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Carbon credits and solutions in the Voluntary Carbon Market are currently still the most viable options in getting companies to invest in emission reduction activities in the near-term. For these to be effective and credible mechanisms in mobilizing finance for a low-carbon transition, we need to continually ensure that carbon emissions are accurately tracked and accounted for.
To tackle this unwieldy topic of credible carbon accounting, Openspace partnered with KPMG to host a panel of key drivers within the carbon space earlier this month. The panel included John Davis, Commercial Director of South Pole; Jade Feinberg, Director of ESG at KPMG; Lia Nicholson, Head of Sustainability at Terrascope and Matthias Ong, Head of Corporate Engagement at CDP. During the session, the panelists discussed the practical limitations of accounting methods, perceptions around the carbon markets and the ever-controversial carbon credits, as well as the necessity of data-driven tech solutions to facilitate corporate decarbonization commitments. We outline our key takeaways below.
The huge variability in emissions data collected and interpreted, whilst a limitation, is also a huge growth area.
The panel noted that financing the value chain and managing Scope 3 emissions are crucial aspects of the transition towards decarbonization, and as countries enhance regulations and mandates around disclosures, there is an increasing focus on the need to ensure data collected from value chains and around emissions are relevant, complete, consistent, transparent and accurate[1]. It is especially important to measure supply chain emissions despite data challenges since Scope 3 emissions account for, on average, 75% of a company's corporate footprint.
By now, most of us are familiar with the challenges that come with inconsistent applications of international accounting standards and in interpretation of data for ratings[2]. For instance, while the Greenhouse Gas (GHG) protocol is a useful international standard for accounting for GHG emissions, there is variability in the Emissions Factors applied and in the activity emissions data collected. While that may be so, the panelists agreed that transparency of data and in accounting for that data is key in getting us to learn and collaboratively improve solutions over time.
As it stands now, it is still difficult to obtain an immense amount of data required for meaningful analytics from large companies and even more so from smaller companies with fewer resources. There also remains a question of data quality as few companies have resources to verify Scope 1 and 2 emissions data and even fewer for Scope 3. Nevertheless, with mounting pressures from regulators, investors, consumers and private actors pushing for greater accountability within the voluntary carbon market, we can expect more disclosures and ideally, greater quantity and quality of data overtime.
Here, it was also noted that where pressures come from looks different depending on geography. It was highlighted, for instance, that regulators are playing a key role in pushing the needle forward in Singapore and in countries like Thailand and Vietnam, push for change is driven by relationships within supply chains. We need to build on this momentum moving forward.
Lower-priced carbon credits is a means to lower barriers to the carbon market as a first step and to help increase demand for decarbonization solutions over time.
The panel noted that ultimately everyone[3] will eventually have to pay for their emissions and while there might be, in some cases, significant upfront costs, it pays to start now. It is not a question of “who pays” but “when you pay”.
To mobilize markets now, however, we need to ensure that the barrier to entry is not too high such that there is a fear around employing certain tools or methodologies. For instance, while verification is important, it cannot be too big of a barrier in getting companies to funnel money into carbon credits and into the carbon market. As long as there is transparency and as long as people can show what their carbon emissions are, lower-priced carbon credits to get people started in employing carbon credit mechanisms and reducing emissions is a good way to build demand. In fact, a recent study done on “Carbon Emission Performance and the Use of Carbon Credits” by Trove Research found that companies buying material quantities of carbon credits are decarbonizing twice as quickly than those that were not -indicating that at least in the interim, carbon credits are viewed as a viable means to mobilize decarbonization efforts.
To further boost people’s confidence in carbon solutions, the panelists also agreed that regulators play a key role in giving clear signals to an unavoidably trend-driven market. Whitelisting certain international standards or providing jurisdiction-specific guidance could help reduce fears of reputational risks associated with greenwashing or greenhushing. This would be an important step in moving carbon markets and in crowding capital for worthwhile initiatives.
“Bring all the solutions to the party.”
Among others, the panelists identified the following solutions to help us mobilize carbon markets and improve credibility of carbon accounting methods over time - (1) financing digital solutions that help improve data infrastructure, (2) encouraging healthy competition among players within the space, (3) joining networks or consortiums engaging with issues related to the carbon markets and (4) shifting narratives around conservation funding to capitalist funding.
Thank you to all who joined us, and we look forward to engaging with more players within the space and learning alongside other investors, policymakers, tech players both within and outside of Southeast Asia.
#activeintelligence#livelyminds
[1] As per the 5 principles of the Greenhouse Gas protocol which seeks to have companies represent their emissions data in a true and fair way.
[2] This is not unlike issues found in finance accounting standards like the International Financial Reporting Standards or Generally Accepted Accounting Principles that took decades to be developed and even then, requires continued refinement.
[3] No one is immune since, for instance, the cost of a carbon tax is passed down to consumers which is eventually recirculated back to governments through tax collection.
Carbon credits and solutions in the Voluntary Carbon Market are currently still the most viable options in getting companies to invest in emission reduction activities in the near-term. For these to be effective and credible mechanisms in mobilizing finance for a low-carbon transition, we need to continually ensure that carbon emissions are accurately tracked and accounted for.
To tackle this unwieldy topic of credible carbon accounting, Openspace partnered with KPMG to host a panel of key drivers within the carbon space earlier this month. The panel included John Davis, Commercial Director of South Pole; Jade Feinberg, Director of ESG at KPMG; Lia Nicholson, Head of Sustainability at Terrascope and Matthias Ong, Head of Corporate Engagement at CDP. During the session, the panelists discussed the practical limitations of accounting methods, perceptions around the carbon markets and the ever-controversial carbon credits, as well as the necessity of data-driven tech solutions to facilitate corporate decarbonization commitments. We outline our key takeaways below.
The huge variability in emissions data collected and interpreted, whilst a limitation, is also a huge growth area.
The panel noted that financing the value chain and managing Scope 3 emissions are crucial aspects of the transition towards decarbonization, and as countries enhance regulations and mandates around disclosures, there is an increasing focus on the need to ensure data collected from value chains and around emissions are relevant, complete, consistent, transparent and accurate[1]. It is especially important to measure supply chain emissions despite data challenges since Scope 3 emissions account for, on average, 75% of a company's corporate footprint.
By now, most of us are familiar with the challenges that come with inconsistent applications of international accounting standards and in interpretation of data for ratings[2]. For instance, while the Greenhouse Gas (GHG) protocol is a useful international standard for accounting for GHG emissions, there is variability in the Emissions Factors applied and in the activity emissions data collected. While that may be so, the panelists agreed that transparency of data and in accounting for that data is key in getting us to learn and collaboratively improve solutions over time.
As it stands now, it is still difficult to obtain an immense amount of data required for meaningful analytics from large companies and even more so from smaller companies with fewer resources. There also remains a question of data quality as few companies have resources to verify Scope 1 and 2 emissions data and even fewer for Scope 3. Nevertheless, with mounting pressures from regulators, investors, consumers and private actors pushing for greater accountability within the voluntary carbon market, we can expect more disclosures and ideally, greater quantity and quality of data overtime.
Here, it was also noted that where pressures come from looks different depending on geography. It was highlighted, for instance, that regulators are playing a key role in pushing the needle forward in Singapore and in countries like Thailand and Vietnam, push for change is driven by relationships within supply chains. We need to build on this momentum moving forward.
Lower-priced carbon credits is a means to lower barriers to the carbon market as a first step and to help increase demand for decarbonization solutions over time.
The panel noted that ultimately everyone[3] will eventually have to pay for their emissions and while there might be, in some cases, significant upfront costs, it pays to start now. It is not a question of “who pays” but “when you pay”.
To mobilize markets now, however, we need to ensure that the barrier to entry is not too high such that there is a fear around employing certain tools or methodologies. For instance, while verification is important, it cannot be too big of a barrier in getting companies to funnel money into carbon credits and into the carbon market. As long as there is transparency and as long as people can show what their carbon emissions are, lower-priced carbon credits to get people started in employing carbon credit mechanisms and reducing emissions is a good way to build demand. In fact, a recent study done on “Carbon Emission Performance and the Use of Carbon Credits” by Trove Research found that companies buying material quantities of carbon credits are decarbonizing twice as quickly than those that were not -indicating that at least in the interim, carbon credits are viewed as a viable means to mobilize decarbonization efforts.
To further boost people’s confidence in carbon solutions, the panelists also agreed that regulators play a key role in giving clear signals to an unavoidably trend-driven market. Whitelisting certain international standards or providing jurisdiction-specific guidance could help reduce fears of reputational risks associated with greenwashing or greenhushing. This would be an important step in moving carbon markets and in crowding capital for worthwhile initiatives.
“Bring all the solutions to the party.”
Among others, the panelists identified the following solutions to help us mobilize carbon markets and improve credibility of carbon accounting methods over time - (1) financing digital solutions that help improve data infrastructure, (2) encouraging healthy competition among players within the space, (3) joining networks or consortiums engaging with issues related to the carbon markets and (4) shifting narratives around conservation funding to capitalist funding.
Thank you to all who joined us, and we look forward to engaging with more players within the space and learning alongside other investors, policymakers, tech players both within and outside of Southeast Asia.
#activeintelligence#livelyminds
[1] As per the 5 principles of the Greenhouse Gas protocol which seeks to have companies represent their emissions data in a true and fair way.
[2] This is not unlike issues found in finance accounting standards like the International Financial Reporting Standards or Generally Accepted Accounting Principles that took decades to be developed and even then, requires continued refinement.
[3] No one is immune since, for instance, the cost of a carbon tax is passed down to consumers which is eventually recirculated back to governments through tax collection.
