Environmental markets buoyant despite pandemic

The coronavirus pandemic rocked the markets, but the environmental theme looks set to be a long-term winner, says Peter Cripps

The coronavirus pandemic wreaked havoc with the global economy in 2020, pushing businesses under and wrecking government finances.

But the traded environmental markets, covered by Environmental Finance's Market Rankings, have a different story to tell.

While not immune from the horrors of Covid-19, they appear to have survived its infection, and have emerged in rude health.

That is mainly because they are driven by long-term trends such as climate change, which have not been impacted by the pandemic.

It seems that action to tackle climate change may have been hastened by the pandemic, as governments around the world have understood that the recovery needs to be a green recovery.

So, commitments to environmental policies seem to be strengthening, rather than falling victim to the malaise spread by the pandemic.

That is good news for the carbon markets, which look to put a price on carbon and cap emissions of greenhouse gases.

They are benefitting from buoyant sentiment. For example, Louis Redshaw, CEO of Redshaw Advisors, expects the EU's Green Deal to lead to materially higher prices of EU Allowances, "sooner rather than later".

Another contributing factor is the change in administration in the US.

As David McCullough at Eversheds Sutherland puts it, a Biden administration is expected to be "very favourable" for carbon markets the US.

Meanwhile, the structural change in the energy grid, as ever-cheapening renewable energy comes online, displacing fossil fuels, has not been reversed by the pandemic. This has been positive for the market in renewable energy certificates (RECs).

Tim Pabst, managing director of STX, which won three awards, says: "Despite Covid-19 and the overall decrease in energy demand, renewable energy supply saw record growth in 2020," propelled by government policy and corporate demand for voluntary RECs.

How the rankings were conducted:

Companies were emailed in October and asked to nominate the leading traders,brokers and service providers in the markets covering carbon emissions, renewable energy certificates, and weather and catastrophe risk, via an online survey. They were asked to vote only in those categories in which they had direct experience and to make their judgements on the basis of: efficiency and speed of transaction;reliability; innovation; quality
of information and services provided;
and influence on the market, not just the volume of transactions handled. More than 950 completed responses were received. Only one vote per company site was allowed and those firms that nominated themselves had their votes disregarded.

He adds that, if the more climate- friendly policies of the incoming Biden administration can be implemented it could accelerate renewable energy development, especially by tackling one of the biggest issues, the outdated infrastructure... we expect the federal government to step up in their own green procurement."

This also has ramifications for the  weather market, which is seeing the types of products sold adapt to this new renewables-powered reality.

And the effects of climate change are not going away, leading to strong demand for 'traditional' weather hedges and weather- related cat bonds.

Overall, the growing impacts of climate change, the growing acceptance that it is a problem that needs to be urgently addressed, and the fact the response to the pandemic offers an opportunity to do this, augur well for these markets.

Many of the players which are mentioned in the following pages – for example, Element Markets, which also won six gongs last year – have been plugging away at these markets for years, and it looks like their dedication will be increasingly rewarded for years to come.

Congratulations to all this year's winners.

 

GHG MARKETS  
EU EMISSIONS TRADING SYSTEM  
CategoryWinnerRunner-up
Best broker, spot & futures Evolution Markets  
Best trading company, spot & futures Redshaw Advisors Vertis
Best broker, options Evolution Markets  
Best trading company, options Vertis CF Partners
Best advisory/consultancy Redshaw Advisors ClearBlue Markets
Best law firm Reed Smith  
Best verification company SGS Swan Energy
Best exchange/clearing house Intercontinental Exchange (ICE) European Energy Exchange (EEX)
NORTH AMERICAN MARKETS (California)  
CategoryWinnerRunner-up
Best broker, spot & futures Karbone Evolution Markets
Best trading company, spot & futures Element Markets STX
Best broker, options Evolution Markets  
Best trading company, options Element Markets STX
Best offset originator Bluesource Element Markets
Best advisory/consultancy ClearBlue Markets Element Markets
Best law firm Eversheds Sutherland  
NORTH AMERICAN MARKETS (RGGI)  
CategoryWinnerRunner-up
Best broker Karbone  
Best trading company Element Markets Bluesource
NORTH AMERICAN MARKETS (All)  
CategoryWinnerRunner-up
Best advisory/consultancy Element Markets ClearBlue Markets
Best law firm Latham & Watkins Eversheds Sutherland
Best verification company Ruby Canyon Environmental Aster Global
Best project developer Bluesource  
KYOTO PROJECT CREDITS (JI and CDM)  
CategoryWinnerRunner-up
Best broker, secondary market EnKing International  
Best trading company, secondary market EnKing International Redshaw Advisors
Best advisory/consultancy Kanaka Management Services EnKing International
Best law firm Baker McKenzie  
Best verification company EPIC Sustainability Services  
Best project developer Kanaka Management Services EnKing International
Best exchange Intercontinental Exchange (ICE)  
CHINESE MARKETS  
CategoryWinnerRunner-up
Best advisory/consultancy ClearBlue Markets  
 
WEATHER MARKETS  
WEATHER RISK MANAGEMENT - NORTH AMERICA  
CategoryWinnerRunner-up
Best broker TP ICAP  
Best dealer/structured product seller MSI GuaranteedWeather Munich Re
WEATHER RISK MANAGEMENT - EUROPE  
CategoryWinnerRunner-up
Best broker TP ICAP  
Best dealer/structured product seller Munich Re  
WEATHER RISK MANAGEMENT - ASIA  
CategoryWinnerRunner-up
Best broker CQ Energy  
Best dealer/structured product seller AXA  
WEATHER RISK MANAGEMENT - AUSTRALIA  
CategoryWinnerRunner-up
Best broker CQ Energy TP ICAP
Best dealer/structured product seller Nephila Swiss Re
WEATHER RISK MANAGEMENT - GLOBAL  
CategoryWinnerRunner-up
Best advisory/data service Speedwell Weather Parameter Climate
Best law firm Reed Smith  
CATASTROPHE RISK MANAGEMENT - GLOBAL  
CategoryWinnerRunner-up
Best dealer (structurer/arranger) Nephila Climate Swiss Re= Sompo Global Weather=
Best broker TP ICAP Willis Towers Watson
Best advisory Parameter Climate  
 RENEWABLES MARKETS 
 RENEWABLE ENERGY CERTIFICATES - NORTH AMERICA 
CategoryWinnerRunner-up
Best broker Karbone  
Best trading company STX Element Markets
Best advisory Karbone Element Markets
Best law firm Akin Gump  
 RENEWABLE ENERGY CERTIFICATES - EUROPE 
CategoryWinnerRunner-up
Best broker STX Redshaw Advisors
Best trading company STX Redshaw Advisors
Best advisory Redshaw Advisors ClearBlue Markets
 RENEWABLE ENERGY CERTIFICATES - AUSTRALIA 
CategoryWinnerRunner-up
Best broker Natural Capital Partners TFS Green
Best trading company South Pole  
Best advisory South Pole  
Best law firm Baker McKenzie  
 RENEWABLE ENERGY CERTIFICATES --CHINA 
CategoryWinnerRunner-up
Best advisory South Pole  
Best law firm Baker McKenzie  
 RENEWABLE IDENTIFICATION NUMBERS 
CategoryWinnerRunner-up
Best broker Karbone Element Markets
Best trading company Element Markets Bluesource
Best advisory Element Markets Karbone
Best verifier EcoEngineers  
Best law firm Eversheds Sutherland