Voluntary carbon offsets and renewable energy credits play a major role in helping large corporations meet their climate goals. Many are turning to marketplaces that allow companies to trade credits and offsets like any other commodity. One of the leaders in the space is Xpansiv, an exchange that lets investors swap offsets linked to sustainability projects.
The San Francisco-based startup connects buyers and sellers of carbon and other ESG-focused commodities. Also, it provides market data for voluntary carbon offsets, renewable energy credits, and low-carbon fuels. With Xpansiv’s software, clients can access underlying data backing up assets linked to sustainable projects and then use the corresponding credits to offset their carbon emissions.
Much of what Xpansiv does mirrors what other commodity exchanges do. For example, the firm has partnered with CME Group to launch futures contracts tied to voluntary carbon offsets, letting traders make bets on how much a ton of carbon will cost well into the future.
These products aren’t being traded on a massive scale, at least not yet. But the market is growing. Xpansiv added nearly 150 customers during the 2022 first quarter, topping the total number of customers added during all of 2021, according to the Private Equity News website.
Last year, Xpansiv accounted for about 90% of carbon offsets trading for immediate delivery on exchanges. The company says trading volumes in these products nearly quadrupled in 2020.
That kind of growth has caught the attention of some powerful investors – including The Blackstone Group, the world’s largest private equity firm. In early July, Blackstone announced a $400 million investment in Xpansiv to finance the exchange’s expansion plans. The dollar amount is roughly double the amount previously raised by Xpansiv since it was founded in 2016.
“Blackstone’s support of the Xpansiv vision for commodity markets that value ESG is a major milestone and the beginning of a new chapter for the company,” Xpansiv CEO Joe Madden said in a press release. “This partnership will help us solidify our leading position in carbon and leverage our platform to scale markets and products to accelerate the energy transition across renewable energy, digital fuels, and beyond.”
The money will fund both organic growth initiatives at Xpansiv and acquisitions. For Blackstone, it continues a recent string of investments the firm has made in ESG-focused businesses, which include Legence, an energy-transition company, and Sphera, a provider of ESG performance and risk management software.
“We believe environmental commodities are a critical new asset class that must scale exponentially to meet climate change mitigation targets pledged by governments, companies, and entire industries,” Bilal Khan, senior managing director at Blackstone, said in a statement.
“Xpansiv is a leader in this space, and we are delighted to provide the capital and resources to help them further expand their offerings and accelerate their growth.”
The current incarnation of Xpansiv was formed in 2019 when it merged with CBL, a global carbon offset exchange founded in 2009. The merged company has more than 200 employees and offices in Sydney, New York, San Francisco, Seattle, Houston, Vancouver, London, Milan, and Bendigo, Australia.
Both funding rounds and acquisitions have bolstered Xpansiv’s growth. The latter includes its March 2022 buyout of APX, a leading provider of registry infrastructure for energy and environmental markets. That deal came a year after Xpansiv acquired Project OTX, a London-based market-access provider for Compulsory Stockholding Obligations (CSO), renewable fuels, and renewable fuel certificates. The OTX deal moved Xpansiv into the UK and Europe.