Are carbon offsets about to have their day at last?

investmentnews.com:

After more than three decades on Wall Street — first at Goldman Sachs Group Inc. and then at Bank of America Corp. — Tom Montag thought he’d seen most forms of financial wizardry. Then Hank Paulson asked him to tackle carbon offsets.

It was the summer of 2022, and the former US treasury secretary had recently taken the helm at TPG Inc.’s Rise Climate, the private-equity firm’s main green investment vehicle. Paulson wanted to build a new multimillion-dollar venture called Rubicon Carbon that buys up credits derived from funding forest projects or backing wind farms as a way to let polluters compensate for their own contributions to climate change. A burst of corporate pledges to address emissions had sent a niche market, still only worth about $1 billion today, into a full-fledged rally. TPG injected $300 million into Rubicon, Bank of America bought in, and JPMorgan Chase Co. joined as a strategic partner.

The goal was to “unleash as much carbon finance as possible,” Montag said in an interview.

But a string of scandals threw the anticipated boom into question. There was the collapse of a giant forest-protection effort in Zimbabwe that had become one of the world’s largest sources of carbon offsets. High-profile lawsuits attacked companies such as Delta Air Lines Inc. and KLM for making false claims based on the credits, further spooking buyers. Prices for carbon offsets tracked by MSCI peaked in 2022, when Paulson recruited Montag, and have been on a downward trajectory since.

“The market has not grown as fast as I’d hoped,” Montag said. “There have been so many things up in the air that companies are wanting to see how it all lands.”

Montag and other backers on Wall Street haven’t blinked. They’ve remained convinced