ecoAsset Risk Management: the Missing Link.
Allowances, credits, and other tradable environmental assets created as a result of compliance programmes – collectively known as the ecoAsset portfolio – introduce financial uncertainty as their balance sheet values rise and fall with emissions market prices. Like other commodity markets characterised by forward price uncertainty, ecoAsset portfolio risk is manageable using commodity risk management techniques. But, despite the availability of risk mitigation tools, environmental programme managers have traditionally focused exclusively upon compliance risk. Today, however, the increasing focus on the impact of the environment on the corporate bottom line is encouraging companies to raise the priority of their ecoAssets and search for tools and techniques to incorporate the compliance programme into their enterprise risk management efforts.