Has the time of environmental markets finally arrived?

 

As Environmental Finance's Market Rankings celebrates its 20th anniversary, its winners are reaping the rewards of foresight. Peter Cripps reports

It has been 20 years since Environmental Finance started conducting its annual surveys of the environmental markets. 

The Market Rankings were set up in 2000 to assess sentiment and identify the best performing companies operating in tradeable, environmentally-themed markets.

20 years on, much has changed. Dozens of countries have some form of emissions trading scheme and many more have plans to implement one. Even if the prices at which allowances currently trade are typically not high enough to cause drastic changes in corporate behaviour, this sends a clear signal that governments are increasingly seeing the need to put a price on carbon.

The carbon markets are, on the whole, seeing sentiment strengthen due to policy interventions, such as efforts to address the oversupply of allowances in the EU emissions trading system. But politics still has the potential to undermine markets, as can be seen in the Western Climate Initiative, where the US federal government has lodged a legal challenge on the linkage between the carbon markets of California and Quebec.

Another big change over the past two decades can be seen in the weather itself. As noted by participants in both the weather and catastrophe risk markets, incidents of extreme and costly weather events and climate-related natural catastrophes are increasing.

The spate of incidents in 2017 and 2018 have had an impact. As can be seen in the arena of sustainable finance more broadly, investors are increasingly aware of the impacts of climate change and its potential to hit their returns.

Investors who got their fingers burned in the catastrophe bond market after numerous bonds were impaired are now demanding higher yields to compensate them for the risks.

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 850 completed responses were received. Only one vote per company site was allowed and those firms that nominated themselves had their votes disregarded.

Corporates, too, are increasingly waking up to the risks and opportunities arising from climate change. Many, including those signed up to the RE100 initiative, are now sourcing green electricity in a trend that is boosting the market for renewable energy certificates.

And the push by the Task Force on Climate-related Financial Disclosures for companies to report the risks and opportunities their business faces as a result of climate change is driving some to look to the weather risk market.

In short, the impacts of climate change are becoming increasingly evident and the need to address greenhouse gases increasingly urgent. The markets designed to help address these problems are enjoying growing support, from regulators, investors and business.

The focus on these themes will only grow. The companies that are leading in these markets now are well positioned to lead in the future. Many of these firms – for example, South Pole, Evolution Markets, Element Markets, Baker McKenzie and Nephila – have already built up years of experience.

My congratulations to all of this year's winners – I am sure they can look forward to decades of success to come. EF

 

EU EMISSIONS TRADING SYSTEM
CategoryWinnerRunner-up
Best broker, spot & futures Evolution Markets ETS Markets
Best trading company, spot & futures Vertis CF Partners
Best broker, options Evolution Markets Vertis
Best trading company, options Vertis CF Partners
Best advisory/consultancy ClearBlue Markets ETS Markets
Best law firm Reed Smith N/A
Best verification company Lucideon TUV Nord
Best exchange/clearing house ICE EEX
NORTH AMERICAN MARKETS (California)
CategoryWinnerRunner-up
Best broker, spot & futures Evolution Markets Element Markets
Best trading company, spot & futures Element Markets Mercuria
Best broker, options Evolution Markets ClearBlue Markets
Best trading company, options Element Markets RBC
Best offset originator BlueSource Element Markets
Best advisory/consultancy ClearBlue Markets Element Markets
Best law firm Latham & Watkins Eversheds Sutherland
NORTH AMERICAN MARKETS (RGGI)
CategoryWinnerRunner-up
Best broker Evolution Markets BGC Partners
Best trading company Element Markets Vitol
NORTH AMERICAN MARKETS (All)
CategoryWinnerRunner-up
Best advisory/consultancy ClearBlue Markets Element Markets
Best law firm Eversheds Sutherland Latham & Watkins
Best verification company First Environment Ruby Canyon
Best project developer Blue Source Element Markets
KYOTO PROJECT CREDITS (JI and CDM)
CategoryWinnerRunner-up
Best broker, secondary market South Pole  
Best trading company, secondary market Vertis South Pole
Best advisory/consultancy South Pole Kanaka Management Services
Best law firm Baker McKenzie Reed Smith
Best verification company EPIC Sustainability Services N/A
Best project developer Kanaka Management Services South Pole
     
WEATHER MARKETS
WEATHER RISK MANAGEMENT - NORTH AMERICA
CategoryWinnerRunner-up
Best broker ICAP Aon Benfield
Best dealer/structured product seller Nephila Climate Sompo Global Weather
WEATHER RISK MANAGEMENT - EUROPE
CategoryWinnerRunner-up
Best broker Willis Towers Watson Aon Benfield
Best dealer/structured product seller Nephila Climate Munich Re/New Re
WEATHER RISK MANAGEMENT - ASIA
CategoryWinnerRunner-up
Best broker CQ Partners N/A
Best dealer/structured product seller Nephila Climate Munich Re/New Re
WEATHER RISK MANAGEMENT - AUSTRALIA
CategoryWinnerRunner-up
Best broker CQ Partners Risk Solutions International
Best dealer/structured product seller Nephila Climate Sompo Global Weather
WEATHER RISK MANAGEMENT - GLOBAL
CategoryWinnerRunner-up
Best advisory/data service Speedwell Nephila Climate
Best law firm Reed Smith N/A
CATASTROPHE RISK MANAGEMENT - GLOBAL
CategoryWinnerRunner-up
Best dealer (structurer/arranger) Nephila Climate Swiss Re= Sompo Global Weather=
Best broker Guy Carpenter Marsh
Best advisory Speedwell RMS
     
RENEWABLES MARKETS
RENEWABLE ENERGY CERTIFICATES - NORTH AMERICA
CategoryWinnerRunner-up
Best broker Evolution Markets Karbone
Best trading company 3Degrees Element Markets
Best advisory Karbone Evolution Markets= Element Markets=
Best law firm Latham & Watkins N/A
RENEWABLE ENERGY CERTIFICATES - EUROPE
CategoryWinnerRunner-up
Best broker South Pole  
Best trading company Vertis South Pole
Best advisory South Pole Vertis
     
RENEWABLE ENERGY CERTIFICATES - AUSTRALIA
CategoryWinnerRunner-up
Best broker TFS Green N/A
Best trading company South Pole N/A
Best advisory South Pole N/A
     
RENEWABLE IDENTIFICATION NUMBERS
CategoryWinnerRunner-up
Best broker Element Markets Karbone
Best trading company Element Markets Bluesource
Best advisory Element Markets Karbone
Best verifier EcoEngineers N/A
Best law firm Eversheds Sutherland N/A