An article recently published by Carbon Pulse shared that HSBC announced it will only finance carbon projects aligned with the ICVCM’s Core Carbon Principles.
It’s a clear signal that integrity is starting to shape decisions by major financial institutions. But is the rest of the market keeping up?
John O’Brien, Managing Director from CMS, shares his view on the issue:
“It’s an important step in the right direction. It shows that integrity and governance issues are becoming increasingly important”.
However, the challenge isn’t just on the supply side.
“In Australia and New Zealand, some buyers still prefer non-ICVCM CCP-labelled credits as they are cheaper”.
He notes that for integrity-led approaches to gain real traction, buyer behaviour will also need to shift towards prioritising higher-quality credits. So while financial institutions are tightening standards, John suggests demand hasn’t fully caught up.
While this signals a broader shift in how financial institutions are approaching carbon markets, the extent of that shift is still limited in practice, particularly in New Zealand.
John states “…no bank is going to finance a project solely on the basis of voluntary carbon market revenues. The market is too small, too unreliable, and too risky”.
So for projects seeking funding, integrity alone isn’t enough.
“It is critical for projects that they have significant capital, equity and strong predictable cash flows to repay debt that are not only reliant on carbon credit revenues”.
This highlights a gap between where the market is heading and how it currently operates. As integrity becomes more central to the carbon market, the question becomes: Will buyers follow? Or will price continue to outweigh quality?
Read the Carbon Pulse article for more on the topic:
https://carbon-pulse.com/496563/ (behind a paywall)