EU Carbon Extends Gains to Record; Sustainable Money to Surge, Says Morgan Stanley (2)

By Mathew Carr

Nov. 16, 2021 — EU carbon allowances, the world’s benchmark emissions price, surged to further highs this morning after reaching record levels Monday, a day after climate talks in Glasgow.

By 2025, Morgan Stanley forecasts Sustainability/ ESG assets under management will reach $6.5 trillion (29% compound annual growth rate 2020-25).

Investors are seeking sustainable investments beyond Europe, including in emerging countries. They are pushing into other ESG (Environment, Social and Governance) themes such as social cohesion and women-led companies — and they are seeking new technologies to invest in that will mitigate emissions of heat-trapping gases and help countries adapt. They are not just seeking to screen out fossil-fuel exposure.

The COP26 outcome is setting up a private sector-led energy transition. With the U.S. and China building bridges Tuesday and the World Trade Organization in reform … economic activity globally could surge to help try save the climate. The UN talks set global accounting rules and guidelines for carbon trades for the first time, which will boost collaboration between countries and incentivize global companies to go green. See link below.

“For Europe, the sustainable finance disclosure regulation should result in more sustainability fund launches and strong net inflows. Although the green transition is under way, 2022 will be a quieter year for new climate-focused
policy. Instead, the development of the broader EU taxonomies (final four environmental objectives plus a new social framework) could drive incremental interest in these sustainability themes,” Morgan Stanley said in a research note Tuesday written by a team including Jessica Alsford in London.

Green debt issuance to jump by almost half to $1.475 trillion in 2022 vs $1 trillion in 2021: Morgan Stanley

With natural gas prices surging too as Germany suspends certification of a key new supply pipeline from Russia, EU carbon futures rose as high as 67.74 euros a metric ton, according to ICE.


See my post-COP26 take: I travelled back from Glasgow Sunday.


Financial Times snip (Nov. 15):

EU carbon prices hit record high after COP26 Industry gauge climbs 5.5% and is more than double its level at start of year

The cost of carbon needs to rise to help push heavily polluting fuels like coal off the grid and encourage industry to invest in cleaner technologies

European carbon prices jumped to an all-time peak above €66 a tonne on Monday as traders bet that the outcome of the COP26 climate talks was likely to strengthen emissions markets that are seen as a key tool of decarbonisation.

The EU Emissions Trading System, which sets the price for utilities and industry for emitting one tonne of carbon in the bloc, climbed 5.5 per cent to €66.74 a tonne, more than double the level at the beginning of the year and up from €55 a tonne a month ago.

Traders and analysts said the outcome of the COP talks, while not as strong as some had hoped, still pointed to a trajectory whereby governments will need to see the cost of carbon rise to help push heavily polluting fuels like coal off the grid, while encouraging industry to invest in cleaner technologies.

China and the U.S. jointly supported global carbon markets at the Glasgow talks.

(Updates with debt, natgas, context)

COP26: CarrZee pano photo

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