Carbon as the new global asset class

In 2021, when Article 6 of the Paris Agreement was signed in Glasgow at COP26, I claimed that Carbon was now a new global multi-billion-dollar asset class. I based my claim on 3 reasons that all new asset classes rely on:

1. International Framework - this new asset class comes under the only global carbon-compliant framework: the UNFCCC Paris Agreement.

2. Sovereign Systems - there are national systems that a country can implement to measure, verify and report its carbon at the sovereign level (e.g. Article 5) within its national climate plan i.e. Nationally Determined Contribution.

3. Product Definition & Parameters - carbon credits under Article 6 are not just clearly defined but agreed by all countries and can be used and traded by governments and the private sector, potentially unlocking billions. (i.e. ITMOs-Internationally Transferred Mitigation Outcomes)

Therefore, it was great that, 4 years later, I was able to discuss this topic with concrete and real examples at the inaugural Nordic Climate Finance Summit in Oslo with my esteemed panelists: 

• Ina Hoxha Chief Investment Officer, Climate Bonds Initiative. 

• Lucas Zaehringer Co-founder & CEO, Planet2050

• Henry Waite Co-founder & COO, Kumo Earth

• Matthieu Delouvrier Head of International Development, aDryada

The session “Carbon as the New Global Asset Class” addressed the transformation of carbon from an environmental concern into a financial asset, and reflected the growing intersection between climate action from countries and the capital markets. To do so, the session’s agenda covered three critical dimensions:

• Framework development for carbon as a bankable asset

• Nature-based solutions integration with financial structures

• Technology integration for market efficiency (front and back-end)

From Climate Bonds to Equities to Tech, all panelists appropriately acknowledged that there were both opportunities and challenges to this new assetization, and demonstrated a realistic awareness of the market complexities involved in transforming carbon into an asset class. The session was designed for an audience already familiar with climate finance basics, making it most suitable for intermediate to advanced practitioners rather than beginners.

My esteemed panelists discussed how carbon credits can be transformed into standardized, liquid financial instruments. The focus on "assetizing" carbon removals and nature-based solutions suggests practical approaches to creating revenue streams from countries and their sovereign environmental systems and achievements. This is an approach that we at ITMO Ltd have conducted over the last 4 years with many countries.

The technology component is crucial in addressing how carbon is properly measured, verified, and accounted for at the national and international levels. We discussed how tech can ensure transparency and traceability - critical issues for market credibility - while AI could optimize trading and market analytics. But once again, the Paris Agreement provides a global framework with rules and regulations to enable this transparency and traceability to take place (i.e. Article 13).

Although the session may have been quite technical for those new to carbon markets, even to those familiar with the Voluntary Carbon Market (VCM), the compliance complexity challenge discussed suggests that this is a rapidly evolving and fast-growing market. In fact, the world’s first globally compliant sovereign assets are already on the market, with more to come at COP30.

This is one of the reasons why the session focused heavily on frameworks and opportunities and provided enough details on actual implementation challenges that practitioners face. Moreover, it seemed that there was not a lack of interest or demand of this new asset class from the capital markets, but rather a lack of understanding and institutionalised data and information. 

Overall, this panel was well-structured and addressed carbon finance from both strategic and practical perspectives from debt (Climate Bonds Initiative) to Equity (Planet 2050) to tech (Kumo). This was particularly valuable for financial professionals, investors, and policymakers looking to understand how carbon is becoming integrated into mainstream finance. The inclusion of both opportunities and challenges suggests a realistic rather than a promotional approach to this fast-emerging global compliant carbon market.

However, as all new market makers can attest, liquidity is key. And this is why everyone on the panel invited the whole audience to look into this new asset class and consider providing liquidity at COP30 in Belem, Brazil. I invite you to do the same and enter this new multi-billion-dollar market.

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