What does it mean to invest in carbon as a PE strategy?
Until recently, carbon credits were usually contracted under a pay on delivery contract. Now, the low hanging fruits are gone and, there are various structures evolving such as upfront advance against potential future CERs generation, debt and investing private equity into projects with carbon embedded assets. All investments in clean energy will become mainstream going forward and the future for all private equity investors will be to focus on sustainability. Post the Copenhagen outcome, most investors are awaiting more clarity on the post 2012 international agreement and also monitoring US participation in the carbon markets. How do you mitigate the risk of CERs accruing from a project? CDM projects carry a number of risks including validation, registration, verification and impacts from continuous evolution of the UNFCCC’s CDM policies. In addition, all CDM projects are exposed to regular project risks such as financial closure, implementation delays, regulatory and compliance issue
