Dec 4, 2023

SINGAPORE: The price of carbon is going up. While no one knows exactly how high it will go or how quickly, money managers are beginning to assess the impact of rising costs on their equity investments. Invesco Ltd now tests its portfolios under a range of carbon prices from less than US$10 a tonne to more than US$100. At Morgan Stanley, the sustainability research team is monitoring carbon regulations that are likely to inflate costs for companies. Political debates about environmental, social and governance aside, the rising price of carbon is a growing threat to returns. Half of the earnings for companies in the MSCI World Index are at risk of declining if global carbon prices reach US$100 a tonne by 2030, according to estimates by researchers at Lombard Odier. As of now, the price of carbon is less than US$30 a tonne, but Europe’s new tariffs on carbon-intensive imports may hasten an increase, the Swiss asset manager said. Europe’s so-called carbon border adjustment mechanism (CBAM), is designed to create a level playing field by making sure that imports of certain goods are subject to the same carbon prices as domestic producers pay in Europe. While it doesn’t take effect until 2026, CBAM will likely “promote the convergence of carbon prices towards the EU’s level”. — Bloomberg Subscribe now to our Premium Plan for an ad-free and unlimited reading experience! Tags / Keywords: