Candido Bracher, chief executive officer of Sao Paulo-based Itau Unibanco SA, said that when it comes to corporate claims made under the banner of environmental, social and corporate governance, calls for differentiating between what’s “green” and what’s not have been getting louder.
“We should make a move toward having this standardized in one single measurement, one single regulation, which would make it easy to understand and easy to deal with,” Bracher said.
Daniel Klier, global head of sustainable finance at HSBC Holdings Plc, agreed, adding that the fast pace of ESG adoption makes promulgating a coherent set of rules all the more important.
“We’ve seen so many large multinationals using this crisis to change their business models,” Klier said. “Look at the big oil and gas majors, technology companies, transportation companies.”
Former Bank of England Governor Mark Carney said one of his main focuses is achieving clarity in the market for carbon offsets, which can be built into something much larger to help achieve net-zero global emission targets.
Carbon offsets are used by individuals and companies to compensate for their carbon footprints. Each credit is supposed to be backed up by activities that reduce emissions, like forest conservation or the promotion of cleaner-burning wood stoves. But those projects are so varied that it’s difficult for buyers to determine the value of carbon saved from different initiatives.
It’s also not clear how much money actually goes to the pollution-saving pursuit and how much goes to the broker that sells the offset.
While “complex,” the market will be “a very major component” of the climate solution, Carney said during an IIF panel.
Standard Chartered Plc CEO Bill Winters, who also spoke at the IIF conference, is chair of an industry task force looking to boost credit offsets. The group, which has more than 40 members including BP Plc, Royal Dutch Shell Plc and Unilever NV, estimates the market needs to grow by between 15 and 160 times in order to meet the Paris Agreement goal of limiting global warming to 1.5 degrees Celsius.
The carbon offset market is currently regulated by non-governmental organizations and carbon registries – some of which are taking steps to set standards. But Winters has said tougher rules are needed to make it easier for regulators to be consistent and transparent around pricing and trades, similar to the way ratings agencies operate. Doing so could help to deliver a higher global carbon price, he said.