UK Pension Schemes Under Pressure for Climate Impact Reporting

The mid-sized and smaller pension schemes in the UK are under tighter rules as new reporting regulations are requiring more detailed information.

The UK has been one of the fastest countries to adopt the Taskforce on Climate-related Financial Disclosure (TCFD) reporting requirements into law. This covers corporates, regulated financial institutions, and pension schemes.

Large pension schemes in the country have to report climate risks in line with TCFD guidance since last October. This is also part of the Occupational Pension Schemes Regulations 2021.

According to a law firm associate, the trend goes towards demanding more and more detailed information. He also added that:

“The aim is clearly a good one. That said, the regulations are detailed and it is going to be quite an uphill battle for smaller schemes to comply. There will be a challenge to find the time and resources.”

The requirements stem from the 2017 recommendations of the Financial Stability Board (FSB), which was a forum set up in the wake of the 2008 global financial crisis.

Pension Schemes as Responsible Stewards

Schemes in the UK have to disclose four measures in their accounting which include:

the total carbon emissions of all the scheme’s assets;
a measure of the intensity of such emissions per unit of currency;
a measure of the trustees’ own choices in relation to climate factors; and
a measure of the extent to which the scheme’s investments align with the aim of the Paris Agreement to limit global warming to 1.5°C.

The last measure has become compulsory only recently. This obliges trustees of the schemes with the Paris goals as their 3rd measure to find a new one.

Speaking on the recent change in reporting for pension schemes, the Department for Work and Pensions (DWP) Secretary noted that it’s to support trustees in their climate disclosures.

And so more work is necessary to refine methodologies and ensure consistent and robust reporting. This is vital to also ensure that schemes act as responsible stewards on behalf of millions of UK pension savers.

Commenting on this, Director of Policy and Advocacy at the Pensions and Lifetime Savings Association, Nigel Peaple said:

“As we enter the next phase of scheme reporting, it is important that the largest companies and asset managers meet institutional investors’ expectations… by enhancing their climate impact disclosure, as well as fully implementing their regulatory responsibilities within the TCFD regime.”

Getting enough information

Preparing TCFD reports started with larger pension funds last year. But it includes mid-sized operators this year, too, from £5 billion in assets under management to £1 billion.

This would be challenging for smaller pension schemes in the UK. One challenge is the ability of trustees to get relevant information from asset managers.

This may not be the case with listed equities and corporate credits. But it might be for emerging markets and private asset classes where confidentiality is a concern.

For instance, Hymans Robertson, a pensions and financial services consultancy firm stated that private market managers are failing to provide their clients with the information they need to manage climate risks.

The firm’s analysis revealed the industry-wide concerns about the incomplete disclosure of climate data.

Hymans also stated that the reporting of carbon emissions data is not yet commonplace. It said that:

“Managers of property and infrastructure funds are better prepared with just under half – (44%) for property and 48% for infrastructure – providing data on carbon emissions… In contrast, private equity and private debt managers were able to report significantly less information on climate issues – no private debt managers in the survey provided carbon emissions data.”

In line with this, the DWP remarked that it will review the existing thresholds for pension schemes’ climate-related reporting.

Taking into account (or ignoring) the risk

Reporting in line with the TCFD framework measures financial risk linked to climate change. But this is not the only concern for UK pension schemes.

Asset managers must also take into account stewardship and engagement. This means looking at ways how the financial sector can help in the race to net zero.

Some experts in this matter said that some schemes will find it impossible to meet the new TCFD reporting requirements.

While operators may see it as a once-a-year exercise, there’ll be more requirements on what the trustees need to do.

A worst-case scenario would be some firms will refuse to give trustees the TCFD information. And this will place their portfolio under question.

If such happens, any scheme that ignores climate change reporting also turns a blind eye to a major risk to pension savings. Most importantly, they’re missing out on vital investment opportunities.

Pension schemes in other countries have been diligent enough in disclosing their climate change data.

Allocating capital more efficiently

Regulators across the entire UK investment chain are committed to disclose climate information. And the government is making plans to reach its target of net zero carbon emissions by 2050.

This means that resilient pension schemes protecting savings from climate risk are within reach. But to achieve this, pension trustees should focus on their three major duties:

Exercise of investment powers for their proper purpose;
Take into account material financial factors (including transition and physical risks); and
Act according to the “prudent person” principle.

The prudent person principles means:

“Trustee investment powers must be exercised with the ‘care, skill and diligence’ that ‘a prudent person would exercise when dealing with investments for someone else for whom they feel morally bound to provide.”

Performing those duties will allow for a more efficient allocation of capital. Better yet, firms and investors alike will understand the financial implications of transitioning to a lower-carbon economy.

Finally, the International Sustainability Standards Board (ISSB) also has new climate reporting standards. Adoption of these standards will further place more pressure on climate reporting by pension schemes.

But the UK government has committed to promptly implementing the ISSB standards. The goal is to help pension scheme savers in their investment decisions.

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Salesforce Launches First-of-a-Kind Carbon Credit Marketplace

The first step to achieving net zero is to reduce carbon emissions. In response to this, Salesforce will launch a first-of-its-kind carbon credit solution called the Net Zero Marketplace.

San Francisco-based Salesforce is a cloud-based tech company that provides customer relationship management (CRM) services to businesses of all sizes worldwide.

The global leader in CRM introduced its carbon credit marketplace. It’s a trusted platform that makes the process of buying carbon credits easy and transparent.

Such a solution will allow organizations to buy high-quality carbon credits from ecopreneurs to ramp up the race to net zero.

The market platform will also provide everyone with access to project pricing and 3rd-party ratings.

Many carbon credit providers join Salesforce as inaugural partners, including:

Climate Impact Partners,
Respira International, and
3rd-party rating companies Calyx Global and Sylvera.

Boosting the Race to Net Zero

The global voluntary carbon market (VCM) is poised to grow up to $50B by 2030. This is driven by corporations’ pledges to hit their net zero targets.

Still, organizations may not know how to create a carbon credit portfolio. Some don’t even know where to begin as buying carbon credits can be complex. But they want to trust that the projects producing the credits have a positive impact.

Add to this the fact that providers of carbon credits don’t always have the tools needed to bring the credits to the market.

Enter Salesforce Net Zero Marketplace.

Salesforce carbon credit marketplace is built on the firm’s Commerce Cloud tech. It connects buyers and ecopreneurs.

Ecopreneurs are environmentally-focused entrepreneurs who lead and drive climate action worldwide. They offer a catalog of 3rd-party rated carbon credits and a seamless ecommerce experience for buying them.

Net Zero Marketplace also features a climate action hub where anyone can learn and engage in the climate issues that matter to them.

Entities that seek to achieve long-term emission reductions can supplement their efforts with carbon credits. This is where Salesforce comes in.

Chief Impact Officer, Suzanne DiBianca, said:

“Net Zero Marketplace brings together Salesforce’s values, technology, and commitment to ecopreneurs to create a trusted market so organizations can transparently source carbon credits and accelerate climate action.”

Emission Reductions and Carbon Credits

Carbon dioxide has the same impact on the climate no matter the place and the source.

Polluters can buy carbon credits to help offset their direct emissions. Credits are from projects that avoid, reduce, or remove CO2 from the air.

Examples of carbon credit projects are forest conservation, tree planting, wind farms, solar cookstoves, or better farming methods.

While the first step to reaching net zero is to reduce emissions, that alone is not enough. Climate experts believe that this time of climate emergency calls for trying all options possible.

And carbon credits are one of them that can help incentivize more emissions reductions. They place a price on carbon, which makes an impact now while other efforts are ongoing.

Carbon projects undergo a series of verifications by global standards. If a project meets those standards, carbon credits can then be issued and sold in the market.

Salesforce carbon credit marketplace for transparency

Validating and verifying the quality of a carbon credit may take some time; the process can also be challenging.

Salesforce carbon credit marketplace tries to fix these concerns by aggregating and publishing 3rd-party ratings for projects. And that’s even possible without the need for a paywall.

The transparency of this marketplace helps organizations decide which carbon credits are most suitable for them. The partners identified earlier aid Salesforce to bring the said transparency to its platform.

For instance, Sylvera provides expert ratings to vet projects that deliver real climate benefits. And though carbon projects are very useful in fighting climate change, reliable data is vital to reveal their full potential.

With Sylvera’s ratings, Net Zero Marketplace users can discover projects that bring real climate benefits. The platform also offers carbon credit purchases to any entity, along with education and resources needed.

Any entity can access it and buy carbon credits through it. They will also be able to see project descriptions, UN Sustainable Development Goals, and 3rd-party ratings.

Buyers will also be updated on project progress, boosting reinvestment.

During the launch, Salesforce carbon credit marketplace will offer over 60 projects across Africa, Australia, Europe, Latin America, and the U.S.

Salesforce carbon credit pathways

There are two main reasons why Salesforce goes on its carbon credit journey. It sees carbon credits as a way to:

finance nature-based solutions and new technologies needed today, and
set an internal price on carbon to further support its emissions reduction efforts

The tech company bought its first carbon credits in 2017 as part of its climate action strategy.

Last year, it achieved net zero residual emissions across its full value chain and reached 100% renewable energy for its global operations.

Also, Salesforce launched its $100 million Climate Justice and Ecosystem Restoration Fund.

The firm will invest another $100 million in Carbon Dioxide Removal (CDR) projects by 2030. And it does this as a member of the First Movers Coalition, alongside Alphabet and Microsoft.

It will continue to reduce emissions while investing in carbon credits to offset the emissions it can’t yet reduce.

Buying carbon credit via Salesforce Net Zero Marketplace in the US starts in October this year.

The platform will expand to more markets in 2023.

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Public Transportation Pricing Schemes Can Cut Emissions

Governments are considering public transportation pricing schemes to help with the rising costs of energy and the burden of inflation. Germany tested the low-priced transit tickets that cost only €9 and also cut carbon emissions by 1.8 million tonnes.

Germany has been offering riders very low monthly ticket prices. This applies to all local trains, metros, trams, and buses for 3 months.

The pricing scheme is an effort to promote the use of public transport and ease the burden of high energy costs.

According to a public-transport organisation in Germany, VDV, the scheme was successful.

52+ million people have bought the €9 tickets, which reduced car use and cut carbon emissions by 1.8 million tonnes.

Oliver Wolff, VDV’s CEO said that:

“The 9-euro ticket not only relieved citizens financially but also had a clearly positive effect on the climate.”

Notable Impacts of Low-cost Public Transportation

The discounted ticket is a huge price reduction because monthly tickets for local transport in Berlin costs €107.

Among the new buyers of monthly tickets since June, more than half said the cheaper price was the key incentive for their decision.

The country’s national rail authority, Deutsche Bahn, reported that it has sold 26 million of the low-cost tickets alone. And over the summer months, they saw a 10% increase in public transport passengers.

As such, they called the 9-euro ticket experiment a total success.

The decision to subsidize the tickets comes as Germany continues to see high inflation, which hit around 8% last month.

Months before this scheme, the ridership was on a slight downward trend.

Alongside reductions in CO2 emissions, the pricing mechanism also improves air quality in metropolitan areas.

Researchers at the University of Potsdam noted that air pollution levels go down by up to 7% as a result of the low-cost ticket.

They said that their findings may have significant implications on policy and health. Their results show that subsidizing public transportation may be a viable way to lower air pollution, particularly in cities.

That can contribute to the UN’s sustainability goal of creating more resilient, safer, and healthier urban areas.

Sustainable Road Transport and Pricing

The results of the experiment reflect the World Economic Forum’s recent report on Sustainable Road Transport and Pricing.

The paper advocated for affordable public transport to boost “adoption and reduce the financial burden for current users.”

WEF’s report argued that road pricing systems should be designed to account for the economic, environmental, and societal impacts of public road transportation. Incorporating these impacts in individual choices means considering the following:

In the U.S., emissions from transportation account for about 27% of the country’s total emissions, making it the largest contributor.

In the EU, transport footprint has jumped by 33% since 1990 while other sectors have cut down emissions.

As shown in the chart below, light-duty vehicles (passenger cars and vans) are the greatest contributor to EU transport GHG emissions.

The carbon footprint from heavy-duty vehicles (trucks and buses) is #2, followed by marine and aviation.

Transport remains a key challenge to achieving the EU’s climate targets. In fact, an analysis shows that transport alone can emit more than the bloc’s total share of the Paris Agreement’s 1.5°C carbon budget.

And that’s even under an ambitious decarbonization policy scenario.

As EU member states are looking for ways to curb transport emissions, the public transportation pricing scheme in Germany may offer one solution.

But this 9-euro ticket scheme expired at the end of August. Still, many advocates are pushing for an extension. Wolf remarked that:

“All responsible actors should therefore now decide quickly on the continuation and further development of such an offer… If we take the traffic turnaround and climate change seriously, then we have to act now.”

As noted by the EU lawmakers, 15% of the bloc’s total emissions come from road transport. And so cutting these emissions is vital if the region has to reach its climate goals.

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U.S. Banking Regulator Hires First “Climate Cop”

The U.S. Office of the Comptroller of the Currency (OCC) hired its first “climate cop” or chief climate risk officer, Dr. Yue (Nina) Chen to manage climate-related financial risks.

OCC is the federal agency overseeing the largest banks in the U.S.

The banking regulator reinforced its commitment to confront risks associated with climate change by appointing Chen.

OCC believes that climate-related financial risks can affect the safety and soundness of banks through physical and transition risks. This may also impact various sectors of the economy as well as access to financial services.

And so, hiring an officer to police the matter is critical to minimize the said risks.

Climate Change and the Banking Sector

Global warming and extreme weather events put more pressure on banks in figuring out how much money to lend to firms. And pricing those loans becomes even more difficult.

Proponents of climate-driven financial oversight say that a catastrophic weather event causing bigger losses to banks is a big issue. It can threaten the stability of the financial system.

The idea to integrate climate-related risks into financial regulation was from Democratic lawmakers. They have been warning others about the dangers of climate change to markets.

In fact, President Joe Biden assembled a team of climate experts inside the White House. And OCC is one of those agencies involved in this matter.

The Climate Cop

OCC is the chief regulator of about 70% of the assets in the U.S. commercial banking system.

The agency’s role is to ensure that national banks and federal savings associations know their climate-related financial risks. And that they create risk management frameworks to measure, track, and control those risks.

The Acting Comptroller Michael Hsu said that the agency will take a two-pronged approach to act on climate change:

engaging and learning from others
supporting the development and adoption of effective climate risk management practices at banks

Thus, OCC designated one of its bank supervisors last year to serve as a climate risk officer to urge banks to consider climate risks in their operations.

Dr. Chen’s role is an expansion of that and is crucial in delivering OCC’s functions.

As a climate cop, Chen will oversee the OCC’s new Office of Climate Risk. She will also lead the agency’s climate risk efforts related to supervision, policy, and engagement.

Dr. Chen will focus on developing a new system to assess climate-driven risks to banks. It’s important to figure out how to monitor and manage them.

She will directly report to Hsu. He foretold this move in his speech on the issue.

Hsu said that the appointment of a new climate risk officer will speed up “our internal function into a full-fledged office reporting directly to me”.

He also noted that regulators are starting to consider how testing banks for readiness for climate-related threats could look in the future. He added that:

“With regards to scenario analyses for larger banks, a strong emphasis on diversity of approaches needs to be maintained… With climate-related risks, I believe we are much more exposed to failures of imagination — not asking enough ‘what if?’ questions — than we are to failures of stringency or consistency.”

Dr. Chen’s Background

Dr. Yue Chen has a doctorate in chemical engineering from the Massachusetts Institute of Technology.

She had worked at Goldman Sachs in the Wall Street giant’s asset management business. She was then employed at the Royal Bank of Canada.

OCC’s climate cop is not Chen’s first role as a regulator. She was the executive deputy superintendent in the climate division of New York State’s banking department.

There she “was responsible for integrating climate-related financial risks into supervision of regulated entities,” as per OCC’s statement.

Dr. Chen was also the vice chair of the climate risk steering group at the International Association of Insurance Supervisors.

Under her leadership, the OCC will continue to focus on championing climate risk management frameworks for the federal banking system.

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DeepMarkit to Co-Host Climate Week Blockchain Summit with Flowcarbon in New York City

DeepMarkit announced that it is sponsoring and will co-host the Climate Week Blockchain Summit on September 20th.

The event is organized by Flowcarbon and dClimate to occur during Climate Week New York City 2022, the biggest climate event in the world taking place from September 19-25 in NYC.

Climate Week 2022 partners and sponsors include the Climate Group, Estee Lauder Companies, The Climate Pledge, Johnson and Johnson, Google, FedEx, and many more.

Members of the DeepMarkit team will also attend the North America Climate Summit (NACS) organized by the International Emissions Trading Association (IETA) in partnership with International Carbon Action Partnership (ICAP).

The CW Blockchain Summit is a one-day event to be held at Project Farmhouse, a sustainable event center that embodies eco-conscious living.

The event features exclusive leadership panels, keynote speakers, a happy hour event and a dinner.

Meanwhile, the NACS will occur at the Westin New York at Times Square from September 20-22nd. It’s a forum to understand the world’s net zero landscape and clean growth opportunities through interactive sessions and workshops.

There will also be an IETA members nightcap reception happening.

The DeepMarkit team expects to benefit from the event by strengthening existing relationships and sourcing new business development opportunities.

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Plastic Credits are Coming – ClimeCo and Enaleia Ink Deal

ClimeCo has partnered with Enaleia to tackle plastic pollution in Kenya via a plastic collection project producing plastic credits under Verra.

ClimeCo is a global sustainability company advancing the low-carbon future with market-based solutions. It’s a leading firm in the management and development of environmental commodities.

Enaleia is a non-profit social enterprise addressing two problems for the marine environment – overfishing and plastic pollution. It works with coastal communities and teaches them practices that preserve fish populations while removing piles of plastic from the seas.

ClimeCo’s additional funding will support Enaleia’s newest plastic project in Kenya. This deal between the two companies will produce plastic credits under Verra’s Plastic Program.

ClimeCo, Enaleia, and Plastic Credits

For ClimeCo’s director of Plastic Program, Chris Parker, a plastic credit is:

“… an environmental commodity that represents the collection or recycling of one tonne of plastic material, which companies use in their ESG, CSR, and sustainability programs… Our approach is to create a system solution to the ocean plastic challenge.”

According to a study, humans produced about 460 million tons of plastics in 2019. This rate will grow even more despite the increasing use of plastic recycling technologies.

Some firms are recycling carbon dioxide to make plastics like polymers and earn credits out of it. In fact, ~ 250,000 metric tons of CO2 are being used as a raw material in polymer manufacturing each year.

This forms part of their ESG strategy to make operations become sustainable.

In the case of Enaleia and ClimeCo, plastic credits will be from collecting plastic wastes in vital fishing areas in Kenya.

With ClimeCo’s funding and the sale of the credits, Enaleia can collect 1,000-3,000 tonnes of plastic a year.

Enaleia works with ClimeCo and the Kwale Recycling Center in Kenya to collect and integrate plastic into the circular economy.

Other professional experts in sustainable development are also taking part in the project.

Plastic Project in Kenya

The Kenya plastic project supports 350+ fishers in Kwale County by empowering them to collect plastic wastes in land and ocean. These include abandoned nets, gear, and marine litter.

Around 20% of ocean plastic is fishing gear.

The number of fishermen will increase to 800 from the coastal communities in the following months.

The collected waste will then go to Kwale Recycling Center. It’s a local collection and recycling company that processes plastics into useful materials and products.

Plastic wastes are recyclable into various consumer goods like clothes, shoes, packaging, bags, rugs, bottles, and more.

The Plastic Credit Model

As per Lefteris Arapakis, Enaleia’s Co-Founder and Director:

“Through the plastic credit model, we can set up large-scale plastic cleanup projects that can create a real impact on our oceans… by empowering the fishing communities at this scale, we can not only clean up significant amounts of plastic but also prevent further ocean plastic pollution…”

Enaleia’s project incentivizes the fishing community to use more sustainable fishing practices. For instance, fishers can reduce overfishing by limiting their activities while collecting plastic.

The project also provides a supplemental income to a community seeing some of the highest poverty rates in Kenya.

Here’s how plastic credit creation works.

Under Verra’s Plastic Program, projects that collect plastic from the environment may be issued Waste Collection Credits (WCCs). Whereas projects that recycle plastic may be issued Waste Recycling Credits (WRCs).

Together, these credits are known as Plastic Credits. They’re confirmed via the project validation and verification process.

Each plastic credit represents one tonne of plastic waste that would otherwise have not been collected or recycled.

The end user can buy and retire plastic credits to offset their plastic waste footprint. All plastic credit issuance and retirement records are available on the Verra Registry.

The ClimeCo and Enaleia project will generate plastic credits called WCCs.

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Patch Secures $55 Million to Boost Carbon Credit Platform

Climate tech firm Patch secured $55 million to scale their business to meet the growing demand for climate action through voluntary carbon markets.

U.S.-based Energize Ventures led the Series B financing round with Singaporean sovereign wealth fund GIC as its new investor. Existing investors that joined include Coatue Management, Version One Ventures, and Andreessen Horowitz.

The fund will be for hiring more staff, expanding into new markets and developing Patch technology.

This latest round brings the company to a total of $80 million in funding to date.

Patch Platform: Bridging Climate & Technology

Climate scientists agreed that reaching global climate goals will need carbon removal to scale 1 million times its current capacity by mid-century.

Removing carbon from the atmosphere is key to fighting climate change. And many businesses are looking to help fund this climate action as part of offsetting their emissions.

This is where Patch comes in, playing a crucial role in bridging climate and technology. Its platform has the ability to embed climate action into each product and service via its API.

The software allows users to build carbon removal directly into their digital products and services to deliver an automated carbon neutralizing experience.

This is ideal for e-commerce and deliveries, as well as for travel and financial service products.

It’s important to get as many firms as possible to take action to reverse climate change. But many are struggling to integrate this into their businesses.

Remarking on this, Patch CEO and co-founder Brennan Spellacy said that:

“At Patch, we are changing that. Our infrastructure lowers the barrier to entry for both businesses and climate project developers looking to enter the carbon market which, in turn, could help unlock 20% of the climate change solution the world so desperately needs…”

With Patch’s platform, businesses of any size and budget can buy carbon credits to tackle their emissions.

The infrastructure transforms a traditionally complex and opaque system for buying carbon credits.

Patch gives entities seeking climate solutions the infrastructure they need to grow and scale their businesses. Its platform also helps facilitate impactful transactions on the VCM.

The market is seen to grow to $50 billion in 2030 and $100 billion by 2050.

For Tyler Lancaster of Energize Ventures who’s joining Patch board of directors, this growth makes “it one of the largest and most paramount markets of our time.”

But today’s carbon credit infrastructure is so fragmented and lacks standardization. This makes it difficult and complex to tap into, according to Lancaster. He added that:

“Patch’s platform provides a much-needed digital backbone that simplifies the transaction complexity of the carbon management ecosystem for both buyers and suppliers… It also increases transparency, and enables the carbon market to scale to meet global climate goals.”

The image below shows a snapshot of Patch carbon credit platform.

100+ Corporate Customers

For a year, Patch grew its customers 5x more to over 100 companies across all industries. They span from e-commerce to financial services.

Some of the firms that integrate climate action into their business using Patch platform include:

Afterpay: the buy now pay later group

The group said that Patch platform enables thousands of its customers to understand and take action to offset the emissions of their purchases.

European investor EQT

EQT leveraged Patch to place itself at the forefront of climate innovation. It’s using the platform to neutralize its emissions through bold investments in frontier technologies.

Shop Apotheke Europe

One of Europe’s leading e-pharmacies is also using Patch to buy credits to neutralize the firm’s emissions for the first half of 2022. This is part of the company’s robust decoupling strategies.

Restaurant company Just Salad

The food company recently integrated Patch right into its mobile app. This offers customers the ability to neutralize their order’s carbon footprint in an easy swipe.

Patch itself has grown its team very fast by 400% to over 60 employees worldwide in the last year. The tech company had opened a European headquarters in London.

The firm has been attracting top talent from leading tech companies like Shopify, Stripe, and Plaid.

Its latest funding round includes new investors such as B Capital Group, AENU, Blue Impact, Andrew Robb, Frank Slootman, GIC, and MCJ Collective.

The $55 million will put the company on track to deliver a massive climate impact worldwide.

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The 5 Top Carbon Offset Project Developers

Are you looking to directly reduce your carbon footprint or support projects that cut emissions elsewhere? Then carbon credits allow you to do either of these.

A carbon credit is also called carbon offset in the voluntary carbon market (VCM).

Each credit goes through a general lifecycle process that starts from creation to retirement. Individuals and firms use these credits to voluntarily offset their emissions.

With growing pressure on corporations to take climate action, the VCM demand deems to grow up to 10x over the next 10 years and 30x by 2050 from 2020 value.

As such, we’re also expecting to see more carbon offset project developers enter the market to meet the rising demand.

This calls for a better understanding of the role of developers in the VCM. The same goes for the state of the carbon project developer ecosystem and its maturity level.

That’s important to inform the supply-side views on the market’s ability to deliver on the integrity claims of carbon credits.

Most notably, this article will also shed light on what are the top carbon offset project developers that contribute to the growth of the market. We’ll identify five of them to help you find the best developer you need.

The Role of Carbon Project Developers in the VCM

Delivering the promise of the Paris Agreement calls for adopting more ambitious emission reduction initiatives.

It also requires more commitments to develop carbon offset projects to neutralize unavoidable emissions.

It’s becoming clearer that well-designed VCMs are critical to achieve the Paris Agreement goal. That’s to enable the world to reach net zero emissions by 2050.

And carbon project developers play a central role in the VCM. They are key to delivering its success given the current state of the market and its projection.

Project developers perform several tasks to help ensure the growth of the VCM. These include:

Sourcing carbon offset projects
Working with carbon credit standards and verification bodies, and other partners, and
Bearing the financial risks of developing carbon projects

The Current State of Carbon Project Development

Observing the current state of the carbon project development ecosystem reveals a couple of insight.

One of them tells us that the carbon project developer ecosystem remains concentrated by volume into a few players with big portfolios.

Yet, it’s the small and mid-sized carbon project developers holding smaller carbon portfolios that dominate the market.

The difference is so huge that you’d think the developer market remains largely untapped. And it seems to be the case right now.

9 out of the top 10 carbon offset project developers by issued volume are working on large-scale avoided conversion / REDD+ or improved forest management projects.

Another notable observation is the dominance of avoidance carbon offsets, particularly with renewable energy.

Renewable energy developers, which are mostly from India and China, dominate the market by number.

But the recent supply shifts prompt project developers with avoided emissions portfolios to expand into nature-based projects.

However, lack of expertise in nature-based projects may limit developers with removal portfolios producing industrial carbon capture credits.

This may give them higher project development risks like fire.

Lastly, when it comes to type of project, nature-based seems to be dominant.

Almost half of total volumes of credits issued was from nature-based project developers. This result is due to high entry to market barriers.

Most issuances are in the hands of a few large nature-based operators in the Global South.

While the top carbon offset project developers of most improved forest management portfolios are in the U.S. Blue Source and Finite Carbon are the dominant players in this field.

Offset buyer preferences are forcing project developers to shift to nature-based solutions and removal credits.

But with limited new market players, there’s a risk of failing to meet increasing demand. This may further impact the current carbon pricing.

Project developers tend to focus on nature-based avoidance carbon credits. But other types of carbon credit projects are also available to consider for your offsetting needs.

With that being said, here are the top five carbon offset project developers that made it to our list.

Top Carbon Offset Project Developers

1. BlueSource, now Anew

Formally founded in 2001, Blue Source has a new brand name called Anew after merging with the Element Markets last June. It gets the top one slot when it comes to providing offset credits from improved forest management, carbon capture, and other projects.

It has offices in the U.S., Canada, and Europe, and an environmental commodities portfolio that extends across 5 continents.

Since inception of its legacy companies, Anew has the following achievements:

transacted 150+ million tonnes of carbon
provided 240+ million diesel gallons equivalent of renewable fuels for transportation
developed projects on over 3.5 million acres of forest and farmland
developed 400+ overall projects

Anew’s activities amount to the emissions avoidance of 539 million solar panels generating power for an entire year.

Plus, the firm also developed projects with protocols made via scientific review and public stakeholder processes. Oversight for these projects comes from the top carbon standards, including:

Climate Action Reserve,
Verified Carbon Standard (Verra),
American Carbon Registry,
California Air Resources Board,
Alberta Environment, and
Canadian Standards Association.

What sets Anew apart from other project developers is that it serves the multiple functions of a broker, trader, retailer and advisor in the carbon space.

Under its core project development expertise, forestry projects, Anew follows these steps for a project to be eligible for offset crediting:

Apart from developing natural climate solutions like forestry projects, Anew also offers the following services and project development:

2. Finite Carbon

Finite Carbon, founded in 2009, is North America’s biggest developer of forest carbon offsets by volume. It focuses mainly on improved forest management projects.

With offices in 7 US states, it combines unparalleled project development experience with extensive carbon market knowledge.

To date, this offset developer is able to achieve the following performance.

The developer generated over of all compliance offset supply. It has also delivered 800+ million dollars to landowners.

Unlike other top carbon offset project developers such as Anew, Finite Carbon is working with landowners who have 5,000 acres or more. Anything less than 1,000 acres is not a cost-effective project for the company.

But with its upcoming Core Carbon program, those who own as little as 40 acres can enter the growing carbon offset market.

Its entire offset project development process can take up to 6 months long, depending on several factors. In general, it involves the following processes:

Same with other developers, Finite Carbon pays the capital for each project. And then it collects only a percentage of the carbon offsets once completed.

With its wide coverage, the developer’s projects are in every region and major forest type from the Appalachians to coastal Alaska. Below is its project map showing its forest projects.

If you’re after a project developer that demonstrates expertise in forestry offsets, Finite Carbon should be on your top list.

3. 3Degrees

For over 15 years, 3Degrees has been a pioneer in providing climate solutions. Within that time period in the project development market, the company has achieved these results:

The company also deals with many other carbon offset projects apart from nature-based solutions. They mostly include landfill gas capture projects.

3Degrees’ project development solution is broken down into 5 major phases:

Setting aside its proven track record in the space, what makes 3Degrees stand out from other top carbon offset project developers are a couple of differences. They include the following:

Quality Standards:
3Degrees works with all four of the major internationally-recognized voluntary carbon offset standards. They include Verra, Gold Standard, American Carbon Registry, and Climate Action Reserve. The firm ensures that each project adheres to approved protocols.

Tailored Solutions:
3Degrees help organizations build a portfolio of high-quality projects that are relevant to their business and engage stakeholders.

Portfolio Management:
The project developer takes a holistic approach to portfolio management. It works with clients to balance immediate needs with long-term program goals.

All these enable 3Degrees to be a strategic partner for entities looking to build a portfolio of high-integrity carbon reduction and removal projects. They include opportunities both for long-term and new project development.

4. Forest Carbon

Making it to the top 4 spot, Forest Carbon’s main goal is to restore degraded tropical forest and wetland ecosystems. These projects fall under the broad category of REDD+.

So far, it’s a premium restoration project developer in Southeast Asia. Its projects deliver benefits for local communities, biodiversity and investors.

With offices in Jakarta and Singapore, Forest Carbon’s team is built on a track record of success in the region. The team brings a decade of experience working on the ground, from mapping wetlands and assessing below-ground carbon storage, to winning community support.

The REDD+ developer follows these key project development stages.

Feasibility assessment:

Forest Carbon is on the ground to assess threats to tropical forest ecosystems and develop business models to protect them.

From the dry dipterocarp forests of Malaysia to the carbon-rich peat swamp forests of Indonesia, the developer specializes in assessing these areas. It offers the following major advantages in creating carbon credits from natural climate solutions:

Rapid GIS assessments with our in-house team
Automated carbon credit calculations
Drone-based aerial surveys

Project design:

In designing its REDD+ projects, Forest Carbon works exclusively under the Verified Carbon Standard (VCS). It also adopts the Climate Community and Biodiversity Standard.

Forest Carbon has designed Indonesia’s first peatland restoration project in Central Kalimantan under VCS. It also did the same with Seima, Cambodia – WCS Restoration Project.

Impact verification:

Forest Carbon is leveraging IoT sensors and machine learning for a project’s robust impact verification.

These IoT sensors monitor water table levels for peatland ecosystems. They also provide fire risk data in real-time in a project dashboard. The data generated make it easier to measure project impact by auditors.

5. C-Quest Capital

C-Quest Capital (CQC) is a social impact project developer that aims to transform the lives of families in poor communities worldwide.

The firm does it by providing access to sustainable energy services and clean energy technologies that reduce emissions.

CQC was founded in 2008 and is headquartered in Washington D.C., USA, with local offices in India, Malawi, Malaysia, Singapore, Cambodia and Australia. Its global teams lead project operations across Sub-Saharan Africa, Central America, and South and Southeast Asia.

The developer creates high impact carbon offset credits under three operational platforms:

Cleaner Cooking,
Efficient Lighting, and
Sustainable Energy (Nature-based Projects).

Together, they form the so-called Transformation Carbon projects. They all comply with specific carbon offset standards. They then go through rigorous 3rd-party assessments by auditors to ensure credits are real and measurable.

Currently, CQC certifies all new projects under the Verra Verified Carbon Standard (VCS) same with other top carbon offset project developers on our list.

Each project is registered onto a cloud-based data management system using Android phones or tablets. Registration involves data collection for monitoring and follow-up.

Doing all these are critical for project evaluation, verification, and improvement.

So, for high integrity and high impact offsets that help the poorest communities, CQC tops this project category.

As you can see, each project developer has its own set of processes when developing a project. But overall, you have to carefully think about the specific results you want to achieve.

They may follow the same offsetting standards but not all carbon offset project developers will make it to the top of our list. You’ll never go wrong with any of them.

The post The 5 Top Carbon Offset Project Developers appeared first on Carbon Credits.

New Carbon ETF “KARB” Launched On The NYSE

Carbon Fund Advisors introduced the Carbon Strategy ETF with NYSE Ticker KARB to provide exposure to global compliance carbon markets.

The Carbon Strategy ETF “KARB”

The Carbon Strategy ETF is an actively managed exchange-traded fund that uses a reference index – the Carbon Streaming BITA Compliance Index.

It’s a rules-based index that tracks the performance of the compliance carbon markets via an allocation into a series of carbon allowance futures.

KARB ETF will hold futures contracts on carbon allowances in emissions trading systems (ETS) in North America and Europe. These particularly include:

European Union Allowances (EUA)
California Carbon Allowances (CCA)
US Regional Greenhouse Gas Initiative (RGGI) CO2 Allowances
United Kingdom Emissions Trading Scheme (“UK ETS”)

The Fund aims to maximize capital appreciation while minimizing the cost of rolling futures.

Apart from providing exposure to regulated carbon markets, KARB ETF may also bring potential appreciation in carbon prices as the world aims to achieve the Paris Agreement goals.

The ETF also seeks to give investors a vehicle to benefit from stricter regulations and reductions in the amount of allowances. This may lead to higher prices.

It may also act as a hedge against climate-related risks. And it can even give investors access to the emerging asset class of carbon.

Compliance Carbon Markets & KARB

Governments and jurisdictions that form the compliance carbon markets created the ETS to put a price on emissions. They’re also to incentivize carbon-intensive industries to cut down their emissions.

ETS is also known as the cap-and-trade program.

As for Tim Collins, Carbon Fund Advisors’ founder and president:

“There is a growing global push to regulate and reduce greenhouse gas emissions in an effort to combat climate change… and ETS can be an effective tool for governments across the globe to achieve their climate goals.”

The compliance carbon markets have grown rapidly in value from $220 billion (€186 billion) in 2018 to $899 billion (€760) in 2021.

They’re established by regional, national or subnational jurisdictions to cap total emissions allowed for certain industries.

The cap, or permitted emissions, declines each year to achieve the climate goals of the jurisdiction.

Carbon allowances, also called carbon credits, equal to the emissions cap can either be freely allocated and/or auctioned to emitting companies by the regulating body.

Firms with caps may buy or sell carbon allowances based on their need. For instance, a company with lower emissions can sell their allocated carbon allowances to others with higher emissions.

Tesla is a perfect example for this, earning billions of dollars in regulatory carbon credits sales.

Entities that don’t have enough allowances to offset their emissions at the end of the reporting period will face fines.

Trading carbon credits is limited to entities registered in an ETS only. And most investors do not have access to this carbon trading.

Some active futures markets may provide investors with exposure to compliance carbon markets.

Still, the challenges of getting access to derivative markets make direct investments in carbon allowance futures contracts difficult.

This is where the Carbon Strategy ETF offers a potential solution.

The KARB ETF opens the door to invest in a portfolio of carbon credit futures at a time when prices will increase further to meet the Paris Agreement targets.

Also, reduction in the supply of carbon credits each year as the cap declines may lead to higher prices. High carbon prices are crucial to prompt companies to invest in lower emission alternatives.

In fact, carbon prices need to reach $130/ton by 2030 and $250/ton by 2050 to meet net zero ambitions.

Carbon Streaming Corporation holds a 50% equity interest in Carbon Fund Advisors Inc.

The post New Carbon ETF “KARB” Launched On The NYSE appeared first on Carbon Credits.