On Thursday, DBS Bank, Standard Chartered Bank, the Singapore Exchange and Singapore sovereign wealth fund Temasek announced a new joint venture, Climate Impact X (CIX), a Singapore-headquartered global exchange and marketplace for the trading of high-quality carbon credits. CIX will use satellite monitoring, machine learning and blockchain technology to enhance the transparency, integrity and quality of carbon credits that deliver tangible and lasting environmental impact.
In a statement on Thursday, the four parties offered their rationale for a new exchange, saying that low-carbon technologies (including the rapidly expanding suite of global renewable energy solutions) are likely not enough to help corporates effectively reduce carbon emissions in the near term. In fact, such technologies may only reduce two-thirds of emissions, well short of requirements to achieve Paris Climate Agreement targets to limit global warming to 1.5 degrees Celsius. The institutions behind CIX say high-quality credits can bridge this gap and play an important role in a holistic climate mitigation strategy.
“It is becoming increasingly apparent that the world requires a carbon market of the highest international standards,” DBS CEO Piyush Gupta said in Thursday’s announcement. “As a leading global financial and trading hub, supported by strong regulatory frameworks, Singapore is well placed to lead such sustainability efforts. To catalyze 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 galvanizing change by gathering like-minded industry leaders to a centralized world-class platform, scaling the global voluntary carbon market and expediting the transition to a low-carbon economy.”
The group expects global demand for high-quality carbon credits in the voluntary carbon market to increase at least fifteen-fold by 2030, up to 1.5 to 2 gigatons of carbon dioxide (GtCO2) annually. Despite this robust demand outlook, they say, 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, limiting overall market liquidity. CIX’s Larsen says that by bolstering a well-functional marketplace with strong impact and risk data, CIX will “enable efficient price discovery and catalyze the development of new projects.”
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 standardized contracts – catering primarily to multinational corporations (MNCs) and institutional investors.
Initially, CIX help to develop the market for Natural Climate Solutions (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. 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.
“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,” said SGX CEO Loh Boon Chye. “From avoiding and reducing emissions within companies’ operations and value chains, to using renewable energy sources wherever possible and finally neutralizing 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.”
“Temasek is committed to generating positive impact on people and the planet through our global investments,” added Temasek Chief Investment Officer Rohit Sipahimalani. “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 organizations to address their carbon footprints through both market and natural climate solutions.”
The joint operation of CIX by DBS, SGX, Standard Chartered and Temasek will be subject to all required regulatory approvals and consents to be obtained
“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,” said Mikkel Larsen, Interim CEO of Climate Impact X and Chief Sustainability Officer at DBS. “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.”
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