“Only our approach really eliminates CO2 emissions”,
say Christian Jasperneite and Hendrik Leber (Acatis) in the private banking interview.
Together with the company Cap2, Acatis wants to make funds climate neutral. The head of the asset manager, Hendrik Leber, and Cap2 founder Christian Jasperneite explain how this works in an interview with private banking magazin. A conversation about I deologies, possible imitators and the power of Brussels bureaucracy.
private banking magazin: Mr. Jasperneite, I come to you as a private client with the wish that my portfolio becomes climate neutral. How would you go about that with Cap2?
Christian Jasperneite: Actually, it’s relatively simple. We look at what securities are in your portfolio and what you as an investor are responsible for in terms of emissions. Then we buy European emission rights to that extent and set them aside in a climate foundation. This removes them from the market for all time, and an issuer is obliged – secured by European law – to cut emissions by this amount.
Did Mr. Leber approach you with the same request or how did the contact between Acatis and Cap2 come about?
Hendrik Leber: We’ve known each other for quite some time. A year ago, I did a
I read an article about the CAP2 concept and thought: I want that right now. I’m a big fan of carbon credits, although I fell for it once before in the noughties. Back then, they were abundant on the market, and all you could do was lose money. In the meantime, the situation is different: the rights are becoming more and more expensive, it’s working with scarcity, market mechanisms are taking effect, and it’s an ideal time to put that into investment funds.
The concept is implemented in several Acatis funds. What makes the approach better than funds that advertise themselves as “Paris compliant,” for example?
Jasperneite: Paris-compliant funds take care in their structure to have a very low
carbon footprint. But the restructuring of portfolio structures induced by this only changes the ownership structure, not the emissions. With Acatis funds, on the other hand, there is a real impact. Emissions are actually reduced, and to the exact extent that investors are responsible for them. This goes much further than what Paris-compliant approaches can ever offer.
Leber: I am a friend of solutions and not of ideologies. We now have a method that leads to the goal with pinpoint accuracy, while everything else only soothes the conscience.
To some, this sounds like modern indulgences …
Leber: I’ve heard that a few times. From my point of view, it’s the other way around. All those who play only with good intentions achieve nothing. We, on the other hand, eliminate effectively. We lock the emission rights in a safe so that they can never be used again.
Jasperneite: That’s exactly the point. You don’t pay something to have a clear conscience later on. Rather, you pay to remove actual rights from the market. So this has nothing to do with feel-good effects, but is a clean economic principle.
They have emphasized that the concept allows them to make their funds carbon-neutral at low cost. How high is the expense ratio?
Leber: We sold the big polluters from our portfolio in the last six months to keep costs in check. Of course, the concept goes to performance, that’s clear. In the case of the Acatis Aktien Global fund, there are around 7,000 tons of CO2 that are released into the atmosphere on a pro rata basis by the companies that are included in it. At a CO2 price per ton of just under 100 euros, that makes 700,000 euros. Added to this is the value-added tax. In the case of Acatis Aktien Global, this amounts to about 10 basis points. With other funds, the rate can be somewhat higher, up to 30 to 40 basis points.
How are the costs offset?
Leber: For every ton of CO2 produced in the portfolio, we buy twice the amount of emission rights. Half of these are retired, and with the other half we want to profit from the increase in value that can be expected due to the constant shortage.
And what if this plan doesn’t work out? Do you see no danger of the price mechanism being politically overridden?
Leber: We also trust in the power of the Brussels bureaucracy. Once this mechanism has been implemented politically, no national government can simply back out.
Jasperneite: If you look at the trend over the past few years, you can see that changes have always tended to go in the direction of tighter restrictions, so that rights are becoming scarcer even more quickly. In this respect, I’m relaxed.
There are voices that say that financial market players have no business in the carbon market because volatility increases and prices would only be driven by price speculation …
Leber: I don’t understand the argument. Of course, there will be more volatility because new players will appear on the market. But we are permanently withdrawing emissions from the real economy, we are not trading them!
Jasperneite: I know the accusation that it is critical when financial investors have access to the market. Investors have access to many futures, but they also provide liquidity. I honestly don’t see how, in the area of emission rights, a futures market would work without financial market players.
Do you think this concept will find many imitators? The design sounds relatively simple …
Jasperneite: At first, we also thought that this was the case, but over the past twelve months we have realized that the pitfall is often in the details.
For example?
Jasperneite: These are technical questions. How do you deal with value-added tax? There, dealing with the rights you hold is different from dealing with those you donate. Authorities like the CSSF have to agree to the process, it needs legally binding information from tax offices. You also need a climate foundation that has a suitable set-up in its articles of association and its boards. We work with the Climate Concept Foundation in Hamburg. I think it is therefore not so easy for a copycat. But if there are other providers, I see that as an accolade for the approach, and it would also be great for the climate.
Why can’t the rights be deleted immediately?
Jasperneite: Currently, the market stability reserve is still working against this. As long as the number of emission allowances in circulation remains above 833 million, this mechanism ensures that the auction volume of emission allowances is constantly reduced. Cancellation at the present time would counteract this and reduce the efficiency of the measure.
So if that 833 million mark is not reached, the Cap2 concept would be redundant.
Jasperneite: Then, from the current perspective, the foundation would no longer be absolutely necessary, but the rest of the concept would not change.
Leber: As far as that is concerned, we would like to make ourselves superfluous.
As emission rights become increasingly scarce, future technologies such as hydrogen are also becoming more attractive. Hydrogen has long been a big issue for Acatis. A nice side effect?
Leber: That’s more the main effect. We want the market to find the most cost-effective way to achieve climate neutrality. The goal is to initiate these new technologies and make them exportable. We can develop that in Germany.
Jasperneite: Ideally, the topic of emissions trading will also become more established worldwide. At the moment, this is still a very European issue. The USA is still having a hard time with it. In China, a system is being set up along the lines of the European setup.
Mr. Leber, you are considered one of the best-known value fund managers in the country. Why does this sustainability approach fit in with value investing?
Leber: At Acatis, we have held these emission rights pure for a long time, in the sense of adding value. If demand goes up, supply goes down, then as a Value investor strike. In Germany and Europe, we are currently doing a roll backwards and going into the dirty coal-fired power generators in the wake of the energy and gas crisis. In this respect the demand for CO2 certificates would have to increase significantly.
This article appeared on 11/16/2022 at the following link:
