The Ledger
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Environmental commodity markets will face shortages and price inflections by mid-2020s
“And in the window of time we're in now, sort of mid decade, 20 twenties, we are likely to be flipping into an environment where we're going to be in shortage of many of these instruments. And that's likely to cause a significant price inflection.”
Campbell: Compliance carbon prices will rise as permit shortages manifest
“So we see the size of these markets and the compliance side growing the volumes of actual permits come down over time, but we believe price will be growing as the shortages that we expect to take place. Start to manifest themselves in different markets.”
Campbell: Investors must be wary of unstructured voluntary carbon markets
“So what we have seen is a very, very disparate set of opportunities in the voluntary markets, many of which are interesting, but many of which are also not interesting, both as actually doing good in the world, as well as an investment opportunities. And like …”
Campbell: Negative press will not derail voluntary carbon market trend
“And the negative news you would think is probably going to make the end users just take more time in assessing what to do and may slow down some of them from pulling triggers quickly. I don't think it significantly alters the secular theme or the trend that's …”
Campbell: Environmental markets lack institutional capital to reach fair value
“More recently, we've come across environmental markets in the last five years, which we think is another example of one of these nascent markets where there is not significant capital yet and move those markets to what we think is, is fair value as an example.”
Oil companies' resistance to compliance carbon programs has sharply declined
“And while there was resistance, 10 and 15 and 20 years ago, you know, where you would see oil companies lobbying against these sorts of programs, what you've seen in the last half decade is More and more of them see the writing on the wall. They realize we're …”
Government-mandated price floors create positively skewed compliance carbon market investments
“The governments are often regulating price minimums and even escalating price minimums, which can create unique and interesting and positively skewed investment opportunities for investors.”
Campbell: Compliance carbon market returns are fundamentally uncorrelated with equities
“The more important time horizon that we use is focusing on the medium and long-term of what will drive prices in these markets, and that's the fundamentals of each of these individual markets, the supply, the demand, the regulatory changes that are occurring, …”
Extreme heterogeneity among voluntary carbon offsets makes standardizing exchange-traded products highly unlikely
“In light of the underlying heterogeneity of different voluntary carbon offsets that are associated with many, many different projects in many, many different countries, it's very hard to have a standardized exchange traded standard That really captures all of …”
Campbell: Voluntary Carbon Markets Will Grow Substantially Over Next Decade
“And we do think over the next decade, the voluntary markets can be quite substantial. Because of the ubiquity of carbon emissions, it's just everywhere. So we think as more and more of the world actually say, you know what, we're going to start to figure out h…”
Compliance carbon policymakers explicitly designed markets to rely on investor price discovery
“On the compliance side, helping the policy makers achieve their objective of reducing emissions from their emitters by being part of that market and participating in that market, which is explicitly contemplated by the market design in order. They want investo…”
Campbell: Environmental markets reward active market picking over passive beta
“This is very much a sort of market pickers opportunity or sort of a stock pickers type opportunity where you want to cherry pick the markets that are the most interesting at current prices and given the current fundamentals and regulatory regimes.”
Extended regulatory wait times signal substantial sidelined capital eyeing compliance carbon markets
“In some of these markets, there's actually extended wait periods in order to get access to the market to us. That's another sign that there's lots of capital waiting to get into these markets.”
Campbell: Bain Capital Internal Fund Focused on Uncorrelated Non-Equity Strategies
“We were all heavily, heavily exposed to equity risk, so it was no surprise that a lot of what we were craving was investments that are diversifying from equity risk, so strategies that are more in the absolute return and uncorrelated buckets, so either explici…”
Campbell: Manager selection relies on the same core process as stock picking
“When I moved over from stock picking to allocating, it ended up being quite a bit more similar than I thought, in the sense of, at the end of the day, you're interviewing teams about what they do in their day job, and then conducting research to try and build …”
Campbell: Bain Capital waited for emitter acceptance before entering carbon markets
“And again, back to our investment thesis, that's part of what we've been waiting for is seeing a point where even those entities being regulated are going, you know what, it's just the right thing for us to do.”
California's cap-and-trade program has achieved 100% emitter compliance to date
“In the program's History to date, there has been a hundred percent compliance as far as we know with this program, and that in part has been not that big of a lift for the emitters because the prices have been low, relatively low historically.”
California carbon futures trade tens of billions despite smaller underlying permit markets
“In California, the annual trading volume of the futures is in the tens of billions of dollars and even smaller Commodity market. And the underlying permits in California is single digit billions of dollars.”
Compliance carbon instruments experience 30% annualized volatility, resembling single-stock equities
“If you look statistically at the annualized volatility of some of these instruments, I would think of it as, you know, while these are commodities, it's something like a modestly volatile single stock equity. So you're looking at annualized vol that could be i…”
California's compliance carbon market price floor escalates at 5% plus CPI annually
“The California market had very low volatility because for most of the last decade, the price was at the regulatory price floor where it basically the auction prices couldn't go down. The futures were trading right around this price floor. So you saw it really …”
Campbell: Voluntary Carbon Market Operates Exclusively OTC Without Centralized Exchanges
“On the voluntary side, the answer is no, not yet. And there may never be, just given the natural decentralization of what this Market is we're using the word market to imply that there is one, but the reality is it's very much over the counter bilateral type r…”
Bain Capital Formed Partner Capital Group Around 2008 Financial Crisis
“And after doing that for about a decade, the firm was looking to start a new group in order to find investment opportunities for the personal capital of the partners at the firm. And I was invited to throw my hat in the ring for that opportunity. This was righ…”
Campbell: Healthcare royalty investors grew from single digits to dozens
“So over time that's included things like investing in healthcare royalties, which when we first started looking at it, there were a single digit number of investors and partners in that market. These days there's, you know, many dozens”