When procuring carbon credits, why pull all your credits from the same basket?
London, 18th September 2024
When procuring carbon credits, why pull all your credits from the same basket?
Like the time-old investment strategy says, diversify your portfolio to diminish risk. And the same could not be truer for carbon credit procurement.
High-integrity carbon credits are an essential part of a robust net zero strategy being driven by direct emission reductions. But companies are unnecessarily walking into a reputational minefield by procuring credits in the way they are now.
Too often companies today are procuring all their carbon credits from the same provider. But what if that project or provider suddenly doesn’t stand up to scrutiny?
Sustainability managers must be strategic about how they spend their limited resources, and being forced to write off sometimes millions of dollars’ worth of credits will be a blow for them and the global carbon budget.
Given the many types of high integrity carbon credits available now, the best way for companies to reduce their risk and balance price, scalability and durability is with a diverse carbon portfolio.
Balancing investments across different projects can ensure a company is resilient to the kinds of market fluctuations we have seen over the past year, and any technological or project uncertainties.
In any emerging industry, it’s challenging to predict which technologies will become the most cost-effective. But by initially investing in a wide range of project types and then actively responding to changing trends, buyers can have the flexibility to shift their portfolio towards the most promising technologies as they emerge.
In the case of carbon removals, a portfolio of actively managed credits can quickly adapt to the technologies that show the greatest scalability over time.
And with evolving regulations such as the EU’s Green Claims Directive and the Corporate Sustainability Reporting Directive, a credit portfolio that stretches across multiple credit types and uses, will help businesses transparently align with more kinds of carbon accounting and reporting requirements. This will help in demonstrating credible and impactful climate action to consumers and clients.
Thinking more broadly, price is often the most significant barrier to entry for many companies.
By diversifying across project types with a range of durabilities, from nature-based solutions to direct air capture, companies can achieve a blended price point that is far more accessible for the average corporation. As a result, more companies can buy in, and the market can scale faster, which means more climate action happening today.
The bottom line is CSOs and moreover CFOs, need to think of integrating a diverse portfolio of carbon credits into their business’s net zero strategy as an essential exercise in risk management for the benefit of their corporate reputation, reporting requirements, and wider market resilience.
Carbonplace makes this possible in three ways:
- Providing the ability to assess, trade and manage diverse portfolios of carbon credits on one unified platform
- Offering extensive price transparency and detailed project information to help buyers build a diverse portfolio of carbon credits
- Facilitating easy auditing and reporting to further reduce risk and ensure compliance with evolving regulatory landscape
By leveraging the tools and approaches of more mature financial markets, carbon credit portfolios can play a vital role in helping corporations future-proof their businesses, achieve net zero goals and accelerate climate action.
Media Contact
Sophie Dodd, Carbonplace