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Towards A Future Of Carbon Credits And Systematic Investing
Climate change is an existential threat to the islands of The Bahamas. Global warming is going to be a problem for the world in future, both physically in the form of displaced populations and economically in the form of disruptions to commerce. The world stands to lose around 10% of total economic value from climate change by 2050, according to the Swiss Re Institute, if its surface temperature keeps increasing on the current trajectory and if governments fail to conform to the Paris Agreement and to 2050 net-zero-emission targets.
Despite this, global warming has resulted in a marriage between climate and finance and thus is likely to create economic opportunities even as it creates vulnerabilities. This is especially true in The Bahamas, whose natural resources can be put to work to trap carbon safely. The government is planning to monetize its seagrass meadows, salt marshes and mangroves and develop a blue-carbon credit regime. It has passed two laws – the Climate Change and Carbon Initiatives Act 2022 and the Carbon Credit Trading Act 2022 – to allow for well-regulated trading in a new asset class consisting of carbon credits, carbon securities and carbon-linked digital assets. In this, our second mini-report in this year’s series, we look at the opportunities that this turn of events might generate for The Bahamas.
Meanwhile, more and more international HNW investors are using state-of-the-art trading platforms located in the jurisdiction. They are turning in increasing numbers to systematic investing, an approach that emphasizes data-driven insights, scientific testing and disciplined portfolio-construction techniques. Gone are the days when international private investors – overwhelmed as they are by mountains of data – could navigate volatile markets safely without recourse to brokers’ and platforms’ analytical tools. Diversification remains the key to the construction of more robust portfolios. Over the rest of this year, as our report illustrates, HNWs’ investment strategies might take account of the comeback of mega-cap stocks, breakthroughs in carbon-capture technology and an upswing in the commodities super-cycle. HNWs with moderate risk appetites are also profiting from today’s erratic markets by allocating some of their investment portfolios to hedge funds, many of them in The Bahamas.
Our report also contains a shopping list of tips to help the investor reduce the risk of ending up in the clutches of a dubious broker. There are no prizes for guessing the most important tip of all – the choice of jurisdiction, with an emphasis on good regulation.
