Singapore, again: Consortium sets up Carbon Exchange to bridge gaps in global emissions

Rick Steves

The exchange will facilitate the sale of large-scale high-quality carbon credits through standardized contracts – catering primarily to multinational corporations (MNCs) and institutional investors. new consortium was born to develop a carbon exchange and marketplace, Climate Impact X, with the goal of providing organizations with high-quality carbon credits to address hard-to-abate emissions.

DBS Bank, SGX, Standard Chartered, and Temasek have joined forces to launch Climate Impact X, which will use satellite monitoring, machine learning, and blockchain technology to enhance transparency, integrity, and quality of carbon credits.

Leveraging Singapore’s position as a leading international financial, legal, and commodities hub, the initiative was forged as a result of the country’s emerging stronger taskforce Sustainability Alliance for Action (AfA).

Today’s low-carbon technologies including current renewable energy solutions are unlikely to be enough in the near term to help corporates effectively reduce their carbon emissions.

According to research, such technologies may only reduce two-thirds of global emissions, which may not be sufficient to achieve the goal under the 2015 Paris Climate Agreement to limit global warming preferably to 1.5 degrees Celsius.

High-quality carbon credits can provide a practical solution to bridge this gap, especially in the near term, and will play an important role in a holistic climate mitigation strategy.

Mikkel Larsen, Interim CEO of Climate Impact X and Chief Sustainability Officer at DBS, said: “Climate Impact X will provide a solution for corporates to address unavoidable carbon emissions in the near term and propel the development of new carbon credit projects worldwide.

“With an initial focus on Natural Climate Solutions, the carbon credits will also create an impetus to address another grave risk of biodiversity loss and help serve local communities. CIX will build on collective action by global governments, corporates and individuals to achieve a net-zero economy.”

Global demand for high-quality carbon credits in the voluntary carbon market is estimated to increase at least fifteenfold by 2030, up to 1.5 to 2 gigatons of carbon dioxide (GtCO2) annually[3].

Trust among investors and buyers, however, may still be limited by a lack of transparency over the risks and effectiveness of carbon reduction projects, which leads to liquidity issues for these projects.

“By facilitating a well-functioning marketplace with strong impact and risk data, CIX will enable efficient price discovery and catalyze the development of new projects”, Mr. Larsen continued, as the exchange and marketplace will focus initially on Natural Climate Solutions (NCS), to be launched by the end of 2021.

The exchange will facilitate the sale of large-scale high-quality carbon credits through standardized contracts – catering primarily to multinational corporations (MNCs) and institutional investors.

The Project Marketplace will cater to a broader spectrum of corporates seeking to participate in the voluntary carbon market, offering them a curated selection of NCS projects that can help meet their sustainability objectives. Each project on the Project Marketplace will be supported by transparent environmental impact, risk, and pricing data.

NCS are cost-effective and provide significant benefits by supporting biodiversity and generating income for local communities. They involve the protection and restoration of natural ecosystems such as forests, wetlands, and mangroves. Asia is one of the largest suppliers of NCS globally

CIX will feature carbon credits from various high-quality NCS projects around the globe on its platforms. It is also in conversations with global rating agencies to provide independent ratings to these projects.

The joint operation of CIX by DBS, SGX, Standard Chartered and Temasek will be subject to all required regulatory approvals/consents to be obtained.

Piyush Gupta, Chief Executive Officer, DBS, said: “It is becoming increasingly apparent that the world requires a carbon market of the highest international standards. As a leading global financial and trading hub, supported by strong regulatory frameworks, Singapore is well placed to lead such sustainability efforts.

“To catalyse the development of new carbon credit projects, there is a need for more high-quality carbon credits and the active cross border trading of such credits to drive global price transparency. We look forward to galvanising change by gathering like-minded industry leaders to a centralised world-class platform, scaling the global voluntary carbon market and expediting the transition to a low-carbon economy.”

Loh Boon Chye, Chief Executive Officer, SGX, commented: “SGX serves the ecosystem as a leading sustainable and transition financing and trading hub. Climate action is a key priority for us and we support internationally accepted carbon mitigation hierarchies.

“From avoiding and reducing emissions within companies’ operations and value chains, to using renewable energy sources wherever possible and finally neutralising and compensating for hard-to-abate emissions, we will work with our ecosystem throughout this journey. Climate Impact X will be an integral part of this vision, backed by SGX’s track record as a major price discovery venue for global commodities and Singapore’s strong and trusted financial infrastructure.”

Bill Winters, Group Chief Executive, Standard Chartered, said: “Standard Chartered operates in many of the world’s fastest-growing economies across Asia, Africa and the Middle East, which are home to a high proportion of the world’s natural climate solutions.

“To meet our shared climate objectives, we need to see a significant capital shift to these markets to protect nature and enable a sustainable low-carbon transition. Voluntary carbon markets are necessary to accomplish this transfer efficiently and, as set out in the work of the Taskforce on Scaling Voluntary Carbon Markets, we must agree to a consistently high standard of carbon credits for this market to be credible and effective. This is the decade for action, and we are confident that Climate Impact X will play a critical role in aligning the planet’s emissions profile to a net-zero future.”

Rohit Sipahimalani, Chief Investment Strategist, Temasek, said: “Temasek is committed to generating positive impact on people and the planet through our global investments. We provide capital to catalyse new ideas and solutions. Climate Impact X aligns with our commitment to invest in businesses that will yield positive climate benefits as well as developments in their broader ecosystems for the long term. We are pleased that the platform will help organisations to address their carbon footprints through both market and natural climate solutions.”

The exchange will be headquartered in Singapore as its financial, legal and commodities hub infrastructures are foundational to nurturing a trusted ecosystem of partners required to scale the global voluntary market.

The country aims to become a global carbon services and trading hub, transforming the nation into a “Bright Green Spark”.

FinanceFeeds has recently covered Deutsche Bank’s announcement of an ESG centre in Singapore. The centre will work across all the business divisions of Deutsche Bank and also help develop fintech products addressing gaps in the ESG market, including impact monitoring, data management, and payments to un-banked communities.

The Monetary Authority of Singapore is continually promoting fintech innovation on ESG matters. The regulator has recently launched an accelerator, where startups must aim to solve at least one of the three key challenges proposed by MAS: (i) Mobilising Capital; (ii) Monitoring Commitment; and (iii) Measuring Impact. Fintechs must submit applications by 11 June 2021.

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