund investors to transition toward models that offer a broader range of investment options, and to diversify their revenues beyond carbon instruments. ICF’s Carbon Funds Outlook 2008 is now available at www.icfi.com/markets/energy/doc_files/carbon-procurement-guide.pdf.
About ICF International
ICF International (NASDAQ:ICFI) partners with government and commercial clients to deliver consulting services and technology solutions in the energy, climate change, environment, transportation, social programs, health, defense, and emergency management markets. The firm combines passion for its work with industry expertise and innovative analytics to produce compelling results throughout the entire program life cycle, from analysis and design through implementation and improvement. Since 1969, ICF has been serving government at all levels, major corporations, and multilateral institutions. More than 3,000 employees serve these clients worldwide. ICF’s Web site is www.icfi.com.
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