The kind of credit you want
CARE FOR A LISTED investment that’s not correlated to general (and, lately, jittery) sentiment on the JSE and other major stock exchanges?
Such beasts are rare – but it may be worth mentioning that Sterling Waterford next month opens offers on its second Carbon Credit Note (CCN), basically a carbon derivative instrument that represents a prepaid forward contract in the hands of investors.
There’s a physical demand for CCNs by industrial companies that produce carbon emissions in excess of regulated norms. Naturally, if demand for CCNs increase, the participants in the second CCN will be in the money.
Early in 2005 Sterling Waterford issued its first CCN at US$9,90 (5641c). The instrument listed in April 2005 at $14 (8400c) and in June 2008 the payout on the matured note was $24,17 (R195) – a nifty 250% rand return for early bird investors and 130% for investors who bought the CCN on listing.
The second CCN will be listed in the final quarter of 2008 and mature in 2012. Estimates show that roughly R18 000 should secure an investor 100 CCNs.
Broadly speaking, CCNs are a good bet, with environmental concerns growing almost on a daily basis. The ratification of the Kyoto protocol by Russia and the implementation of the European Union Emissions Trading Scheme (EU ETS) in early 2005 markedly increased activity in the CCN market.
One possible attraction for SA investors is that Sterling Waterford’s second CNN is priced in euro rather than US dollars, which placates concerns over long-term greenback weakness. That comes in the wake of the EU ETS, which largely dictates the carbon market is increasingly priced in euro.
Naturally, Sterling Waterford’s CCNs aren’t entirely without risk and should be seen main- ly as a portfolio enhancing investment instrument rather than a core investment. However, the instrument offers some capital protection and is backed by a project portfolio managed by BNP Paribas.
Adding a touch of green to the standard investment portfolio may not be amiss.