SparkChange has developed a technology platform and financial product ecosystem for qualified institutional and individual investors seeking exposure to carbon allowances. Our mission is to simplify access to carbon markets and prices around the world, as more investors with access can create a bigger environmental impact.
Securities, issued via the SparkChange platform, provide investors direct exposure to the value of physical carbon allowances – without the complex and costly set-up requirements needed to access the market directly and take delivery of physical carbon allowances.
Carbon emissions markets: The basics
Regional legislators regulate carbon emissions via market-driven initiatives, which sets a carbon price. SparkChange believes carbon regulation may tighten as the world struggles to hit its climate goals, putting upward pressure on the carbon price.
1 permit = 1 tonne of CO2
In order to pollute, emitters must buy Carbon Emission Allowances from regulators – each allowance covers 1 tonne of CO2
Supply of allowances is reduced annually
Legislation automatically reduces the supply of allowances each year, decreasing emissions over time and creating upward price pressure
Increases pressure to reduce pollution
A rising carbon price incentivizes emitters to switch to greener solutions and reduce their greenhouse gas emissions
As of June 2020, the price of European and California carbon allowances was $30.301 and $16.822 per tonne of CO2, respectively. It is estimated that carbon allowance prices need to reach a range of $50 – $100 per tonne of CO2 to achieve the emissions reductions goals of The Paris Agreement.3
The problem with today’s solutions
Investing directly in carbon emissions requires complex market infrastructure and operational capabilities. As a result, investors have typically used a rolling futures strategy, which has drawbacks:
Futures create performance drag
A rolling futures strategy (i) incurs the cost of contango annually (ii) can lead to slippage due to negative interest rates and (iii) is operationally intensive.
Commodity futures are difficult for some investors to hold
Many investors cannot hold futures, especially physically-delivering contracts like carbon allowances.
Futures lessen environmental impact
Only by buying and withholding a physical carbon allowance, rather than buying a future, do you ensure the allowance’s use is prevented.
|Holds physical inventory|
|Net environmental impact|
Hedging Carbon Exposure
Qualifying for ESG standards
Green financial products issued on the SparkChange platform are designed for institutional and individual investors. The platform’s core products provide direct exposure to the value of physical carbon emission allowances.
As a standalone investment
SparkChange believes carbon regulation may tighten as the world struggles to hit its goals, putting upward pressure on the carbon price.
Blended as part of a portfolio
Integrate carbon exposure into equity and fixed income products in order to manage risk, deliver ESG goals/metrics and accelerate the transition to a low carbon economy.
Our leadership team has 100+ years combined experience across ESG, ETFs and algorithmic trading and deep domain expertise in designing, executing and monetizing low carbon investment strategies.Our team
Offices: London, Seattle and Boston
Years experience across financial technology and sustainability
Our mission is to remove 1 billion tonnes of emissions
Insights & News
Leaked information on the “Fit for 55” reform: What does it means for European carbon allowances?
This week the European Commission will issue its formal proposal to reform the EU Emissions Trading System. What are the main changes being put forward?
Californian Carbon Allowance market ripe for impact investors
With investors helping to set record prices, California’s emissions market has burst into life and become a potential key market for impact investing to drive greater climate ambition.
European Carbon Allowances at Record Levels: time to drive more abatement
With the cost of emitting carbon dioxide in Europe at near-record levels, how can we incentivise more abatement?
Investing in markets Vs. investing in technology
Why robust carbon pricing is the key to technological change.
The Rise of Impact investing: SparkChange’s role in boosting climate ambition
A summary of the mechanisms that can help drive scarcity value within the EU Emissions Trading System and how these can benefit impact investors.
Leaders’ Summit on Climate: good news, but still not enough
As major emitters announce new emissions-cutting pledges, the numbers confirm we are still far off what’s required to contain global warming.
European Carbon Allowances: Summary of Market Characteristics and ICIS Price Forecasts
A liquid alternative asset class with uncorrelated returns, strong track record and further upside due to regulatory tailwinds
The Batman and Robin of Decarbonisation: Carbon Allowances and Carbon Offsets
Our Head of Research, Jan Ahrens, explains the differences between carbon offsets and carbon allowances and assesses their suitability as Paris-aligned investments.
Introducing our Head of Research: Jan Ahrens
Our Head of Research, Jan Ahrens, tells us about some career highlights, what drew him to Spark Change, and the challenges he's started to tackle since joining us.
Introducing our Head of Trading Operations: Anthony Gordon
Our Head of Trading Operations, Anthony Gordon, reveals what makes SparkChange unique, the appeal of the company’s mission, and the challenges faced while delivering our technological vision.
Benefits of our approach
As a standalone investment
Capture investment returns
European emission allowances are one of the best performing commodities over the last 5 years5 supported by regulatory tailwinds
Create more direct, tangible environmental impact than traditional green investments, by withholding emitters’ permits
Blended as part of a portfolio
Instead of divesting securities, neutralize a portfolio’s exposure to tightening climate regulation and a rising carbon price
Qualify for ESG standards
Combine with equity/fixed income structures to qualify for ESG standards such as CTB/PAB benchmarks
1 Data from ICIS as of 30th June 2020
2 High-Level Commission on carbon prices
3 World Bank State and Trends of Carbon Pricing 2019
4 Based off SparkChange internal estimation
5 “After Topping Commodity Gains in 2018, Carbon Set to Surge Again” Bloomberg, December 27, 2018
Investors and partners