Corporates keep the faith on net-zero goal

As net-zero pledges proliferate, more corporations than ever are turning to energy and commodity markets to enable the implementation and risk management of their transition plans, say the co-heads of energy and commodities at TP ICAP

The interdealer broker has long been active in the vast array of markets that underpin the energy transition, but recently has been positioning itself as an energy transition pure play, says David Silbert, chief executive of TP ICAP’s Americas energy and commodities business.

Through its three brands – ICAP (Energy Risk’s 2025 Commodity Rankings Broker of the year), PVM and Tullett Prebon (Energy Risk’s 2024 Broker of the year) – TP ICAP operates across the entire spectrum of the energy transition – from fossil fuels to clean and alternative fuels, and everything in between. Its presence in agricultural markets, for example, informs its activity in biofuels, while a long-standing presence in weather markets is now helping firms with longer-term climate risk mitigation.

Additionally, TP ICAP is active in mandatory and voluntary carbon, electricity and certificate markets, as well as the markets needed to build the new energy landscape, such as copper, aluminium, steel, iron ore and lithium.

With ambitious growth plans for its commodities business, the brokerage lured Silbert out of retirement in June 2024 to lead the business in the US, and he was joined the following month by Joachim Emanuelsson, chief executive of energy and commodities for Europe, the Middle East and Africa.

Energy Risk caught up with them to discuss their outlook for the energy transition.

Are clients reviewing their transition plans under the new US administration? What questions are they asking? 

Joachim Emanuelsson, TP ICAP

Joachim Emanuelsson: While there might be some slowing or rethinking in certain areas because of the recent administration change in the US, we expect corporates to stay the course. Most large corporates still want to become carbon-neutral, and we are getting questions on this more and more frequently.

We can play a big role in helping clients understand their carbon risk and hedge their exposures. Firms need to fully understand the many options available to them and the financial implications of each on their businesses.  

David Silbert: The movement towards a cleaner energy system is already well established, and I don’t see anything derailing it. I don’t think having a different person in the White House is going to dissuade a corporate chief executive – who has a 20-year time horizon to solve this problem – from acting.

In fact, the earlier firms act, the easier, and probably cheaper, it will be to procure offsets and make changes. While the early movers are taking more risk because policies are not as clear, they’re buying offsets at levels that are probably very inexpensive compared with future prices.

What impact do you see the current geopolitical and economic situation having on corporates’ transition plans?

David Silbert: Potentially having more natural gas and oil coming out of the US and the possible end to the war in Ukraine will have an impact on all markets. But I don’t think there is going to be a material shift in the direction of travel for the energy transition.

Our clients need the ability to solve different sets of problems at different stages on their journeys, and we’re in a good position to do this as we’re active in such a wide range of markets every day.

How would you describe the energy transition progress so far and what needs to happen next?

Joachim Emanuelsson: There are definitely leaders and followers. The first wave of action came before the Covid-19 pandemic but slowed down around 2022 when firms needed to deal with the more immediate issues caused by the war in Ukraine, conflict in the Middle East and the new higher interest rate environment.

What we now need is tighter regulation. A lot of work is being done around standards in the voluntary carbon markets, for example, and mandating greener shipping fuel. Once the rules have bite, you’ll see corporates really moving. It might be a couple of years away, but it’s coming.

David Silbert: Around 500 large corporates have made pledges to become carbon neutral by 2040. Some of these firms understand the impact on their financial health better than others. We’re working very closely with Amazon, for example, which has a very evolved way of analysing its exposures and planning its route to carbon neutrality using a mix of offsetting options and changes to the way it does business. 

Not all of these firms are at that stage yet.  We hope that, by helping Amazon, we’ll be able to assist other larger corporates identify their exposures and then manage them through hedging or changes of activity. As our job is to help firms quantify the cost of their transition plans, we need to understand their exposures and what financial instruments are available to hedge their risk.

How are firms managing the challenges of increasing integration of renewable energy sources into traditional energy markets?

David Silbert, TP ICAP

David Silbert: As firms evolve and use new sources of energy, we look at how we can help them source that energy, whether it be through long-term power purchase agreements (PPAs) or helping them identify construction opportunities. These markets are highly complex and regionally diverse so it can be difficult for firms to gain transparency into what their costs will be. It takes a footprint like ours to be able to identify all the options.

Joachim Emanuelsson: It is important to be realistic about timeframes for the phasing out of fossil fuels. Crude oil and refined products will gradually move away from transport, but huge demand will remain from manufacturing, construction, electric vehicle production, steel production and agriculture.

Biofuels, renewable energy and new technologies will slowly flow into the energy mix, but I think in 30 years’ time there will still be fossil fuels in the system. 

How can you help your clients make the most of recent advances in the weather markets?

Joachim Emanuelsson: There is so much potential in the weather space. There are now many more points where data is collected worldwide, so risk can be more accurately priced. A great example is the drought that lowered water levels in the Panama Canal last year, restricting the shipping flow and sending rates skyrocketing. Ship owners could hedge against an event like this but, more interestingly, the operator of the Panama Canal could sell calls on the rates for going through the canal.

Our global weather team operates beyond a typical broker remit, hand-holding clients through deals and acting in an advisory capacity.

David Silbert: Through the wide range of markets we cover, TP ICAP has access to an incredible amount of data. Capturing and cleaning that data to create analytics is a key strategy for us.

Beyond that, big data firms are now capturing and storing data that enables better pricing of catastrophic risk and the development of sophisticated weather derivatives. And a huge development in the weather market has been the surge in firms selling protection against catastrophic risk.

It’s no longer just reinsurance companies that are underwriting this risk, it’s also large hedge funds and other financial institutions. As more participants enter the market, the price of protection is dropping, making it more available to different kinds of firms. That’s an exciting development.

It is now possible, for example, to construct a contract that pays out in electricity, rather than financially. So, if the wind doesn’t blow and you’re exposed to a PPA that involves wind, the policy will pay you in power in real time and we’ll supply you with the renewable energy credits required to offset it.

How is TP ICAP harnessing advances in technology and data for its clients?

Joachim Emanuelsson: Having a wide range of data is essential. We collect data across all of the markets we are in around the world; and that’s not just energy and commodities, but interest rates, equities, foreign exchange, and so on.

But it’s also paramount to clean that data to avoid the garbage-in/garbage-out scenario. We need to ensure datasets are strong, and not just one-dimensional, but contextual. We can do that as we capture what’s happening in the physical and derivatives markets. The data can tell us, for example, where storage levels were at the time of a trade or what the weather was like. That’s the real value we can deliver to our clients.

Artificial intelligence is already playing a huge role in the analytics of data and is a tool used by our brokers. But what’s important is how you use AI and the knowledge gained from it, what to look for in the results and how to point the AI in the right direction. You need people with analytical and creative minds.

Ultimately, we are in the relationship business, and our aim is to lead with a human touch powered by technology. We want to provide the best possible tools for our brokers to empower them to do the best job for our clients.

Learn more

How TP ICAP is helping firms navigate the energy transition

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