Investing in carbon credit fund is a great way to make money while upholding a good environmental cause. Since the inception of carbon credit fund, the returns have always been positive. This should not come as a shock because everyone is investing in a carbon-free atmosphere. However, before making any investment decision, ensure that you fully understand what it entails.
Carbon credit fund offers a low-risk investment opportunity. Low risk does not mean the absence of risks. However, the risks are minimal. This is mostly because it is not as volatile as other forms of investments like futures. On the other hand, there is also limited information available about this type of investment. Notwithstanding, we have gathered the pros and cons for you. Read on and be informed.
What Exactly Is A Carbon Credit Fund?
A carbon credit is part of an environmental protection trade policy. This help limits the amount of greenhouse gases companies can release into the atmosphere. One carbon credit signifies a permit to release one ton of carbon dioxide or other gases into the atmosphere.
This is actually just for companies, but individuals have begun to trade on these carbon credits too.
Pros And Cons Of Investing In Carbon Credit Fund
Just like every other form of investment, carbon credit fund has its pros and cons. After reading, you should be able to tell if the pros outweigh the cons or vice versa. Either way, you will be able to make better investment decisions.
Pros
- Potential returns: Every investor invests for the sole purpose of getting financial returns. The major benefit of investing in carbon credit fund is the ability to get favourable financial returns. Interestingly, the fund has been yielding returns so far since its inception. This makes it a safe investment option, although further personal research is important.
- Supports the environment: The main goal of the carbon credit fund is to limit the carbon emission of companies. Companies are required to annually check and abide by the specified limit and below. As an investor who cares about the environment, this is a perfect way to invest in what you care about. It is fun and more enjoyable to make money while preserving the environment.
- Accessibility: It is very accessible to invest in this fund. You can easily access carbon offsets exposure instead of going through each and every company. You do not need to trade carbon futures to invest. Easy accessibility makes it the go to investment plan.
Cons
- High risk investment: Every single investment opportunity poses a risk. As an investor, you have to get accustomed to the fact that you can lose your capital. The high risk of carbon credit fund comes from the fact that it tracks the performance of its futures counterpart. As you already know, futures are very volatile.
Additionally, unlike other investment options, there is limited information available. This is mainly because this type of investment is new. As a result, there is little or no history to track the performance.
- Limited Diversification: These funds are limited when it comes to diversification. Diversification is important for your portfolio. It could help you stay afloat when there is a crash in some parts of your portfolio. On the other hand, if all your investments are in one place (that is not diversified), a little drop can affect you. Lack of diversification increases the risk of your portfolio.
Conclusion
The emission of carbon into the atmosphere is the major cause of global warming and climate change. A reduction in the carbon emission of companies will go a long way in preserving our environment. Investing in carbon credit fund is one way to ensure that companies reduce and limit their carbon emissions into the atmosphere.
