Concerns over carbon market integrity are holding back corporate climate finance, finds survey of business leaders

Company participation could more than double, and finance could increase by up to 10% within two years with greater confidence in carbon markets, survey finds.

LONDON, UNITED KINGDOM, March 20, 2024 /EINPresswire.com/ — Companies would significantly increase their climate investments with more assurances about the transparency, integrity and validity of carbon credits, according to a survey of business leaders.

More than 180 executives and managers were asked about their views on voluntary carbon markets, with around a third reporting their companies are already buying credits as part of their net zero strategies. The carbon credit market, which is verified by independent certification standards but differs from carbon markets supported by governments, was estimated to be worth $1.3 billion in 2022.

The research, carried out by the We Mean Business Coalition along with Intercontinental Exchange (ICE) and Bain & Company, found potential legal and reputational risks as well as a lack of recognition of carbon credits by standard-setters in the corporate net-zero ecosystem discouraged businesses from investing in carbon markets.

The survey found that if these barriers were addressed with more rigorous frameworks and regulations, then:

● Half of companies not currently participating would enter carbon credit markets, up from 22% under the status quo.

● Spending on carbon credits by existing participants would increase by up to 10% within two years.

● More companies would set both near-term climate targets, up from 32% to 50%, and long-term targets, up from 37% to 56%.

“It’s clear there’s broad consensus among business leaders that climate action is a strategic priority and carbon markets are an essential tool for delivering on global net zero goals,” said Luke Pritchard, Deputy Director, Nature Based Solutions, We Mean Business Coalition, and co-author of the survey report.

“But our survey showed that even more corporate climate finance could be unlocked by improving private sector confidence in carbon markets with robust frameworks that ensure greater integrity, transparency and recognition of companies going above and beyond.”

More than 70 per cent of those surveyed said carbon credit markets allowed their companies to take additional climate action, beyond what they would do if not buying carbon credits. Previous research found that companies participating in carbon credit markets were decarbonising twice as quickly as those not engaging with markets.

“Only about 25 per cent of global greenhouse gas emissions are directly priced and nearly all of those are priced through government mandates,” said Gordon Bennett, global head of environmental markets at ICE.

“Carbon credits are therefore an important mechanism for companies to voluntarily compensate for their emissions, addressing the root cause of climate risk and incentivising investment in lower cost abatement opportunities.”

However, when asked what would happen to their budget for carbon credits in the absence of credible high-integrity carbon credit markets, half of respondents warned that their companies would reabsorb the funds rather than reallocate it to direct emission reduction efforts. This demonstrates that investments in carbon credits are not coming at the expense of corporate emission reductions, but are providing additional resources into global climate action efforts.

At last year’s COP28 climate talks, the We Mean Business Coalition and key players in corporate climate action agreed to work together to develop clear, consistent standards for businesses and an “end-to-end integrity framework” for carbon markets. Meanwhile, efforts led by the Voluntary Carbon Market Integrity (VCMI) initiative and the Integrity Council for Voluntary Carbon Markets (ICVCM) are helping to address recent scrutiny and meet growing demand for a high-integrity carbon credit market.

“The message from business leaders is that if companies stop purchasing credits, climate finance is at risk of being forfeited,” said Dale Hardcastle, Partner, Global Head of Carbon Markets, Bain & Company and co-author.

“With the nature financing gap reaching an estimated $4.1 trillion by 2050, we must make use of all tools available, including nature-based carbon credits, to mobilise private sector finance as quickly as possible.”

The survey, which included business leaders from 27 countries across sectors including industrials, technology and financials, also found companies with more than $20 billion in annual revenue were responsible for the lion’s share of credit purchases and spend up to four times per credit more than smaller companies.

The report highlighted that carbon markets can serve other near-term climate objectives, such as protecting and restoring nature and directing capital to climate efforts in the Global South while decarbonisation technology is developed further.

Authors of the report made five recommendations for realising the full potential of voluntary carbon markets for climate finance. These included:

1. Delivering the end-to-end integrity framework and claims guidance proposed during COP28, with critical focus on the standards for carbon accounting and the role of credits in corporate climate strategies.

2. Optimising incentivisation for both direct abatement and utilising carbon credits to compensate for emissions, acknowledging the importance of both in achieving climate goals.

3. Establishing robust safeguards to prevent the misuse of carbon credits.

4. Acknowledging concerns regarding the quality of some carbon credits and developing appropriate solutions to continuously increase their integrity.

5. Seeking opportunities to recognise high-integrity action by companies and provide support for the enhancement of the market’s integrity.

ENDS

Notes to editors

For a copy of the report, further information or interview requests, contact:

Donna Bowater

Marchmont Communications

[email protected]

+61 434 634 099

Matthew Stafford

Marchmont Communications

[email protected]

+44 7788 863692

About the results

The survey was carried out among 187 corporate leaders between November and December 2023. Respondents represented 27 countries distributed across the following regions: North America (55%), EMEA (30%), APAC (8%), LATAM (7%). The most well-represented were Industrials (17%), Technology (16%), Financials (15%), Energy (11%), and Consumer Discretionary (10%).

About the We Mean Business Coalition

The We Mean Business Coalition works with the world’s most influential businesses to take action on climate change. The Coalition is a group of seven non-profit organizations: BSR, CDP, Ceres, Climate Group, Corporate Leaders Group Europe, The B Team, and the World Business Council for Sustainable Development. Together we catalyze business and policy to halve emissions by 2030 and accelerate an inclusive transition to a net-zero economy. For more information: www.wemeanbusinesscoalition.org

About Bain & Company

Bain & Company is a global consultancy that helps the world’s most ambitious change makers define the future. Across 65 cities in 40 countries, we work alongside our clients as one team with a shared ambition to achieve extraordinary results, outperform the competition, and redefine industries. We complement our tailored, integrated expertise with a vibrant ecosystem of digital innovators to deliver better, faster, and more enduring outcomes. Our 10-year commitment to invest more than $1 billion in pro bono services brings our talent, expertise, and insight to organizations tackling today’s urgent challenges in education, racial equity, social justice, economic development, and the environment. We earned a platinum rating from EcoVadis, the leading platform for environmental, social, and ethical performance ratings for global supply chains, putting us in the top 1% of all companies. Since our founding in 1973, we have measured our success by the success of our clients, and we proudly maintain the highest level of client advocacy in the industry.

Matthew Stafford
Marchmont Communications
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