05.21.2021

SGX Forms Carbon Credits Exchange

  • DBS, SGX, Standard Chartered and Temasek to develop a carbon exchange and marketplace, Climate Impact X; providing organisations with high-quality carbon credits to address hard-to-abate emissions
  • Climate Impact X will use satellite monitoring, machine learning and blockchain technology to enhance transparency, integrity and quality of carbon credits
  • Forged as a result of Singapore’s Emerging Stronger Taskforce, Sustainability Alliance for Action (AfA), Climate Impact X will leverage Singapore’s position as a leading international financial, legal and commodities hub

DBS Bank (DBS), Singapore Exchange (SGX), Standard Chartered and Temasek announced their intention to join forces to take climate action. Through a joint venture to be established by the four parties, Climate Impact X (CIX) aims to be a global exchange and marketplace for high-quality carbon credits.

CIX will leverage satellite monitoring, machine learning and blockchain technology to enhance the transparency, integrity and quality of carbon credits that deliver tangible and lasting environmental impact.

Global efforts to address climate change have been driving demand for solutions to help corporates effectively reduce their carbon emissions. However, today’s low-carbon technologies including current renewable energy solutions are unlikely to be enough in the near term.

Certain research shows that such technologies may only reduce two-thirds of global emissions[1], 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[2]. 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 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.”

Driven by corporate climate commitments, 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]. Despite this forecast, there are still challenges to address in today’s market. For example, trust among investors and buyers may still be limited by a lack of transparency over the risks and effectiveness of carbon projects. As a result, suppliers may face challenges in developing new carbon reduction projects, resulting in liquidity issues.

Larsen added: “By facilitating a well-functioning marketplace with strong impact and risk data, CIX will enable efficient price discovery and catalyse the development of new projects.”

CIX Exchange and Project Marketplace to be focused initially on Natural Climate Solutions (NCS); to be launched by end 2021

CIX will offer distinct platforms and products that cater to the needs of different buyers and sellers of carbon credits. These include the Exchange and the Project Marketplace, which are expected to be launched by end 2021. The Exchange will facilitate the sale of large-scale high-quality carbon credits through standardised contracts – catering primarily to multinational corporations (MNCs) and institutional investors.

In addition, 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.

To start with, CIX will focus on helping to catalyse the market for NCS, which involve protection and restoration of natural ecosystems such as forests, wetlands and mangroves. NCS are cost effective and provide significant benefits by supporting biodiversity and generating income for local communities. Asia houses a third of the global supply potential and is therefore one of the largest suppliers of NCS globally[4]. 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.

In addition, CIX will be guided by an International Advisory Council – an independent expert body comprising non-governmental organisations, leading corporates and project developers, and academics and thought leaders. CIX will also work with an ecosystem of global partners and international working groups, including the Taskforce on Scaling Voluntary Carbon Markets (TSVCM) and the Natural Climate Solutions Alliance, to align on leading standards for quality and integrity.

The joint operation of CIX by DBS, SGX, Standard Chartered and Temasek will be subject to all required regulatory approvals/consents to be obtained[5].

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, said: “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.”

Leveraging Singapore’s world-class infrastructure to scale global voluntary carbon markets

CIX will be headquartered in Singapore and will leverage the country’s internationally recognised financial, legal and commodities hub infrastructures. These infrastructures are foundational to nurturing a trusted ecosystem of partners required to scale the global voluntary market. In addition, Singapore has been supportive of initiatives that strengthen the trust and verifiability of carbon credits, as part of the nation’s ambition to become a global carbon services and trading hub.

CIX is an initiative born out of Singapore’s Emerging Stronger Taskforce’s Alliance for Action (AfA) on Sustainability[6]. The AfA on Sustainability aims to position Singapore as a hub for carbon-related services and nature-based solutions, transforming the country into a “Bright Green Spark”.

Source: SGX

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