CARBON CREDIT PORTFOLIO ALLOCATION AND INVESTMENT RETURNS IN AFRICAN MARKETS: THE MODERATING AND MEDIATING ROLE OF CARBON CREDIT PRICE INTEGRITY

Abstract

This study investigated the influence of Carbon Credit Portfolio Allocation on Investment Returns in African markets, with a focus on the mediating and moderating role of Carbon Credit Price Integrity. Employing a quantitative survey design, data were collected from 247 investment professionals drawn from a population of 1,420 institutional investors - comprising fund managers, pension fund investment officers, and insurance company investment executives - across 15 African countries representing approximately 85% of the continent’s carbon credit market activity. Measurement and structural models were validated using Exploratory Factor Analysis (EFA), Confirmatory Factor Analysis (CFA), and Structural Equation Modeling (SEM), supplemented with objective financial performance data. The findings revealed that portfolio allocation positively and significantly affected investment returns, and that Price Integrity both mediated and moderated this relationship, amplifying the benefits of allocation in markets with transparent and credible pricing. High-integrity portfolios were found to yield superior risk-adjusted returns compared to low-integrity portfolios. These results underscored the importance of strategic allocation and market transparency for optimizing returns in African carbon credit markets. The study contributed to the literature on sustainable investment by highlighting the dual role of Price Integrity and offered practical implications for institutional investors and policymakers to enhance market efficiency and investor confidence.