Henrik Hasselknippe, head of markets at Xpansiv, told Environmental Finance: “Environmental commodities—such as carbon credits and differentiated fuels—represent the environmental impact of a given commodity. In two or three years’ time, I think everyone will have moved away from referring to them as ‘ESG commodities’ and that will just be the way the market views all commodities.

“An environmental footprint can best be represented in a number of ways, such as the production method, carbon dioxide (CO2) released, and methane and water intensity. For instance, cotton and rice production have a larger environmental impact on water usage rather than CO2. So, how do you express that? That’s really what we’re working on: quantifying the embedded, environmental impact within global commodity markets.

“I’m not a big fan of the term ‘ESG commodity’ because all commodities must eventually be valued by these impact factors.”