Confidence gradually being restored in carbon markets: MAS
Bourses can be a critical player as they can provide pricing transparency on carbon-credit transactions, says chief sustainability officer at central bank
[SINGAPORE] Confidence is beginning to be restored in carbon markets, said Gillian Tan, the chief sustainability officer at the Monetary Authority of Singapore (MAS) on Thursday (Jun 5).
Recent developments such as the finalisation of global carbon-trading rules at the United Nations’ climate change conference at the end of last year, as well as the implementation of carbon-reduction schemes for sectors such as aviation, have helped rebuild confidence in carbon markets.
“There has been renewed attention on carbon markets as a way to unlock transition finance. And yes, the market has faced challenges... Collectively, we think that confidence is starting to be restored. It’s in the right direction,” said Tan, who was speaking at a sustainability conference organised by the World Federation of Exchanges.
The association is currently chaired by Loh Boon Chye, chief executive officer of the Singapore Exchange.
Carbon markets have been facing integrity challenges over the last few years as reports of greenwashing scandals have emerged, casting doubts on whether carbon credits that had been bought and sold truly represent emission reductions. The prices and trading volumes of credits have plunged over these controversies.
Tan said that exchanges can be a critical player to help strengthen the infrastructure for carbon markets as they can provide pricing transparency on carbon-credit transactions.
A NEWSLETTER FOR YOU
Friday, 12.30 pm
ESG Insights
An exclusive weekly report on the latest environmental, social and governance issues.
“Exchanges can help foster investor confidence, and, over time, I think exchanges can also support the development of derivatives and other financial instruments that can help market participants better manage their risks and exposures if they want to trade in carbon credits.”
However, she also noted that having the infrastructure is not enough, and that more needs to be done to strengthen both the demand and supply of carbon credits to catalyse the growth of carbon markets, even as confidence is gradually being restored.
The Singapore government is developing voluntary guidance on the credible claims and use of carbon credits. The Economic Development Board has also introduced grant schemes to support carbon-market ecosystem players.
SEE ALSO
“So there’s this ecosystem that’s being built. We’re looking at it both from demand and supply, but we need that infrastructure to be in place, and no one does this better than (the exchanges),” she added.
Tan said that besides being able to develop the infrastructure to support carbon trading, exchanges also play an important role in helping issuers navigate the complex landscape of disclosure requirements, enabling access to credible sustainability data through digital platforms, and designing new products that support capital flow towards companies and investments focused on transitioning to a low-carbon business model.
Copyright SPH Media. All rights reserved.
