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Sunday, 5 September 2021

The carbon emissions market might be the next big thing

The carbon emissions market is proving lucrative for many: Energy trading houses are focusing their attention on carbon-trading operations as economies around the world begin to put price tags on emissions, writes the Wall Street Journal. In Europe, carbon-emitting firms can buy top-ups for their emission allowances as well as sell their excess allowances to other firms, paving the way for a trading market that has seen a 23% y-o-y growth last year to USD 281 bn.

Banks such as HSBC are also piling in: Funds and banks are also eyeing carbon-trading activities, with investment firm Pollination Group currently raising funds with HSBC Global Asset Management for a carbon fund that will trade carbon credits. But the absence of a global framework means many banks are still hesitant to get involved.

The growth potential is possibly greater than that of the oil market in the coming years: The global carbon market could be worth USD 22 tn by 2050, energy consulting firm Wood Mackenzie estimates. The value of the market could exceed the oil market’s value by 2030 and possibly even by 2025 depending on how quickly regulation is implemented, Trafigura’s Hannah Hauman told the WSJ. The European Union has plans in the pipeline to expand its carbon market, while China has started its own, and the US may be quick to follow.

Look out for more announcements on the carbon market during the United Nations COP26 climate conference that will kick off on 1 November in Glasgow.

Meanwhile, the European Central Bank (ECB) will be stress testing Europe’s finance industry’s vulnerability to climate change, in a process that will be rolled out next year, people familiar with the process told Bloomberg. Banks will be required to provide data on how their balance sheets might fare over periods of 10, 20 and 30 years as the ECB attempts to study the link between earnings, defaults, and carbon risk in banks’ portfolios. It is possible that banks burdened by carbon intensive loans will see higher capital requirements imposed, with the ECB saying it will gradually begin treating climate risks the same as any other risks to lenders.

Why are companies always looking to hire, yet mns of candidates get rejected? It seems that tech is to blame for the gap between unemployment and the lack of high calibre hires. The Wall Street Journal says that the growing reliance on automation systematically omits many resumes from even being considered. The algorithms used in such softwares — initially used to make the hiring process easier — filter out candidates according to positive criteria such as college degrees and are biased against negative criteria such as criminal records. According to 90% of employees who took part in a Harvard survey, the most suitable prospects are being weeded out and companies must do something about it.

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