Impact of Carbon Market Developments in 2025

A couple of interesting articles out this month on carbon market development:

First from MSCI “Frozen Carbon Credit Market May Thaw as 2030 Gets Closer”

https://www.msci.com/www/blog-posts/frozen-carbon-credit-market-may/05232727859

Key findings

  • The size of the global carbon credit market remained on ice last year, at around USD 1.4 billion. Credit demand (i.e., “retirements”) was pretty much flat on 2023 while average spot prices fell 20%.
  • However, there are some signs of a coming thaw, including the continuing rise in the number of companies setting ambitious climate commitments and a number of positive policy and market developments.
  • As a result, the market could rise significantly in the coming years, creating potential new investment opportunities. Our projections suggest it could be worth USD 7 to 35 billion by 2030 and USD 45 to 250 billion by 2050.

https://www.cif.org/news/ccmm-issuance

CIF CAPITAL MARKETS MECHANISM (CCMM) MAKES HISTORIC DEBUT WITH INAUGURAL $500 MILLION BOND

The Climate Investment Funds (CIF) Capital Markets Mechanism (CCMM), rated by Fitch and Moody’s (AA+/Aa1) today made its market debut as an innovative issuer focused on mobilizing finance for climate action and sustainable development. Its inaugural bond raised $500 million on the back of an orderbook totaling more than $3 billion from investors around the world. The 3-year bond is the first issuance under CCMM’s borrowing program, following the announcement of its listing in November 2024 at COP29.

Pension Reform News (Reason Foundation)

🌟 Work Highlighted 🌟

I’m pleased to share that our research was featured in a recent article by Reason Foundation on public pension debt rankings for state and local governments. 🎓📊

The article delves into the growing challenges of public pension liabilities and how they impact fiscal sustainability. Our paper contributes to this important conversation by providing insights into governance, intergenerational equity, and the long-term implications of these financial commitments.

As policymakers, financial professionals, and communities navigate these complex issues, I hope our work continues to serve as a resource for driving meaningful change and ensuring a sustainable future.

📖 Check out the article here:
👉 Public Pension Debt Rankings for State and Local Governments

https://reason.org/pension-newsletter/public-pension-debt-rankings-for-state-and-local-governments/

hashtag#Pensions hashtag#Sustainability hashtag#Governance hashtag#Finance hashtag#Research

Does the Board Engagement of Public Pension Plans Matter? (Journal of Financial Services Research)

In 2011 I began to hunt around for a Ph.D. research topic. What was on my mind? Corporate governance failures from the Great Financial Crisis for one. Another, flagging demographics and retirement security. Thirdly, the firsthand experience of working with asset owners, their boards, finance and investment committees, and having seen the mixed performance, some excellent, some not so hot, but constantly shifting over time.

Fourteen years, thousands of research hours, one Ph.D. dissertation, several articles, engagement with hundreds of organizations, many conferences and webinars, subsequent studies (2021 Benchmarking Study of Governance in Higher Education with Commonfund Institute), an online assessment tool and one book later, our team in the finance department at Marquette University published these findings in a top academic journal this week. It is with great pride that we share this work. This research began a national conversation on the role governance plays on driving mission-driven and financial-related outcomes over time. Since that time we have seen governance crises play out not only in the private sector, at the municipal and state levels, but also in our federal government, making the subject of this work in this field all the more urgent and compelling.

For further information and updates, see the Asset Owner Governance Project through the Marquette S-Lab.

Abstract

We examine whether the discretionary governance practices of pension board of trustees have a significant impact on the returns of the plan’s invested assets. We construct a unique database of board practices by analyzing meeting minutes of public plan board of trustees. Employing Principal Component Analysis, we formulate a pension plan Board Engagement Index to capture board dynamics beyond mere board size and composition. Our results demonstrate that pension funds characterized by a higher level of board engagement – reflected in higher index scores – exhibit enhanced fund performance. Our results are robust to endogeneity concerns. On an annual basis, one standard deviation increase in the engagement index corresponds to a 3.9% increase in benchmark-adjusted returns, everything else constant. Our findings underscore the substantial impact that board engagement can exert on a plan’s financial performance.

https://link.springer.com/epdf/10.1007/s10693-024-00440-y?sharing_token=1FuoIqekBPmoZ-R-PO5f1ve4RwlQNchNByi7wbcMAY6onb-vdjzKTIjTyLGTLrOzQGJDGvoBKRh4x741iRhyBMktAPeOpz_1yDesAeXWKPIIr2CO3Z3nFWMSaQOEP1tQtdeMAJbXK31dXluGT7TvKqZxlSiekil-vJDgYI7RG54%3D