European Carbon Fund closes at €142 million




European Carbon Fund closes at €142 million
London, 5 January: The European Carbon Fund (ECF), a Luxembourg-based investment company specialising in transactions in the carbon market, has closed at €142.5 million ($172 million) – considerably above its €100 million target.

"All ECF shareholders are investment-grade entities, resulting in ECF being a … highly reliable counterparty for potential sellers and buyers of carbon assets," the investment manager said in a statement released on Tuesday.

The fund reached a first closing in June, but subsequent months have seen a number of major southern European financial institutions sign up, says ECF head Laurent Segalen.

Launched in February 2005, the ECF – which is managed by Paris-based IXIS Environnement & Infrastructures – is one of a growing number of 'carbon funds', investment vehicles which invest and trade in carbon. These allowances and credits are created by emissions trading schemes, such as one launched by the EU last year, and those carbon markets created under the Kyoto Protocol on climate change.

The ECF is co-sponsored by France's Caisse des Depots et Consignations, and Belgian-Dutch Fortis Bank. Other investors include UniCredit of Italy, Spain's Caja Madrid, and Portugal's Grupo Caixa Geral de Depositos.

Unlike most such funds, which aim to provide their investors with carbon credits that they can use to meet emissions reduction targets, the ECF aims to generate financial returns for its investors. The fund is targeting net internal rates of return of 15-20% per year over the life of the fund, which will run to 2012.

Credits from Clean Development Mechanism (CDM) and Joint Implementation (JI) projects – under the terms of the Kyoto Protocol – will account for 80% of its investments, with the remaining 20% being used to purchase government greenhouse gas allowances. The vast majority of the credits will be sourced from CDM projects.

- Environmental Finance Publications is due to publish in February a comprehensive directory of carbon funds and governmental carbon purchase programmes. For more information on the directory – which is aimed both at potential credit sellers (such as CDM and JI project developers) and at potential carbon fund investors – click here.



Updated 06 January 2006