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IHS Markit (INFO) Introduces Global Index for Carbon Credits

Zacks Equity Research

IHS Markit Ltd. INFO yesterday announced launch of the first benchmark for the global price of carbon credits.

Known as IHS Markit Global Carbon Index and developed in consultation with Climate Finance Partners, it combines IHS Markit’s proprietary OPIS data with futures markets data.

The index tracks performance of the largest, most liquid and accessible carbon markets – the European Union Emission Trading System (EU ETS), the Regional Greenhouse Gas Initiative (RGGI) and the California Cap-and-Trade Program.

A carbon credit represents the permission to a company to emit 1 tonne of carbon dioxide. Authorities issue them to companies to keep control on pollution. They can be bought and sold in the secondary market.

Carbon credit remains lucrative per data shown by the index. Total return gained by investors in global carbon since the beginning of 2018 is around 132%. This strong performance was driven by regulatory changes and carbon’s lack of correlation with other asset classes.

A Timely Move

The move is part of IHS Markit’s efforts to expand solutions that cover the carbon market. It seems timely as the market is likely to gain strength driven by increased awareness of regulators and investors about risks related to climatic changes.

Eron Bloomgarden, co-founder of Climate Finance Partners, stated, “The IHS Markit Global Carbon index creates an important benchmark which helps financial institutions to better assess and price climate-related financial risks.” “We see growing investor interest in carbon credits as an asset class,” he added.

We observe that shares of IHS Markit have gained 39.9% year to date, outperforming 38% rally of the industry it belongs to.

Zacks Rank & Stocks to Consider

IHS Markit currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader Zacks Business Services sector are Fiserv FISV, Huron Consulting HURN and Charles River Associates CRAI. While Fiserv and Huron sport a Zacks Rank #1 (Strong Buy), Charles River carries a Zacks Rank #2 (Buy).

Long-term earnings (three to five years) growth rate for Huron Consulting, Charles River Associates and Fiserv is estimated 13.5%, 13% and 12%, respectively. You can see the complete list of today’s Zacks #1 Rank stocks here.

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