By Jane Merriman
Reuters
Monday, February 19, 2007; 1:41
PM
LONDON (Reuters) - Barclays Capital <BARC.L> is to launch what it says is the first global investment tool to tap investors' growing appetite for exposure to trading in greenhouse gases.
Barclays' new tracker, set to launch soon, also illustrates the growing diversity and sophistication of commodity and energy investment products.
Torsten de Santos, head of commodity investor solutions at Barclays Capital, said the tracker was the first of its kind on a global scale.
"We are the largest emissions trading house and we believe we have the expertise to launch a product early," he told journalists at a news briefing on Monday.
The World Bank estimates global trade in carbon dioxide (CO2), the main greenhouse gas, was worth more than $20 billion last year.
The European Union already has a carbon trading market, where companies trade credits that allow them to emit carbon dioxide -- the main greenhouse gas blamed for global warming -- above a certain level.
There is growing pressure from industry players and some governments for an emissions trading market on a global scale.
Last week, for example, Jeroen van der Veer, chief executive of Royal Dutch Shell <RDSa.L> called for a global "cap and trade" system as a way to cut carbon emissions.
Exxon Mobil <XOM.N> chief executive Rex Tillerson has also urged countries to work together toward a global policy to fight climate change.
"The State of California, for example, is looking at it. The states both in Australia and the U.S. have been more proactive in forcing the agenda than the national government is," said Kamal Naqvi, director of commodities institutional fund sales at Barclays.
"We believe it may be a tactical opportunity," de Santos said. He expected the new product would start to trade shortly as there was a lot of investor interest, including from the private banking community.
The new product is essentially an index tracker, but one designed to track the price of global emission credits.
EVER MORE COMPLEX
Commodities investment has mushroomed from $5 billion in 1999 to around $120 billion now.
"We can now say it is mainstream," said de Santos, who said there had been enormous growth in structured products that offer investors innovative ways to gain exposure to commodity and energy markets.
Traditionally investors have used indexes, or baskets of commodities, to gain exposure to the raw materials assets class, but now there is a host of tailor-made products that can generate returns regardless of market direction.
Barclays Capital has by far the largest share of the commodities structured products market and in 2006 issued products worth around $5.5 billion.
Paul Horsnell, head of Barclays' commodities research, said there was massive investor interest in new environmental markets such as carbon and biofuels.
"The reason we are active in that market is because clients are asking for it," he said.
(additional reporting by Barbara Lewis)
