London Climate Week Key Takeaways: Carbon portfolios best practices and new insights

Our expert panel featured:

• Chris Leeds, Elected Market Representative at IC-VCM
• Sebastian Cross, Co-Founder and Chief Innovation Officer at BeZero Carbon
• Julia Kachynska, Global Director at South Pole

Together, they delved into some of the most pressing challenges and emerging opportunities in the sector. For those of you who couldn't be there (or those who want to relive the moment), we have summarised the key takeaways for you below.

Challenges for carbon credit buyers

First, we unpacked the challenges that carbon credit buyers are facing. They came down to two big things:

1. Navigating Complexity in Standards and Certifications

With the ongoing development of reporting frameworks and best practices, it can be difficult to navigate the complexities of various standards and certification processes and integrate carbon credits into broader sustainability strategies. Companies are keen to take action but aren't sure where to align given the ongoing changes to guidelines.

2. Ensuring Long-Term Sustainability

The second big challenge facing buyers is the limited supply of some credits–like NBS removals–that they seek for their portfolio. These challenges are exerting pressure on the demand side of corporate carbon credit procurement which, in turn, is trickling into supply.

Together, these challenges are causing both investment and purchases to crawl, slowing the shift to a net zero world.

Long term solutions

1. A globally recognised standard for carbon credit integrity

A globally recognised standard will create trust in the market and make it simpler for carbon credit portfolio managers to make informed purchasing decisions. It was agreed that work by the IC-VCM has been foundational in providing more standardised definitions of quality, especially on the carbon project supply side.

2. Enhanced transparency of carbon projects

Building market confidence is essential, and it requires a radical enhancement of transparency if we are to improve the perception of the market. Data-driven solutions, like the ones provided by BeZero, will help build this confidence in showing versus telling how projects benefit the climate, as will more digitised Monitoring, Reporting, and Verification (MRV) tools.

3. Integrating carbon credits into mainstream business practices

Carbon credits must go beyond philanthropic efforts and be viewed as part of credible climate transition strategies. This mainstreaming of carbon credits will be critical to the success of broader climate goals.

Immediate actions for carbon portfolio managers

Of course, all the above changes require time and patience, so what can portfolio managers do right now to improve the performance of their portfolio? These three tips came through from the panel:

1. Diversify risk: Build diversified portfolios that spread risk across a mix of avoidance and removals projects and methodologies, then regularly review and adjust portfolios based on current market conditions.
2. Lock-in future supply: Current carbon prices are depressed and predicted to rise rapidly, particularly around high-integrity NBS projects, as market confidence issues are resolved. With this in mind, consider how to best take advantage of this current environment by locking in the supply of high-integrity credits that are likely to be scarce and higher in cost in the future.
3. Enhance transparency and reporting: Increase confidence in your portfolio by working with partners who are investing in technologies and processes that increase transparency and build market trust through an increased cadence of data reporting from projects.

Overall, the key takeaway is that carbon markets continue to mature as more market infrastructure is put in place. These efforts in self-regulation will play a crucial role in supporting the market and helping organisations achieve their net zero targets.

By putting in place risk mitigation and confidence building measured, portfolio managers can be well prepared for the future while creating an impactful, risk-minimised portfolio now.