Abu Dhabi Asset Management Firm to Build $250M Carbon Fund
Offset8 Capital, an Abu Dhabi asset management company, plans to raise $250 million for a carbon investment fund as demand goes up for better-regulated carbon credits.
The company aims to close the initial capital for the carbon fund in the third quarter of this year. The firm decided to establish the fund in the Abu Dhabi Global Market (ADGM) to take advantage of its framework that regulates carbon credits.
Once closed, the carbon investment fund will be the first of its kind in the Middle East.
Offset8’s Carbon Investment Fund
Offset8 Capital seeks to provide funding to projects and companies that actively engage in reducing global carbon emissions. Its primary goal is to finance carbon removal projects that don’t just cut emissions but also benefit the local communities.
The Abu Dhabi firm believes that the voluntary carbon market needs to become easier to understand to attract more stakeholders to further accelerate the fight against global warming.
With those in mind, the company plans to close a $250 million carbon fund. Proposed investments will target carbon reduction projects in the Middle East, Africa, and Southeast Asia. Its current pipeline of carbon removal projects includes reforestation, mangrove, water purification, biodiversity, and biochar.
To date, Offset8 identified over 50 projects in 29 countries that it expects will form the fund’s investment pipeline. In evaluating these projects, the firm will depend on the Integrity Council on the Voluntary Carbon Markets’ Core Carbon Principles for high-quality carbon credits.
Offset8’s plans for raising the carbon fund follow the emirate’s launch of its own carbon credit exchange last year.
Abu Dhabi sovereign fund Mubadala acquired a strategic stake in AirCarbon Exchange (ACX), which established the carbon credits trading exchange and trading house in the UAE capital. This move supports the plan of the oil-rich emirate to allow companies to fund and trade carbon credits. It is part of UAE’s net zero strategies and efforts to offset its emissions.
According to Offset8 Capital’s co-founder, Abu Dhabi’s regulatory framework considers carbon credits as both a financial instrument and a spot commodity that improves compliance and capital requirements.
These actions are in line with the UAE’s preparation for hosting this year’s premier climate change summit COP28. The climate conference’s president is the CEO of the Abu Dhabi National Oil Company (ADNOC). This, and the fact that the country has been pumping huge amounts of oil and gas, stir criticisms from environmentalists.
More Demand Comes More Scrutiny
Not only does the major oil-producing country scrutinize climate-related issues. The voluntary carbon markets (VCMs) are also receiving their share of criticisms. These markets have been seeing a swift increase in trading transactions and growing demand from corporate offsetting goals.
The rapid market growth leads to the creation of new guidelines and calls for stricter regulations. Serious accusations arise pertaining to the swamp of worthless credits. Highlighting this matter, another Offset8’s co-founders, Jules Maitrepierre, said:
“When demand grows there’s naturally more scrutiny and a lot of projects have not been of a quality standard…Now corporates understand the need for high-quality credits and the projects understand that in order to attract capital they need to follow strict guidelines.”
Indeed, addressing this concern, international carbon standards published better principles and rulebooks governing carbon markets. And despite challenges on limited high-quality supply, corporate demand for carbon offset credits remains strong.
The overall outlook for the VCM is positive, with more buyers joining the ‘flight to quality’. It means buyers are becoming more involved earlier in projects and focusing more on contribution over mere offsetting.
Currently, Offset8 Capital is a team of 12 individuals bringing in diverse expertise in the areas of carbon markets, commodity trading, investment, and asset management in emerging markets. All of which are relevant to sourcing high-quality carbon projects and generating the corresponding carbon credits.
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