The new carbon share classes enable clients to help finance tangible climate solution projects, while at the same time decarbonizing their investments by 7% every year, in line with the net-zero 2050 targets necessary to meet the Paris Agreement.

The carbon credits purchased will be equivalent to the Scope 1 and 2 emissions generated by companies held in Robeco’s Global Climate Credits, QI Global SDG and Climate Conservative Equities, and Net Zero 2050 Climate Equities strategies.

Share classes are a categorization within an equity or fixed income investment strategy that are usually used to denote its currency or hedging policy. They are commonly used by asset managers with international clients operating in different currencies and mandates.

Each of the three investment strategies will offer carbon offset share classes under three different fee structures depending on the client’s needs, making nine in all.

Carbon credits represent a means of removing, reducing or avoiding one metric ton of carbon dioxide (or its equivalent) from being released into the atmosphere. These credits are generated by projects such as reforestation, renewable energy, or carbon capture and storage.

Carbon credits need to follow certain quality standards to be certified and offered on voluntary carbon markets. By buying these credits, organizations help to fund concrete projects that mitigate climate change on the ground.

For Robeco’s portfolios, these include a project to repair leaking gas infrastructure in Bangladesh with the purchase and import of specialized leak detectors along with advanced sealant materials. Local people are being trained in how to check for and fix gas leaks to cut emissions.

Carbon markets are not immune, however, to the risks associated with greenwashing, as they face significant challenges concerning their integrity and reliability. Numerous instances have been recorded of carbon credit projects exaggerating their emissions reduction accomplishments, or even fabricating their results.

This makes it challenging for investors to operate confidently within this space. This criticism is currently being addressed by the Integrity Council for the Voluntary Carbon Market, which is working towards better transparency and the setting up of quality standards. Ultimately, anyone buying a credit must take care to ensure that they do what they say they will.

Robeco believes that, in spite of these challenges, carbon markets are vital to achieve the goals of the Paris Agreement, and that investors have an important role to play in making these markets work.

“We should not throw away the baby with the bathwater,” says Lucian Peppelenbos, Climate and Biodiversity Strategist at Robeco. “Research shows that carbon markets can halve the costs of implementing the Paris Agreement by directing capital to the most efficient solutions. So we need to make these markets work.”

“To mitigate the risks associated with carbon credits, investors must select high-quality projects and they must follow the mitigation hierarchy. This means firstly decarbonize your own investments, and secondly support climate solutions that help decarbonize the wider economy. The set-up of our carbon share classes offers these safeguards to our clients.”

The wider potential for carbon offsets is discussed in our new white paper, ‘Leveraging carbon markets for climate investing’, in which Peppelenbos explains how carbon markets are organized and how investors can navigate this landscape while effectively mitigating the risks.