New solution brings carbon asset fund administration and depositary services to asset managers, asset owners and other financial institutions to facilitate the integration of carbon-related assets into portfolios

Depositary services in the European Union will provide the safekeeping of assets including monitoring cash flows, cash reconciliation, timely settlements and follow through of any discrepancies in transactions

State Street Corporation announced the introduction of the State Street Carbon Asset Servicing Solution and depositary services that allows asset managers, asset owners and other financial services institutions globally the ability to integrate carbon-related assets into their portfolios as the demand for the asset class continues to grow.

Historically, the carbon assets market has been made up of many disparate components and manual processes. In utilizing the new carbon asset services solution, State Street seeks to help clients navigate this complex environment, and simplify the management of carbon assets. Additionally, clients accessing the solution will be able to incorporate carbon assets into both existing ESG and non-ESG portfolios, leveraging State Street’s back and middle-office capabilities.

State Street’s Carbon Asset Servicing Solution provides a range of fund administration and depositary services, including recordkeeping, NAV calculation, reporting and other oversight functions. With the adoption of this solution, clients can now leverage State Street’s full range of asset services for this growing carbon asset class.

See related article: State Street Announces Inaugural $500 Million Bond Issuance Under its Sustainability Bond Framework

“The carbon assets market is growing dramatically—as the total traded value for compliance and voluntary credits reached a record €865 billion in 2022 and is expected to grow fifteen-fold by 2030 as new regulations in major regions push corporations globally to report on and offset their greenhouse gas emissions,” said Phil Kim, global head of ESG Product at State Street. “Our new carbon asset servicing solution will help clients gain access to this emerging asset class so they can directly hold carbon allowances and credits and trade them as they would other products, and ultimately look to maximize the potential of their investment portfolios using State Street’s fund administration expertise.”

By providing comprehensive fund administration and first-of-its-kind depository services required in the European Union, State Street’s Carbon Asset Servicing Solution provides asset managers, asset owners and other financial institutions seamless integration of carbon assets into State Street’s core investment servicing offering — coordinating multiple parties’ data, including top carbon registries, exchanges and cash agents, allowing clients to gain exposure to this growing asset class via spot and derivatives markets.

“As businesses continue to move toward models that reduce greenhouse gases and emission standards increase in scale and magnitude, the price of carbon offsets are likely to increase. Investing in carbon assets can help fund the energy transition and diversify portfolios, all while offering the opportunity for investment returns,” concluded Kim.