The Case for Environmental Markets

Colin Campbell is a Partner at Bain Capital and co-head of the Partnership Strategies team that manages assets primarily for Bain Capital’s partners in strategies that diversify away from the equity-orientation of the firm’s core. In its search for attractive, uncorrelated assets, the Partnership Strategies team became an early mover in environmental markets, which today comprise an important part of its portfolio.

Both Tom Steyer and Bill Orum cited carbon credits and offsets as a necessary and important near-term component to effect climate transition. Colin’s deep engagement in the space provides a wonderful primer for those interested.

Our conversation dives into Colin’s background and investment approach that led to the discovery of the opportunity in environmental markets. We then turn to his investment thesis, sourcing, description and nuance of compliance and voluntary markets, and implementation.

Show Notes
6:05 Colin’s background
8:50 A blank slate at Bain Capital
11:34 Leveraging research in the allocator seat
13:30 Strategies to achieve diversification
16:27 Investment opportunities in environmental markets
19:47 Compliance and voluntary markets
23:38 Measuring emissions for carbon permits
28:09 Investment instruments in compliance markets
29:26 Size of compliance markets
30:41 Correlation with other asset classes
32:59 Withstanding short-term volatility
37:00 Inner workings of voluntary markets
40:36 Decentralization within voluntary markets
44:34 Risk and return characteristics
50:40 Portfolio construction
53:39 Operational requirements for participation
55:09 Closing questions