According to a report in Reuters, Credit Agricole, the second largest bank in France and one with a significant global presence, will be focusing its attention on trading on compliance carbon markets while winding down its operations in precious metals.
While a direct link between the two portfolios hasn’t been revealed, the report cites sources who claim that the bank wants to align all its operations with initiatives that are considered more green.
The move could be interpreted as a sign for increased liquidity for the European Emissions Trading System (EU ETS), at a time where Brussels is doubling down on efforts to decarbonize the union’s industry.
Both the EU ETS and other emissions trading systems are generally expected to continue growing after achieving a value of $979 in 2023 (with the EU ETS accounting for just under 90% of that).
Credit Agricole plans to start trading in 2025, with demand for the emissions allowances set to outstrip supply in the coming years.
Why is Credit Agricole abandoning gold for carbon?
The main reason sources cited was the negative performance of the business unit trading gold in the past several years and especially during the COVID pandemic.
Logistical disruptions and closures of key refineries damaged gold production and transportation, impacting deliveries and supply in early 2020 as a variety of measures were enacted across the globe.
This led to a divergence in gold and silver prices between two of the main trading hubs – New York and London – causing many market participants’ positions to go in the red. But while many decided to hold it on their books and wait out the volatile period Agricole decided to cut its losses.
This new focus on carbon markets is not the first move in the direction of more ESG-oriented investing. In December 2023 the bank announced another shift in its operations with the decision not to invest in new oil and gas projects.
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