<- Back
Summary

An introduction to the correlation of EUAs with other assets

Return to Blog
Sommaire
Book a call

European Union Allowances (EUAs) are an excellent option for portfolio diversification. Historically, they have had a low correlation with other asset classes, offering effective protection against unfavorable portofolio swings coming from the broad financial markets.

Carbon allowances have a unique structure as they combine elements of a policy tool and a marketplace. Thus, they are less sensitive to major traditional asset fluctuations.

Unlike most investing options, EUAs can act as an inflation hedge. Indeed, a significant contributor to inflation is often the energy sector. As energy prices increase, inflation rises. Likewise, EUA prices often follow suit when energy sources such as gas become more expensive. In short, EUA prices can be positively correlated with inflation, and carbon allowances can help compensate for the loss of purchasing power due to rising inflation.

Although carbon prices can fluctuate temporarily and have variable correlations with other assets, EUAs are distinguished by their expected long-term price appreciation, thanks to a decreasing supply.

As both a policy tool and a financial instrument, carbon allowances are engineered for a steady price growth. Also, their historically low correlation with most asset classes makes them a valuable addition for any well-diversified portfolio.

Do you like this article?

Share it with your network and introduce Homaio to those interested in impact investing!

The Homing Bird

A newsletter to help you understand the key challenges of climate finance.

Sign up to our newsletter

Utimate guide to carbon markets

Dive into the world of carbon markets, where economics, finance, and environmental science converge. Get your ultimate guide now.

Thank You !
Find our guide with the following link 👉
Download whitepaper
Oops! Something went wrong while submitting the form.
White Paper homaio

Do you like this article?

Share it with your network and introduce Homaio to those interested in impact investing!

Understanding in depth

Decrypting Trump’s impact on Climate - Part 1
April 1, 2025

Decrypting Trump’s impact on Climate - Part 1

In just a few short months, Donald Trump has laid waste not only to U.S. climate policy, but also to the political, legal, intellectual, and physical infrastructure that underpins it. In doing so, he has sent shockwaves through public and private markets, and upended the industrial and energy strategies of most—if not all—nations. More critically, he has steered our collective trajectory onto a faster, more dangerous collision course with a warming planet. This is a two-part series on the impact of Trump on climate. In this first part, we will cover: - How Trump has dismantled U.S. climate legislation - How this policy overhaul is being fleshed out across the administration - The very real implications for US companies and consumers.

The "Omnibus" Simplification of the CSRD and Taxonomy: A Setback for the Fight Against Climate Change?
April 1, 2025

The "Omnibus" Simplification of the CSRD and Taxonomy: A Setback for the Fight Against Climate Change?

The European Union's "omnibus" simplification of the CSRD and the EU taxonomy aims to streamline sustainability regulations. However, there are concerns that this simplification could hinder the fight against climate change, potentially leading to a rollback in environmental protection and a weakening of efforts to achieve carbon neutrality by 2050. Advocates argue for strict and ambitious regulations to maintain Europe's leadership in sustainable development and curb greenwashing, emphasizing the importance of transparency and corporate accountability.

How can investing in European Union Allowances accelerate emissions reduction ? 
March 25, 2025

How can investing in European Union Allowances accelerate emissions reduction ? 

Over the past decade, EU emission allowances (EUAs) have grown by an average of 26.58% annually. However, assessing environmental impact is challenging. Private investors often wonder about their influence on the market. This edition of The Homing Bird analyses how the European Union Emissions Trading Scheme (EU-ETS) supports Europe's decarbonization goals and the role investors play in this process.

Understanding in depth

No items found.

You might also like

Decrypting Trump’s impact on Climate - Part 1
April 1, 2025

Decrypting Trump’s impact on Climate - Part 1

In just a few short months, Donald Trump has laid waste not only to U.S. climate policy, but also to the political, legal, intellectual, and physical infrastructure that underpins it. In doing so, he has sent shockwaves through public and private markets, and upended the industrial and energy strategies of most—if not all—nations. More critically, he has steered our collective trajectory onto a faster, more dangerous collision course with a warming planet. This is a two-part series on the impact of Trump on climate. In this first part, we will cover: - How Trump has dismantled U.S. climate legislation - How this policy overhaul is being fleshed out across the administration - The very real implications for US companies and consumers.

The "Omnibus" Simplification of the CSRD and Taxonomy: A Setback for the Fight Against Climate Change?
April 1, 2025

The "Omnibus" Simplification of the CSRD and Taxonomy: A Setback for the Fight Against Climate Change?

The European Union's "omnibus" simplification of the CSRD and the EU taxonomy aims to streamline sustainability regulations. However, there are concerns that this simplification could hinder the fight against climate change, potentially leading to a rollback in environmental protection and a weakening of efforts to achieve carbon neutrality by 2050. Advocates argue for strict and ambitious regulations to maintain Europe's leadership in sustainable development and curb greenwashing, emphasizing the importance of transparency and corporate accountability.

How can investing in European Union Allowances accelerate emissions reduction ? 
March 25, 2025

How can investing in European Union Allowances accelerate emissions reduction ? 

Over the past decade, EU emission allowances (EUAs) have grown by an average of 26.58% annually. However, assessing environmental impact is challenging. Private investors often wonder about their influence on the market. This edition of The Homing Bird analyses how the European Union Emissions Trading Scheme (EU-ETS) supports Europe's decarbonization goals and the role investors play in this process.

You might also like

No items found.