Abu Dhabi firm plans to raise $250m for carbon fund

An Abu Dhabi asset management firm is planning to raise $250m for a carbon fund as demand increases for better regulated environmental credits.

Offset8 Capital plans to close the initial capital raise for the close-ended fund in the third quarter, subject to regulatory approvals, its co-founders said in an interview.

Abu Dhabi’s carbon exchange

Proposed investments will focus on projects that reduce greenhouse gases in the Middle East, Africa and Southeast Asia.

Plans for the fund follow Abu Dhabi’s launch of its own carbon exchange last year. The emirate’s regulatory framework treats emission credits as both a financial instrument and a spot commodity, which boosts compliance and capital requirements, Offset8’s co-founder Ivan Mozharov said.

The moves come as the United Arab Emirates prepares to host COP28, the world’s premier climate event. The country role has been criticised by environmentalists as it continues to pump vast amounts of oil and gas, with plans to expand production further. The conference’s president, Sultan Al Jaber, is also the chief executive of the Abu Dhabi National Oil Company.

Carbon market

Carbon markets are witnessing a shift, with new guidelines and greater oversight after a boom in demand from companies looking to cancel out emissions led to a flood of useless credits. Major commodity traders like Mercuria Energy Group, Hartree Partners and Trafigura Group, are expanding emissions trading desks.

“When demand grows there’s naturally more scrutiny and a lot of projects have not been of a quality standard,” said Offset8 co-founder and former MET International trader Jules Maitrepierre.

“Now corporates understand the need for high-quality credits and the projects understand that in order to attract capital they need to follow strict guidelines.”

Robert Alpen, a trader at Englehart Commodity Partners who was formerly head of natural gas at Gunvor Group, is on the advisory board of Offset8. Energy trader and risk manager Munenori Fernando Horie is also in the panel.