Abu Dhabi asset manager plans $250m carbon fund

Unsplash/Aristedes Carrera

• Fund will invest in mangrove, forest and biochar projects
• Its assets will be traded on Abu Dhabi’s carbon credit exchange
• Demand for credits expected to grow in line with net zero aims

Offset8 Capital, an Abu Dhabi asset management company, is planning to raise $250 million for a carbon investment fund focused on financing climate mitigation and adaptation projects.

Proposed investments will aim to support local communities in Africa and Southeast Asia on projects involving mangrove restoration, reforestation and biochar.

Offset8, which is based in the financial free zone Abu Dhabi Global Market (ADGM), plans to close the initial capital raise for the fund by October.

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Offset8’s planned fund follows Abu Dhabi’s launch of the world’s first regulated carbon credit exchange in May last year.

The AirCarbon Exchange enables companies to trade and finance carbon credits like conventional financial assets.

Offset8 has opted to establish the fund in the ADGM “to take advantage of its novel framework regulating carbon credits,” the company said.

Abu Dhabi’s regulatory framework treats emission credits as both a financial instrument and a spot commodity. This boosts compliance and capital requirements, according to the company.

It will support the ambitions of the ADGM to become a key jurisdiction in the emerging field of sustainable finance.

To date, Offset8 has identified more than 50 projects in 29 countries that it expects will form the investment pipeline of the fund.

“Offset8 held discussions with potential counterparties in Japan and other countries where the main carbon credit buyers are currently based,” a company statement added.

“Offset8 envisions that such buyers will act as off-takers of the carbon credit that the Fund is expected to receive.”

Demand for carbon credits, generated through projects such as tree planting or using cleaner cooking fuel, is expected to grow as companies seek to use the credits to help meet net zero emissions goals.

In October last year, Saudi’s Public Investment Fund (PIF) established the Regional Voluntary Carbon Market Company to support businesses and industries in the region to achieve net zero goals.

In June, 16 companies from Saudi Arabia, including Aramco and Saudi Electricity Company, bought more than 2.2 million tonnes of carbon credits, priced at SR23.50 ($6.27) per metric tonne of carbon credits, at an auction held in the Kenyan capital Nairobi.

The Regional Voluntary Carbon Market Company is now planning to launch a carbon credit trading exchange in early 2024. It will also establish a fund to invest in climate projects.